At Pengrowth, We are Working to Become a Leader in Thermal Oil, Adding Additional Long Life Reserves and Low Declines to our Portfolio
Our Lindbergh thermal property, the cornerstone of our strategy to become a sustainable energy producer, is currently in development. Rather than being located in the high-cost Fort McMurray area, Lindbergh is located in East Central Alberta. Here, we are developing this niche opportunity whose substantial upfront investment is expected to yield a production profile requiring much lower sustaining capital than conventional or other unconventional opportunities. These attributes, when combined with a low-decline rate, are anticipated to produce stable cash flows to maintain our dividend.
A Low Decline, Low Maintenance Capital Project, Fueling More Stable Free Cash Flow
In February 2012, we began steam injection into our Lindbergh pilot project, consisting of two well pairs. Early pilot results have demontrated very competitive instantaneous steam/oil ratios and well productivity. Since their commencement, the two pilot well pair have outperformed expectations and have:
- Together, produced in excess of 1.3 Million Bbls of bitumen as of June 30, 2014, with a Cumulative Steam Oil Ratio (CSOR) of 2.0.
- In aggregate, produced an average of approximalty 1,640 Bbl/d of bitumen, with an ISOR of 2.4 in the second quarter of 2014.
- Demonstrated faster than expected reservoir response to steam
- Demonstrated lower than expected steam/oil and diluent blending ratios
12,500 Bbl/d PHASE I COMMERcial development
Excellent pilot results and reserve potential have given us the confidence needed to accelerate the first 12,500 Bbl/day phase of commercial development, approved by our Board of Directors in January 2013. Development of Phase I continues to proceed on time, including the following progress:
- Regulatory and environmental approvals received in July 2013
- Upon closing of dispositions announced in July 2013, Phase I development is notionally fully funded
- Construction of central processing facilities and drilling of an additional 23 well pairs commenced in September 2013
- Approximately 90 percent of budgeted capital for Lindbergh's first commercial phase has been spent or committed as of July 31, 2014
- All major equipment has arrived on site and the planned drilling program for 2014 has been completed.
- First steam expected by the fourth quarter of 2014 and first production in the first quarter of 2015
Projected Lindbergh Timeline
By the end of 2018, with two more additional expansion phases, total Lindbergh production is expected to be 50,000 Bbl/d of bitumen.
Projected Production and Free Cash Flow
- Potential for 50,000 Bbl/d by end of 2018
- Expected to generate free cash flow for many years
- Anticipated free cash flow of roughly $600MM per annum once producing at its peak based on a $90.00 US/Bbl WTI price, a 23% heavy oil differential and a par foreign exchange rate.
Established Market and Access to Refineries
- Large demand for heavy oil within North America
- Able to ship across North America via railway
- Ability to refine heavy oil in North America, without having to ship overseas
- Lindbergh is located near Hardisty, which is known for unit train loading, and other transfer hubs allowing for easy shipping of product
- Located outside the high cost Fort McMurray oil sands fairway
Our Lindbergh project targets the Lloydminster formation whose greater depth, relative to the more heavily developed McMurray formation, creates higher pressure and better heat transfer. Other Lloydminster reservoir advantages include:
- Clean, continuous sands
- Expansive, sheet type accumulations, as opposed to channels
- Lower instantaneous steam-oil ratio results in lower operational costs
Lindbergh Development Team: The Capacity & Capability to Deliver
While thermal oil development is an unconventional operation, the Lindbergh project is helmed by a team that has successfully developed four previous thermal properties. With combined experience of ~65 years, this team has:
- The "know-how" to implement this project
- The talent to successfully develop and run the thermal project, ensuring high return
Key Lindbergh Team Members
The key members of the Lindbergh Team bring ~65 years of combined experience on Steam Assisted Gravity Drainage ("SAGD") and thermal development projects, including, but not limited to:
- Deer Creek Energy/Total E&P (Joslyn Pilot & Commercial)
- Connacher Oil and Gas Limited (Great Divide, Algar, Great Divide EIA)
- Syncrude Canada and SynencoEnergy
- Cenovus Energy (Christina Lake, Foster Creek, Borealis, Telephone Lake)
- Husky Energy (Tucker Lake, Caribou, Saleski, Sunrise Joint Venture)
Lindbergh REGULATORY Filings
Please follow the links below to view the applications related to the Lindbergh SAGD Expansion Project. Please note these are very large files and will take some time to download. The files must be unzipped in order for the links to work.