​‘Canada’s not a two-trick pony’: Going outside the Montney and Duvernay

Image: Joey Podlubny/JWN

The Montney and Duvernay plays are stealing the headlines, but there’s a lot more to oil and gas opportunity in Western Canada, according to Sproule vice-president Steven Golko.

Sproule tracks performance metrics on 16 hydraulic fracturing drilling plays in BC, Alberta, Saskatchewan and Manitoba, and some of them stack right up against those dominating big two, Golko told an industry session last week.

“Canada’s not a two-trick pony. There’s lots of opportunity out there,” he said, but added that the high level of attention the Montney and Duvernay are attracting is deserved (both have been referred to as the “Permian of the North”).

“It makes sense; they’re big plays, they’re exciting plays, they’ve got really big wells, they’ve got great economics along with them and they’ve got running room to look at years and years of production ahead. But not everybody is tolerable for the risk profile that comes along with something like the Montney or the Duvernay. Not everyone wants to get into a play with high capital costs per well, likely with a lot of infrastructure cost associated, to bring these plays on development,” Golko said.

He highlighted three plays that Sproule estimates having drilling and completions economics that are comparable to the Montney and Duvernay: the Dunvegan and Torquay oil plays and the Spirit River gas play.

Golko’s comparison is based on Sproule’s single-well half-cycle economics, which place the typical internal rate of return (IRR) for the Montney to be 55 percent, and 23 percent for the Duvernay. He noted the lower figure for the Duvernay is due to its very early stages of development.

In the Dunvegan play in west-central Alberta, drilling has dropped off significantly since the downturn began in 2014, from 80 to 100 wells to just 7 wells this year.

Initial production rates have improved, however, which Golko said may be a result of operators focusing on “sweet spots,” and improvements to completions systems. The top three Dunvegan producers, based on well count, are Canadian Natural Resources, Progress Energy Canada and Whitecap Resources.

Sproule estimates typical Dunvegan 90-day initial production rates at 236 bbls/d, with IRR of 125 percent.

In the smaller Torquay play in southeast Saskatchewan, drilling has held fairly steady over recent years, from 42 wells in 2013 to 45 wells in 2017. There are just eight producers operating in the Torquay, dominated by Crescent Point Energy. Sproule estimates typical Torquay 90-day initial production rates at 159 bbls/d, with IRR of 51 percent.

Although it has dropped off, drilling activity is much busier in the Spirit River gas play in west-central Alberta relative to the Dunvegan and Torquay, Golko said. There were 429 wells drilled at Spirit River in 2014, which dropped to 300 in 2016 and 191 this year. Peyto Exploration and Tourmaline Oil dominate the play, which Sproule estimates has typical 90-day initial production of 1,000 bbls/d and IRR of 54 percent.