The oil and gas industry continues working to develop unconventional plays in British Columbia and Alberta, particularly oil and liquids with an emphasis toward the Duvernay and Montney in the Western Canada Sedimentary Basin (WCSB).
Peters & Co. noted the industry's redevelopment of the Montney has expanded to include tight oil exploration. Total Montney well count was 800 in 2011 and 700 in 2012, the investment house said in its latest Winter Oil & Gas Overview.
"While the zone is well known for its significant dry and liquids rich-natural gas resource-in-place, a number of companies have made significant oil discoveries," Peters & Co. said. A top horizontal target in the WCSB, about 25% of 1,500 Montney horizontal wells drilled in the last 2 years encountered oil.
The play west of Edmonton covers an area straddling the British Columbia and Alberta boundary. Raymond James Ltd. has called it, "One of the largest economically viable resource plays in North America."
The Montney shale consists of four distinct intervals of pay: Upper, Middle, Middle Lower, and Lower. Most gas wells have been in the Upper interval and some companies are beginning work in the lower Montney.
So far the Montney remains best known for Triassic gas in northeastern British Columbia where horizontal development began in 2005.
In November 2012, the Alberta Energy Resources Conservation Board and Alberta Geological Survey (AGS) issued a joint study estimating the province's shale formations—including the Duvernay, Montney, and Muskwa—could contain 3,324 tcf of gas, 58.6 billion bbl of natural gas liquids, and 423.6 billion bbl of oil.
Regarding the Montney, the ERCB-AGS study estimated gas resources at 2,211 tcf, NGL at 28.9 billion bbl, and oil at 136.3 billion bbl. For the Duvernay, the study estimated 443 tcf of total gas in place, 11.3 billion of NGL, and 61.7 billion bbl of oil.
Dean Rokosh, a study author and ERCB technical advisor, said, "The companies can say, of course, whether they believe it's economic or not, but it's still a learning curve in every one of these formations."
Drilling statistics from the Canadian Association of Oilwell Drilling Contractors showed 280 rigs drilling in Alberta and 42 rigs drilling in British Columbia as of Mar. 19.
Peters & Co. said 10,874 wells total were drilled in the WCSB (excluding 2,846 bitumen delineation cores) during 2012. Of those wells, 80% targeted crude oil or bitumen and 60% were horizontal.
Montney oil sought
Companies actively testing oil-prone Montney exploration acreage include ARC Resources Ltd. at Ane Creek and Tower, Athabasca Oil Sands at Kaybob, Celtic Exploration at Karr, CIOC at Karr and Simonette, Canadian Natural Resources Ltd. at Tower, Crew Energy Inc. at Tower, Harvest at Ante Creek, Imperial Oil at Berland, Long Run at Girouxville, RMP Energy Inc. at Grizzly and North Waskahigan, Seven Generations at Karr, and Triology Energy Corp. at Kaybob West.
Trilogy of Calgary has drilled more than 40 horizontal wells at its Kaybob oil field with most of them being drilled since January 2011.
In June 2012 the company said lower natural gas prices prompted it to reallocate capital previously budgeted for additional natural gas wells towards new oil projects.
The 102/4-21 well has been among Trilogy's most productive wells. It produced 948 boe/d of which 63% was oil as of early 2013.
Questerre Energy Corp. of Calgary recently reported test results from its nonoperated horizontal well, the 03-19, which was completed with a 14-stage fracture stimulation in the Kakwa-Resthaven area of west-central Alberta. Questerre holds 25% interest in the well.
Separately, Canadian Natural and Talisman Energy Inc. have each mentioned selling some of their Montney holdings.
Duvernay gains attention
"The Duvernay has seen a significant increase in licensing activity over the past 2 years from 43 wells in 2011 to 100 wells in 2012," Peters & Co. said, adding it expects activity there to remain robust in 2013.
Companies active in the Greater Kaybob and Pembina areas of the Duvernay shale include Angle, Alta, Athabasca, Bellatrix Explorations, Bonavista, Canadian Natural, Celtic, Charger, Chevron, ConocoPhillips, Encana, Enerplus, EOG, Forge, Husky, Penn West, Shell, Sinopec Daylight, Talisman, Trilogy, Vermilion, and Yoho Resources.
"To date, 70 horizontal wells have been drilled (or are currently drilling) into the Duvernay shale in west-central Alberta with 80% of the wells drilled in the Greater Kaybob area and the remaining 20% of the wells drilled in the Greater Pembina and East Shale basin areas," Peters & Co. said. "Drilling activity levels have increased over time from one horizontal well drilled in 2010 to over 50 horizontal wells drilled across the play in 2012."
Peters & Co. expects well results and production will improve as operators optimize drilling and completion practices.
"Of the 70 wells which are currently drilling or drilled, only 23 are currently producing, which underlines the early stage of the Duvernay and the significant amount of capital required to move it into a development stage," Peters & Co. said.
Canadian Natural has licensed a vertical well on the northeastern side of Greater Kaybob area at Waskahigan 102/16-33-62W5. ConocoPhillips recently spudded a well on the northeaster n side at Two Creek 16-24-63-17w5.
Shell, Chevron, and ConocoPhillips have drilled Duvernay shale wells in the Greater Kaybob, with Shell being the most active with nine wells. Chevron has seven, and ConocoPhillips has one.
Peters & Co. believes wells in the Greater Pembina area will help improve Duvernay reservoir understanding although companies are keeping information about a number of these wells confidential so far.
Canadian Natural drilled a horizontal well on the west side of the Pembina fairway in April 2012. Angle, Encana, and Vermilion all have significant acreage with Angle and Vermilion having drilled vertical wells that were not yet on production when Peters & Co. published its winter report.
