October 25, 2016 • Vol. 6, No. 3docFinder alert
docFinder alert

Improving Western Canadian Liquids-Rich Gas Drilling Economics


Improving performance at half the cost

ARC Resources

October 3, 2016

Full Presentation


Efficient liquids-rich drilling drives down overall costs

Canadian National Resources

October 5, 2016

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Email PLS for a quick demo on how docFinder can save you valuable time in researching market activity!

Our docFinder is a remarkable tool for unveiling emerging trends behind industry events and news stories. For example, numerous folks have pointed out that the Canadian natural gas rig count has tripled since mid-May, rising from 26 to 78 for the week ending October 7, 2016 despite a remarkable drop in Canadian capex and persistent low gas prices.

So we turned to docFinder to find out why and discovered that a significant, continued reduction in operating costs has begun to raise margins and thereby stimulate drilling. In particular, gas producers in the Montney are focusing on liquids-rich areas where they can produce condensate for use as diluent in the oil sands region.

One producer is ARC Resources, who said in its October 2016 IR presentation that it has generated a 14% compound annual 2009-2016E growth in total natural gas production and a 28% compound overall annual volumes (growth) in the Montney where operating costs have plunged to C$0.64/Mcf from C$1.33/Mcf in 2009. In addition, ARC's drilling and completion costs have fallen by 25-40% since 2014. This performance has allowed ARC to increase its 2016 capex from C$390 million to C$450 million at mid-year.

Likewise, CNRL, the largest natural gas producer in Canada has reported a 19% decline in its North American natural gas operating costs since 2014 to a mid-range of C$1.15/Mcf. However, its operating costs at its two major growth areas, the Septimus play in the liquids-rich Montney and the Alberta Deep Basin, were just C$0.23/Mcf and C$0.41/Mcf, respectively. In fact, CNRL said its costs have dropped to the point at which a C$1.00/Mcf increase in the AECO gas price would generate an additional C$420 million in free cash flow. That's some good news for a company, who like others, continue to prove that our industry can take low prices and turn it into high performance.

Hot slides and more industry examples!
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featured.slides from docFinder

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IRRs of over 100% on lower D&C costs

October 5, 2016

Seven Generations

Low condensate-rich Montney breakeven

October 3, 2016


Montney has highest reserves & NPV

September 9, 2016


Growth potential driving M&A

September 8, 2016

Encana, the largest Montney producer, has 5,900 premium condensate-rich drilling locations in its Tower and Dawson South projects in BC and Pipestone project in Alberta. Drilling and completion costs were 33% lower in the second quarter 2016 than its 2015 average, driven by a 30% reduction in cycle time and 55% lower domestic frac sand costs. That is giving it an after tax internal rate of return of 120% on its Pipestone acreage, where its type curves show daily production of 850 b/d of condensate along with 2.7 MMcf/d of gas.

The first focus of Seven Generations Energy, the sixth largest Montney producer, was the Kakwa area of the play about 100 km south of Grande Prairie. It recently closed the C$1.9 billion acquisition of Paramount's Kakwa Montney assets, picking up 30,000 boe/d and nearly 100,000 net acres. Driving one of the largest Canadian asset deals of the year was improving economics of the play, where Paramount reported a 26% reduction in drilling costs per lateral meter and 65% decrease in completion costs since 2014. In its October 2016 investor presentation, it said that the breakeven in the play was among the lowest among all liquids-rich North American plays.

Tourmaline Oil Corp., the fifth largest Montney producer, focuses on the gas/condensate part of that play as well as the Alberta Deep Basin and the Peace River High Charlie Lake light oil and gas resource play. The company is forecasting a 2016 exit rate of over 200,000 boe/d, while drilling & completion and operating costs have fallen by more than 50%. Its economics in the B.C. Montney stand out, as the company averages the highest reserves per well (6.1 Bcfe) at an average well cost of just C$2.9 million. Tourmaline’s success led to the October 19, 2016 announcement that it was acquiring C$1.4 billion in Western Canadian assets from Shell, its largest acquisition since 2010.

Murphy Oil has been one of the top ten Montney producers from its dry gas Tupper and Tupper West fields, which represent 36% of its 421 MMboe in North American onshore reserves. While the AECO price has dipped below its C$2.10/Mcf breakeven price, hedging at an average of C$3.00/Mcf has kept its operation profitable. However, the improving gas/condensate economics led to its recent decision to sell its Montney midstream assets for C$539 million and apply the proceeds to its C$486 million cash and carry joint venture with Athabasca Oil that will give it a 70% working interest in the Kaybob Duvernay play and a 30% working interest in the Placid Montney play.


Full Presentation


Full Presentation


Full Presentation


Full Presentation