Apache Canada CEO: '07 Drilling Program Seen Lower Vs '06

Dow Jones Newswires

TORONTO Sep 13, 2006 (Dow Jones Newswires)

Apache Canada, the Canadian unit of U.S.-based energy company Apache Corp. (APA), said Wednesday it expects to drill fewer wells in 2007 than in 2006 as it scales back its coal-bed methane drilling program.

Apache Canada will likely drill between 600-800 natural gas wells in Canada in 2007, a reduction from 850 wells in 2006, and a sharp drop from 2005's 1,450 wells, Apache Canada CEO Brian Schmidt said on the sidelines of a conference.

"I suspect that you'll see a few coal-bed methane wells where we're not as aggressive as before," Schmidt said.

A mild 2005-2006 winter and a benign hurricane season have led to a steep decline in North American natural gas prices, reducing the incentive for firms like Apache to drill shallow gas wells, such as coal-bed methane wells.

The company will likely focus on deeper wells going into next year, Schmidt said.

Due to the focus on deeper, more productive wells, Apache Canada still expects to add as much new natural gas production in 2007 as in 2006, when it expects to add 172 million cubic feet a day to its output. Apache Canada produced 417 MMcf/d and 21,200 barrels of crude a day in the second quarter of 2006.

Like fellow gas producer EnCana Corp. (ECA), Apache Canada is seeing some moderation in drilling costs, although prices haven't started coming down yet, Schmidt said.

However, if gas prices remain at current levels, unit and service costs would likely be reduced in 2007, he said.

Separately, Schmidt said Apache still had 30 MMcf/d of gas and 10,000 b/d of oil off line in the U.S. Gulf of Mexico as a result of last year's devastating hurricanes.

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