Juniors in the Alberta Oil Sands

By Robert Sullivan – Exclusive to Oil Investing News

With conservative estimates putting the amount of recoverable oil from the Alberta Oil Sands at just over 170 billion barrels, the elite of the oil world have flocked to Western Canada over the past decade for a slice of one of the largest proven oil deposits in the world.

Major players such as Suncor Energy Ltd. (TSX:SU), Royal Dutch Shell plc (NYSE:RDS.A), and the partners behind Syncrude Canada Ltd. have enjoyed the lion’s share of the action up to this point, which is in part due to the steep capital costs required to extract bitumen.

There are, however, some junior players on the scene who are looking to carve out their own slice of the massive oil sands pie. Below is a list of four junior companies with Steam-Assisted Gravity Drainage (SAGD) plays in the Alberta Oil Sands.

BlackPearl Resources Inc. (TSX:PXX)

BlackPearl has operations at three core properties in the Alberta Oil Sands, an a project in Saskatchewan, Onion Lake, which accounts for the bulk of its current average output of 8,113 boe/day.

BlackPearl’s Onion lake project is a SAGD play, and the company has filed an application with regulatory authority to ramp up production to 12,000 boe/day.

BlackPearl’s key property is its Blackrod lease in Alberta, a SAGD play which is still at pilot stage. With an estimated 619 million barrels of contingent resources*, BlackPearl anticipates output at Blackrod could eventually hit 70,000 boe/day.

The company has set a production of 30,000 boe/day by 2016 as it moves forward with its Blackrod and Onion Lake projects, and has indicated it will eventually look to shed its non-core holdings in order to redeploy capital into these projects.

Southern Pacific Resource Corp. (TSX:STP)

Southern Pacific is funding a push into the oil sands with production from its Senlac project in Saskatchewan. A SAGD operation, output at Senlac averaged 4,915 boe/day in 2011. The company plans to use the expected net operating income of $65 million per year from the project to expand its developments in Alberta.

The planned expansion is centered on Southern Pacific’s McKay property, a SAGD development that has received regulatory approval for 12,000 boe/day of output. The company is also planning an application for a phase two expansion, which would eventually push output up to 36,000 boe/day.

Southern Pacific is also developing its Red Earth thermal project, located in the Peace River Oil Sands in Alberta, which it inherited through its acquisition of North Peace Energy Corp. in 2010. The property is estimated to hold 105 million barrels of contingent resources, and is eventually expected to produce 10,000 boe/day.

Alberta Oilsands Inc. (TSXV:AOS)

Aptly named, Alberta Oilsands (AOS) owns four leases in the province, all of which are SAGD developments. The company’s lease-holdings total 66,000 hectares, include its Grand Rapids, Algar Lake, and MacKay River prospects as well as Clearwater, the company’s main project.

AOS’ core property is its Clearwater Project, estimated to hold 373 million barrels of contingent resources. It is initially slated to produce an average of 4,350 barrels of oil equivalent per day (boe/day), before a planned phase two expansion to 25,000 boe/day.

Production is yet to begin at Clearwater, but AOS has submitted an application for regulatory approval of the first phase of the development.

Connacher Oil and Gas Ltd. (TSX:CLL)

Connacher’s core play is its Great Divide joint venture, which includes the Algar and Pod One SAGD projects. Production from the two projects averaged 13,454 boe/day in 2011, following the start up of operations at Algar.

Contingent resources owned by Connacher are estimated to be upwards of 600 million barrels, and the company eventually plans to boost capacity across its Great Divide play to 44,000 boe/day.

* Contingent resources refer to known accumulations of a petroleum resource, but where the project is not yet developed enough to completely weigh in all commercial and technical factors. 

Securities Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.