Excelsior Energy Ltd. (ELE-TSXV)
July 10, 2009 Issue
The Most Powerful Name In Corporate News and Information
Excelsior’s Proprietary Combustion Overhead Gravity Drainage (COGD) Technology Provides The Potential To Cut Capital And Operating Costs And Reduce The Amount Of Gas And Water Required By 80% In Exploiting In Situ Bitumen Resources
Excelsior Energy Ltd. (TSXV: ELE) is an early
stage, oil sands company with 58 operated sections on two contiguous blocks
in the Hangingstone and West Surmont areas of the Athabasca Oil Sands Region
near Fort McMurray, Alberta. The Company has developed a proprietary in situ
combustion technology (“Combustion Overhead Gravity Drainage” or “COGD”)
which has game-changing potential in the development and recovery of heavy
oil and bitumen. An application for an experimental pilot project to field
demonstrate the COGD technology will be submitted at the end of the second
quarter of 2009 with a targeted start up in early 2011. In addition the
Company indirectly holds a 100% working interest in UK North Sea Licences
P1500 and P1691 covering four part-blocks through its 75% owned subsidiary
ENS Energy Ltd. Excelsior's strategy is to capture oil and gas appraisal and
development opportunities where we can leverage Management’s diverse
international operating, heavy oil and field development expertise with
developing technologies to produce oil and gas.
Geologist; 25 years of international, multi-discipline industry experience in increasing senior management positions with British Petroleum, Sun Oil, Canadian Occidental (now Nexen), Alberta Energy Company (now EnCana) and Calvalley Petroleum. Extensive international oil and gas field development experience in diverse offshore and onshore operating environments including North Sea, China, Netherlands, S.E. Asia and Yemen.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – July 10, 2009
David Winter: “Essentially, I wanted to start my own company. I’ve had a lot of success being a part of leadership teams that have built business units with larger companies, and I had the desire to branch out on my own and try my skill-sets and execute my own oil and gas growth strategy. It was to move away from the constraints of large independents, into the smaller more entrepreneurial side of the business and to grow an E&P company from scratch.”
CEOCFO: What is your strategy and focus?
David Winter: “Myself and my partner Robert Bailey, who is an engineer, started Excelsior towards the end of 2005 with the strategy to employ our technical skill-sets and experience in the development of oil and gas fields, especially those that are perceived to be problematic. This perception might be due to complex geology, which is my expertise, or the need for specialist engineering solutions, or involved complex hydrocarbons, such as heavy oil; Rob has a huge background in heavy oil. So we really started off looking for heavy oil opportunities and large resource type, heavy oil plays.”
CEOCFO: Would you tell us about the properties that you are working with today?
“We operate approximately 58,000 acres gross in the Hangingstone area
of the Athabasca oil sands region in Northeast, Alberta. We are about 27
kilometers south of the Fort McMurray, which is the heart of the oil sands
region. The public face of the oil sands is the mining operations of oil
sands and their attendant environmental issues. The total recoverable
resources of the oil sands is estimated to be about 174 billion barrels of
recoverable bitumen. Of that huge volume, only 20% of that resource can be
mined. The remaining 80% is at depths too deep to mine and needs to be
recovered by in situ recovery mechanisms. These commonly use injected steam
such as cyclic steam recovery or steam assisted gravity drainage (SAGD).There
are also a variety of new technologies that are being developed to try to
exploit the bitumen from the deeper reservoirs. These include in-situ
combustion where a portion of the bitumen is burned to create the energy to
melt the bitumen, the use of solvents, and enhanced SAGD. Excelsior has
developed an in situ combustion technology termed COGD, which is the acronym
for Combustion Overhead, Gravity Drainage and is planning a 1,000 bopd
experimental pilot project at Hangingstone. With in situ recovery
mechanisms, the environmental footprint is much smaller than for mining.
Indeed their footprint is approximately the same size as conventional oil
and gas operations, and less than many other public industries.
Experimental laboratory work and computer simulations indicate that higher recoveries, an increase of about around 50%, may be possible using in situ combustion than for SAGD. This is largely due to the higher operating temperatures under in situ combustion, around 600 degrees centigrade, compared to SAGD, around 200 degrees centigrade.
CEOCFO: Will you be licensing that technology to others somewhere in the future?
David Winter: “That’s an option, but first of all what we are doing is applying to put in place an experimental pilot project in the Hangingstone area to test the technology. It has the potential to be a disruptive technology. It will have the opportunity to replace SAGD as the mainstream in situ recovery mechanism.”
CEOCFO: Development is always expensive; what is the financial picture like for Excelsior today?
David Winter: “The experimental pilot itself will cost between $35 and $50 million to execute over a four year period. As oil sands pilots go, it is relatively inexpensive. If we ramped it up to a more commercial scale of 10,000 barrels a day, which is similar to some of the small footprint SAGD projects, we would then be looking at a price tag of around $250 million to put the project together. By comparison, that 10,000 barrel a day SAGD project would cost somewhere between $350 and $400 million to build. To pin it down to a bottom line, a 10,000 barrel a day SAGD project, from our economics, requires a WTI levelised supply cost of around $80 a barrel to develop.We would expect that a COGD, 10,000 barrel a day project would require a WTI levelised supply cost of around $50 a barrel. Those economics were run using the supply costs from the fall of 2008. With the opportunity of higher recoveries per unit cost and supply costs falling as a result of the recent downturn in the industry, the WTI levelised supply costs for COGD could potentially be as low as $40-$45 WTI a barrel.”
CEOCFO: In closing, why should potential investors pay attention to Excelsior?
“Investing in oil sands now is like buying an option on oil prices.
Excelsior’s current share price values its recoverable resource barrels at
about $0.15 per barrel. Long term, over a 2 or 3-year period, I think oil
prices are going up. The fundamentals haven’t changed despite the recent
economic crisis; global oil supply is declining (rapidly in major producers
such as Mexico) and is underscored by the delay and cancellation of major
projects around the world. The fall in global oil demand is not going to
decline fast enough to offset the fall in global supplies. Therefore, the
current low price environment is setting in motion another oil price crisis
in 2 to 3 years, as demand starts to pick up with an improvement in global
economies. The value of bitumen in the ground on a project that has an
project application approved is around $1.00 a barrel. That is the near term
attraction of Excelsior right now; invest in barrels at $0.15 cents a barrel
with the opportunity to take those up to $1.00 a barrel, once we have our
application approved (estimated around June 2010). The next step is to take
a project to commercial production at which point resources are valued at
closer to $10 per barrel. That is the scale of the value growth that
“Myself and my partner Robert Bailey, who is an engineer, started Excelsior towards the end of 2005 with the strategy to employ our technical skill-sets and experience in the development of oil and gas fields, especially those that are perceived to be problematic. This perception might be due to complex geology, which is my expertise, or they need specialist engineering solutions, or involved complex hydrocarbons, such as heavy oil; Rob has a huge background in heavy oil. So we really started off looking for heavy oil opportunities and large resource type, heavy oil plays.” - Dr. David A. Winter
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