Strategic positioning in the resources industry leads to a long-term play that delivers consistent shareholder returns in this highly volatile business. With its in-depth understanding of Canada's resources industry, Progress Energy positioned itself to become the leading player in western Canada's North Montney fairway. Progress has successfully taken the North Montney prospect to the world stage through its joint venture with Malaysian oil giant Petronas, which was finalised in August last year. Among the verified biggest natural gas resources in North America, the North Montney asset plugs Progress into a robust future in Asia, the hottest global market for liquefied natural gas (LNG). "We really focused on the unconventional, the tight gas resources in western Canada," says Michael Culbert, president and CEO of Progress. "Whether it be oil sands or shale gas opportunities across North America, these plays have repeatability and exponential leverage," he says. "When you take a contiguous unconventional resource such as the North Montney and develop it, the leverage is 10 to 20 times better than with a finite conventional reserve." With their vast experience in northeast British Columbia, Progress' principals were confident on the North Montney prospect from the start and resolutely pursued the resource through highly targeted acquisitions over the past 10 years. Progress is the largest landholder in the Montney trend and with its 2010 purchase of additional assets, it has accumulated about 364,000 hectares as of December last year. The North Montney asset accounts for 70 per cent of the company's total landholdings, which span northeast British Columbia and northwest Alberta. By December last year, the company's reserve base had grown to more than 323 million barrels of oil equivalent (MMBOE) or 1.9 trillion cubic feet gas equivalent (TCFE). This raised the production life of its assets to approximately 20 years. With proven and probable reserves at approximately 185 MMBOE or 1.1 TCFE, the North Montney resource is clearly worth the decade-long pursuit. "Being such a large resource, the Montney takes us to the next level, also giving us the opportunity to bring in multinational companies. Large projects really have the scalability required for companies such as Petronas to ultimately support long-term LNG offtake contracts," Culbert says. Progress' strategic partnership with Petronas entails more than HK$8 billion in investments to develop the Altares, Lily and Kahta properties in the North Montney. These properties take up about 60,705 hectares or 17 per cent of Progress' total Montney asset. With the partnership in place, Progress and Petronas are looking into establishing a multibillion-dollar LNG export facility on the west coast of British Columbia. The company expects to finalise feasibility studies within the year in order to reach a final investment decision by 2014. "It's our responsibility to use our expertise to extract enough natural gas out of the joint venture lands to support the LNG facility for 20 years," Culbert says. "We will be wholly behind the efforts of Petronas to operate the LNG facility, working and learning from their Asian and world market expertise. Together, we envision Canadian LNG injecting some level of diversity to the global energy market." Progress has distinguished itself with consistent financial results despite cyclical movements in the marketplace. This stems from a total commitment to being a low-cost producer, giving rise to technological breakthroughs in its production wells. The company uses a pod drilling method to optimise extraction efficiencies at its production wells, whereby each development pod churns out 50 million cubic feet (MMCF) per day. To manage its environmental footprint, the company uses recycled water in its horizontal drilling and completion activities. Progress has 10 existing development pods, with a combined production capability of 500 MMCF per day once fully operational. The company plans to double its corporate production capacity to about 300 MMCF per day by 2015 to remain at the forefront of Canada's resources industry. "We are moving forward aggressively in the field, making sure that we continue to be successful in our drilling results and maintain our historic capital cost efficiencies," Culbert says. "From Canada's perspective, we can really show that we have the solid fiscal regime and a predictable regulatory regime. This allows us to assure investors and partners a very timely commercial schedule, which is key to ultimately being able to secure the Asian LNG markets."
