What is the Montney Formation - Where is the Montney Shale Located? The Montney
Shale Natural Gas Field is located in British Columbia, Canada and extends into Alberta. The Montney Shale Play
is located in the Dawson Creek area just south of the Horn River Shale as well as the Duvernay Shale. Higher natural gas prices have caused companies to look at unconventional resource plays
such as shale formations to extract natural gas. Geologists have known about the Montney Shale for a long time.
Low natural gas prices combined with the lack of technology has caused this shale play to be ignored. Until Now!
The Montney Shale formation is a shale rock
deposit located deep below British Columbia, Canada. Natural Gas can be found in large quantities trapped in this tight
shale play. Companies have been sweeping up land leases all across this area with the goal to explore and drill for
the natural gas. There has also been oil found to the north, west, and south of the Montney Shale which could turn this
shale field into an oil play someday.
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How is Natural Gas extracted from the Montney Shale? Companies drill vertical wells in the
Montney formation and then drill across or horizontally. In most cases, drilling a horizontal well can net you up to
five times more natural gas then a vertical well. The cost of drilling a horizontal well is roughly double that
of a vertical well. New fracturing techniques have really made these shale plays like the Montney Shale, profitable.
Companies shoot millions of gallons of water with the combination of sand at high pressures at the shale rock causing it to
fracture. In most shale formations, an 8-12 stage fracturing program is used to get at the natural gas. This can
take 30-45 days versus back in the 1980's it took 60-75 days to complete. This is possible thanks to new and improving
technology that is being used now a days causing the shale plays to be even more profitable then ever before.
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Record Land Leasing in the Montney Shale
area! Back in 2008, the shale gas land grab was off the charts. It is estimated that the Montney Shale
holds up to 50 trillion cubic feet of natural gas while the Horn River Shale has the potential to be much greater. While it is a bit early to tell, this isn't stopping companies from leasing
land at record prices. On July 18th, 2008, British Columbia Oil & Gas rights auction set a new
record of $610 million dollars for the right to drill at British Columbia's Montney Shale area. A total of 146
parcels covering 134,196 hectares ( average of $4,596 per hectare ) were won with some buyers paying up to $32,500 per
hectare for drilling rights. ( 1 Hectare is equal to 2.47 Acres ) This brings the total so far
this year in British Columbia for shale rights leasing to nearly 1.5 billion dollars! One Parcel just West of Dawson Creek
sold for $157 Million Dollars. This would appear to be one of the core areas in the Montney Shale formation.
The Montney Shale natural gas field is heating up! Encana started
snapping up land years ago for $800 a hector ( roughly $324 an acre ) and is the largest operator in this play to date.
Shortly before the $610 million auction in July, Shell Canada bought Duvernay Oil Company for C$5.9 billion dollars. Duvernay had 450,000 acres in the Montney Shale and Alberta's Deep
Basin.
April 21, 2010 - Encana ( ECA ) Entered into farm-out agreement with Kogas Canada Ltd.
(KOGAS), which will invest up to C$565 million over three years towards earning a 50 percent interest in about 154,000 acres
of land in the Horn River shale play and Montney formation in the Greater Sierra and Cutbank Ridge key resource plays
February 2011 - Encana (ECA) sells Montney Formation stake to PetroChina for C$5.4 billion - Encana Corporation (TSX, NYSE: ECA) has signed a Co-operation Agreement
with PetroChina International Investment Company Limited, a subsidiary of PetroChina Company Limited, that would see PetroChina
pay C$5.4 billion to acquire a 50 percent interest in Encana’s Cutbank Ridge business assets in British Columbia and
Alberta. Under the Co-operation Agreement, the two companies would establish a 50/50 joint venture that would ambitiously
grow natural gas production from the Cutbank Ridge lands for years ahead. Under the agreement, PetroChina would pay
C$5.4 billion to acquire a 50 percent interest in the Cutbank Ridge business assets, an interest that represents current daily
production of about 255 million cubic feet equivalent per day (MMcfe/d), proved reserves of about 1.0 trillion cubic feet
of natural gas equivalent (Tcfe), as at the end of 2010, and about 635,000 net acres of land straddling the British Columbia
and Alberta boundary. The planned joint venture infrastructure, on a 100 percent basis, includes about 700 million cubic
feet (MMcf) per day of processing capacity, about 3,400 kilometres of pipelines and the Hythe natural gas storage facility.
The business assets in this planned joint venture include the majority of Encana’s Montney, Cadomin and other natural
gas assets on a portion of the company’s British Columbia and Alberta lands. Under the planned joint venture, each company
would contribute 50/50 to future development capital requirements. Encana will initially operate
the joint venture’s assets and market the production. Following the completion of the transaction, the joint venture
would operate under the direction of a joint management committee - Link
Companies Drilling in the Montney
Shale - Montney Shale Stocks
Encana ECA - Encana was an early arriver to the Montney Shale aquiring acreage around five years ago. In northeast British
Columbia and northwestern Alberta, our already strong land position in the Montney play has expanded to more than
700,000 acres. With that, EnCana has the largest disclosed land base in this emerging unconventional gas field.
In
the Montney formation in northeast British Columbia, drilling, completion and tie-in costs for each hydraulic fracture stage
in 2010 were down more than 20 percent year-over-year to approximately $500,000, while the average number of fracture intervals
completed per well increased from nine to 13.
“Since we first entered into the Montney approximately eight years
ago, we have seen a steady progression of improving cost structures by leveraging technology and continually optimizing all
facets of the development process. The 2010 average supply cost for the Montney program was approximately $3 per Mcf, making
it one of the most economic plays in our portfolio. Despite this current measure of success, we expect to lower our future
supply cost in the play even further. Our evolution of the development and economics associated with the Montney provides
an excellent analog for what we expect to achieve in other plays throughout our portfolio,” Eresman said.
Talisman Energy TLM - Talisman Energy ( TLM ) has been very active in the Montney Formation - In the
Montney, the company has 11 rigs actively drilling in the Farrell Creek area and is on track to meet its full-year production
guidance of 50-60 mmcfe/d from this region. During the quarter, the Farrell Creek facility was expanded to handle 180 mmcf/d
of throughput
Montney Shale Map
Montney Formation Map
Approach Resources AREX - AREX has been drilling in the Montney Shale play - ( From Seeking Alpha ) The first three wells targeted the Montney and the Doig we have stimulated the [inaudible] in the other two wells, we are waiting on the pipeline
connection so we can flow test these wells. The play continues to be robust in that there are a lot of players out there paying
extremely high prices for acreage, but until we get this pipeline in we can’t really flow test these wells. The Montney
structure in itself looks good. One thing about the Montney
in this area is nothing more than a tight gas plate. It is just like our Ozono Northeast plate, except it has a little more
pressure to it, it has variability’s just like a normal [inaudible] would have, porosity variability’s, permeability
variability’s, you can look at the development around the core fields, the Dawson Creek Field, where Douvenet is working,
where Ark is working, and they are working on core areas that have higher porosity.
Occidental Petroleum - OXY -
Occidental is testing the Montney Shale and will be providing details at a later time.
Apache APA - Apache is testing the Montney, Doig, and Cadomin Shale formation - Our Noel tight
gas project in the Montney area ramped up to
100 million a day by the end of the fourth quarter. 14 wells are drilled in 2010 with continued development of locations in
the Cadomin & Doig formations. This activity will continue in 2011 with 11 more wells. The team's ability to optimize
cost by moving to multilateral and pad development will make Noel a profitable project even at current gas prices. We have
75 additional locations identified in the Cadomin & Doig.
Canadian Natural Resources (CNQ) - Canadian Natural has 385,000 acres on the Duvernay play and 766,000 acres of Montney lands. All acquired
over time and at relatively low cost compared to land prices seen in the last 2 to 3 years.
Canadian Natural's Montney land position is one of the largest positions in Canada. As you can see on Slide 15 we have the second
largest land base in the Montney.
Our gas plan for 2012, Slide 16, targets production to increase by 3% in 2012,
even though we're drilling 9 fewer wells, and is driven mostly by gas acquisitions made in 2011. Capital is up roughly $100
million, as we perceive the expansions of our liquids-rich Septimus Montney gas development, where we will drill 17 wells and expand the plan from 60 million to 120 million cubic
feet a day. Set up in the Septimus plan is expected November 2012, that's the increase, even with low gas prices, our liquids-rich
Septimus development competes for capital with oil. Later this month, we'll connect Septimus to a deep cut facility, which
will take liquids recovery to 45 barrels 1 million of condensate mix, plus an additional 45 barrels 1 million of ethane. Although
low gas prices are challenging for our gas assets, they make our returns on our thermal heavy oil assets even greater.
Murphy Oil MUR - Murphy Oil (MUR) Montney Shale - In Western Canada, we have 6 rigs operating between
the Montney acreage at Tupper. Drilling continues in the Montney
to fill out the Tupper West facilities with a continued focus of managing development and production growth from our dry gas
opportunities pending some level of price support
