Alberta is back – independent evaluation shows province’s latest royalty regime is among the most competitive in North America.
Calgary, AB, June 9, 2010 – A follow-up to a January shale gas evaluation that placed Alberta dead last in terms of economic competitiveness among five main operating areas in North America shows that now, with Alberta’s recently reworked royalty framework, the province has moved from the worst to one of the best regimes in which to invest in emerging shale gas developments.
“In terms of after-tax rate of return,” said Energy Navigator President Boyd Russell – who performed both evaluations, “the most recent Alberta royalty framework represents one of the best opportunities across all jurisdictions at all prices. When you look at higher prices – one of the areas where Alberta’s previous royalty framework was widely criticized – there’s no question that the Alberta government has listened to industry and made appropriate adjustments to make Alberta one of the pre-eminent places for development.”
In both evaluations, Mr. Russell examined the same multi-year, multi-well field that is typical of a development found in any of the five major North American jurisdictions including Alberta, British Columbia, Texas, Louisiana and Pennsylvania. The only difference between the first and second evaluations was the inclusion of the most recent Alberta royalty framework. Depending on gas price, the results show Alberta leading or running a close second in terms of key indicators such as: after-tax rate of return; royalties as a percentage of after-tax cash flow; after-tax cash flow; and supply cost or break-even cost.
While BC’s Net Profit Royalty is more competitive for shale gas at lower prices, Alberta’s new regime is more competitive at higher prices. Mr. Russell believes that, since current low prices have all but halted conventional gas drilling (which represents approx. 70 per cent of total gas supply), the industry will experience supply shortages leading to rising gas prices.
Download a copy of Boyd Russell's June evaluation "Comparing North American Fiscal Regimes".
Energy Navigator develops software solutions that help more than 240 oil and gas companies make better decisions. AFE Navigator® and Value Navigator® provide efficient control and accountability for reserves evaluation, production, cash flow forecasting and capital cost management, ultimately assisting users in performing their jobs with the utmost speed and accuracy. Energy Navigator focuses on creating workflow solutions that enable the effective management of capital and reserve assets, helping companies to reach their full potential. The company’s open philosophy and architecture design promotes workflow integration with other leading industry software.