Lowering the royalty ceiling is also a good
thing for Alberta’s producers. Even if the rest of
the curve stays the same, Celtic’s economics will
be just fine.
And as for the drilling credits program, which will expire in
2011, Wilson isn’t concerned. “It’s a nice little add when we’re
in recession,” he says, “but they’ve got the other components
straightened out now.”
As for challenges, Wilson struggles to identify any worth
mentioning. If he needed financing, he might have something
to say about being a junior company looking for money in a post–
financial meltdown economy, but Celtic is totally running on cash
flow. As for staffing—which you might expect could pose a prob-
lem for a company growing at Celtic’s pace—it isn’t a concern.
The capital from those sales will be redeployed to both mature cash-generating assets
and to growth assets. This year, it will spend
a good portion of its oil-directed spending on
improving recoveries at its waterflood assets in
central Alberta, including a pilot polymer flood scheme. This,
after all, is the kind of work that is an income trusts’ forte and
current commodity prices support the work.
COMPETITIVENESS
Despite its diversification into other jurisdictions, Enerplus is
still heavily invested in Alberta. Its 2010 development capital
plan calls for $96 million to be spent on its Alberta waterflood
properties, another $41 million on its shallow gas properties—
much of them in southern Alberta—and $56 million in the Deep
Basin. So the recent royalty and regulatory revisions announced
by the Alberta government come as welcome developments.
“The government has taken positive steps in reassuring
investors and companies that there’s some stability to the system, that they want the business, and that the business is not
taken for granted,” Kerr says. “It’s also positive that the Alberta
continued from page 61 – talisman
While there is much talk about power switching to take advantage of the North America’s
shale gas bonanza as well as the lower carbon
profile of natural gas power generation, and
while there are also discussions around building a natural gas
distribution network for the transportation market, and while
there are companies optimistically forecasting gas prices recovery a few months or a year out, there are also those who aren’t
as optimistic.
These commodity price pundits point to a tepid U.S. economic
recovery and the arrival of ever more players into the shale gas
“We were pretty proactive early on and brought in the
guys we needed,” he says. “The nice thing about our situa-
tion is because our properties are confined to more or less
one area—even though we’re now spreading out a bit—
we’re still essentially centred on Kaybob. We can add 2,000
or 3,000 boe [barrels of oil equivalent production] without
having to increase the head count. So we’re pretty effi-
cient that way.”
In fact, Celtic may currently have the lowest general and
administrative expense ratio on a barrel of oil equivalent basis
of any producer in Calgary—about $0.80 per barrel of oil equiva-
lent—which is a good place to be in these choppy times.
“You hope for the best and plan for the worst,” Wilson says.
“Keeping your balance sheet in shape is key.”
government recognizes it wasn’t competitive with other juris-
dictions like British Columbia and Saskatchewan and south of
the border. But time will tell how that will shape out.”
While Alberta brought down its top level of the royalty rates,
Kerr says more information is needed about the shape of the
curve versus only where it tops out.
