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Stronger and more stable oil prices combined with cold weather and a good freeze to boost oil and gas activity in Western Canada during the first half of 2017. While the relatively new East Shale Basin attracted attention in late June lease bids, the Viking and the Montney plays continued to lead drilling activity in Western Canada during the first six months of the year, as the industry started pulling itself out of a three-year slump.
Seven key resource plays claimed 45 percent of the 3,850 wells drilled across the region (including test wells): Viking, Montney, Cardium, Bakken, Shaunavon, Duvernay and Wilrich. The targets for the remaining 55 percent of the wells were spread across close to 100 other formations/groups (including 10 percent in the heavy oil areas of the McMurray formation and Lloydminster region).
Read on to see the key trends driving drilling and land sale activity across the plays – and what opportunities are available for oilfield services companies.
The Viking is the basin’s top play based on wells drilled
With 674 wells drilled (based on rig releases) targeting the formation in the first six months of 2017, Viking gained top play. The number was a dramatic increase from 281 in the comparable period a year ago when oil prices were struggling for stability, rising from US$29 per barrel in January to US$47/b by June. Viking activity continues to be focused at Dodsland in Saskatchewan and the adjacent Esther and Provost areas in Alberta.
Of the total rig release tally across Western Canada, the Viking accounted for 17.5 percent of the wells that were drilled in the first half of 2017, up from 14.6 percent in the year-prior period. Raging River and Teine were the two leading operators in the Viking during that period.
Of the remaining six plays, the Montney play accounted for 14.56 percent of the total wells drilled, up from 13.41 percent a year ago.
Other formations that saw a year-over-year increase in drilling activity, based on the percentage of total wells drilled, included the Cardium, Bakken and Shaunavon, while once favorites, the Duvernay and Wilrich, saw year-over-year decreases.
Metres piling up in the Montney
The Montney continues to drive total meterage levels in the Western Canada Sedimentary Basin, with 2.61 million metres drilled from January to June, up more than double from the 1.18 million metres drilled a year ago.
That makes the Montney the overwhelming target of producers. The activity accounted for 28 percent of the total metres drilled across Western Canada.
Of the producers, Encana drilled slightly more Montney meterage than Seven Generations in the first half of 2017 (316,775 metres versus 316,157 metres), with ARC Resources ranking third. All three producers drilled more than 50 wells each in the Montney during the same period.
On a metres-drilled basis, the seven plays accounted for about 60 percent of the total hole drilled in Western Canada during the first half of 2017, about even with last year.
Cardium drilling up significantly
Based on wells drilled, the most dramatic increase in activity during the first half of 2017 was in the Cardium, which saw a nearly four-fold increase in rig releases in this year’s first half compared to the year-prior period.
Three operators — Whitecap, Bonterra and Penn West/Obsidian — accounted for close to 50 percent of the wells drilled in the Cardium during the January-June 2017 period.
Activity has been concentrated in the shoreface play at Pembina and Ferrier, but crews are drilling wells northwestward along the trend at Kaybob, Kakwa and Wapiti, Michele Innes, according to an exploration analyst with Canadian Discovery Ltd.
Duvernay drilling counts flat…
Based on wells rig released, the absolute number of Duvernay wells drilled in the first half of 2017 increased only slightly compared to last year. As a percentage of total wells drilled, however, Duvernay directed drilling declined year-over-year. The same pattern occurred for the number of metres drilled in the play.
A few more wells were spudded in the Duvernay’s West Shale Basin in the first half of 2017 compared to 2016, with the same number of spuds in the East Shale Basin.
Royal Dutch Shell, Chevron and Encana are the main operators in the west and privately-owned Vesta Energy which is an strong player in the emerging East Shale basin – remains the dominant operator in the east.
East Shale Basin activity primed to pick up
One new area of future activity is the emerging East Shale Basin play in central Alberta, which is actually a cousin of the more well-known Duvernay play in northwestern Alberta.
“It’s a bit of a different animal than the [Western] Duvernay [because] there are a fair number of shallower wells being drilled. But it’s mostly [light] oil, with a fair amount of gas,” says Brad Hayes, president of Calgary-based Petrel Robertson Consulting Ltd.
Vesta, a key operator in the play, has been very closed-mouthed about its activities in the East Shale Basin, which it calls the “Joffre Duvernay shale oil play.”
In its late-June land sale, the Alberta government attracted $13.78 million in bonus bids that mostly targeted the play. Buyers included Soo Line Resources Group Ltd., which paid $5.18 million for two parcels, at prices of over $5,000 a hectare.
Also in June, Raging River said it had accumulated about 100,000 net acres of land in the East Shale Basin play (it recently noted it now has 130,000 net acres).
“Although the play remains in its infancy, the characteristics exhibited by it, including relatively shallow depth, contiguous net pay, large estimates of total petroleum initially-in-place, light oil phase and the expected ability for productivity and recovery improvements through technology, are consistent with Raging River’s strategy for creating per share value,” the company said.
It said it expected to drill its first evaluation well in the play in the fourth quarter of this year, with up to six additional evaluation wells to be drilled in 2018.
Contact MNP’s Oilfield Services Team
MNP understands the oilfield services industry – its drivers, challenges and opportunities.
For more information on MNP’s OFS services, contact a member of our team:
Tom Minogue, CPA, CA, CF, 780.832.4298 or tom.minogue@mnp.ca
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