The Southern Corporate Operating Unit (“Southern”) produces crude oil and natural gas in Southern Alberta, Montana and North Dakota. Southern’s core areas comprise the gas producing Chain / Craigmyle field near Drumheller, Alberta and the oil producing area near Medora, North Dakota.
Total sales for Southern averaged 4,389 Boe/d in 2007, comprised of 18.1 MMcf/d of natural gas and 1,369 Bbl/d of crude oil and NGLs. Sales volumes increased in 2007 by 11 percent from 2006 primarily due to increased natural gas and coal bed methane production at Chain.
Average sales volumes for the fourth quarter increased included oil production of over 1,000 Bbl/d from Southern’s properties in Montana and North Dakota.
As Southern concentrated on strategic assets and lowering operating costs in 2007, it disposed of several properties having average daily production of approximately 600 Boe/d. This has left Southern a more focused business unit with operating costs averaging $8.49/Boe, a reduction of 27 percent from 2006.
Southern’s capital expenditures for 2007 totaled $52 million (excluding land). In the Chain region, an additional 27 shallow production wells were drilled in 2007 to maintain production capacity, and most of the wells that were drilled in 2006 were tied into Paramount’s low pressure production system. The Company anticipates maintaining a flat production profile in Chain in 2008, while reducing capital expenditures.
In the United States, where Paramount operates through a wholly owned subsidiary Summit Resources, Inc. (“Summit”), the Company commissioned the construction of two drilling rigs for use by Southern. The rigs arrived in July and were operating on a trial basis by the end of summer. Commissioning of the rigs was completed in the fall, and five wells had been drilled in North Dakota by year-end; targeting Madison, Birdbear and Red River production. Four of these wells have been completed subsequent to December 31, 2007, providing net production to Paramount of approximately 460 Boe/d.
In Montana, Summit has been participating in a development at the Outlook Field, targeting the Birdbear and Winnipeosis formations. During 2007, Summit successfully brought two oil wells onto production and in December drilled an additional well.
In 2008, Paramount anticipates the majority of capital investment for Southern will be directed to drilling 20 wells in North Dakota, targeting light oil from the Madison, Birdbear and Bakken formations.
