Petsec shares up on Canada shale oil deal

Petsec Energy has expanded its focus from conventional oil and gas in the United States to shale oil in Canada, sending its shares to a more than five-month high.

Petsec shares closed up three cents, or 22.22 per cent, at 16.5 cents, its highest close since September 6 last year.

The company on Wednesday said it had agreed to earn a 24.5 per cent working interest in shale oil leases covering 70 square kilometres in Alberta's Western Canadian Sedimentary Basin, that nation's largest hydrocarbon-producing province.

About 90 per cent of oil and gas produced in Canada comes from the area.

To earn the interest, Petsec will pay 35 per cent of the costs to drill one initial well and 35 per cent of the costs of drilling up to three further wells.

It will take until about mid-year to drill and evaluate the results of the first well before Petsec will decide whether to drill the additional wells.

"This is a significant step in the company's transition to securing and developing unconventional oil assets," chairman Terry Fern said in a statement.

"Success in the initial drilling is expected to result in the acquisition of further acreage within the play, which holds the potential for a sizeable shale oil project."

Petsec's key assets in the Gulf of Mexico have recently been hampered by technical woes, restrictions on a third party operated sales pipeline and lower gas prices in the US due to mild winter weather and strong competition from the booming shale gas sector.

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Source: http://finance.ninemsn.com.au/newsbusiness/aap/8419982/petsec-shares-up-on-canada-shale-oil-deal

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