​Producers continue to up the ante in the Montney

Mark Oberstoetter, lead analyst for upstream research at Wood Mackenzie in Calgary, recently called the Montney “Canada’s bellweather play.”

Here’s why.

Encana, currently the largest Montney producer, expects to double its liquids production in the play to more than 70,000 bbls/d by 2019.

Encana is building infrastructure to support this volume growth and plans to start ramping up Montney production as the new facilities become operational in Q4.

Despite Encana’s ambitious plans, Montney powerhouse Seven Generations Energy is likely to become the top regional player, according to Wood MacKenzie.

With year-over-year quarterly production up 73 per cent and funds from operations up 146 per cent to $272 million in Q1, Seven Generations expects to spend between $1.5 billion and $1.6 billion this year. It’s currently on track to average 180,000 to 190,000 boe/d in 2017.

“We had a robust start to the year, running 13 drilling rigs and two pressure pumping spreads for most of the first quarter, and had 78 net wells in various stages of development at the end of March," said Marty Proctor, Seven Generation’s president and chief operating officer, in May.

ARC Resources is No. 3 in the Montney, followed by Royal Dutch Shell.

ARC currently has a land position of approximately 1,200 net Montney sections. Montney production represented approximately 85 per cent of the corporate total Q1 production average of 115,129 boe/d.

ARC’s $750 million capital program for 2017 includes Montney infrastructure investments and a strategic spend in the Lower Montney development.

Painted Pony Energy’s May close of its UGR Blair Creek acquisition increases Painted Pony's Montney land position by 52 per cent to 314 net sections, at an average 94 per cent working interest, and adds owned and third-party firm processing capacity of 155 MMcf/d.

Painted Pony bought UGR from Unconventional Resources Canada in exchange for 41 million Painted Pony shares, the assumption of UGR's net debt of approximately $48 million and payment of transaction costs.

Based on a 2017 capital spending program of $348 million, Painted Pony now anticipates 2017 annual average daily production to increase by 12 per cent to approximately 48,400 boe/d, with an exit production of between 73,000 boe/d and 75,000 boe/d.

The Montney is also an attractive sandbox for smaller players.

Delphi Energy’s $65 million financing transaction in May will support an accelerated capital program in the Montney and will allow it to continue its Bigstone consolidation, following its recently announced acquisition of 22.5 net sections of Montney rights.

Delphi, which averaged of 8,198 boe/d in Q1, has drilled the first eight (5.1 net) wells of its 13 (8.4 net) well 2017 program ahead of schedule. Upon closing of the financing, Delphi intends double its planned drilling program for the remainder of 2017 to spring breakup in 2018, increasing the number of wells drilled from 10 to 20 wells.

The company expects to add a third rig in the fall.

Chinook Energy, which is anticipating a 2017 exit production of 6,300 to 6,500 boe/d, recently shed non-core assets to focus on the Montney. The divestiture yielded Chinook combined net proceeds of $18 million, before closing adjustments.

With the company's focus squarely on the Montney, Chinook's first quarter Birley/Umbach well costs averaged $3.7 million per well to drill and complete. This represents a 30 per cent decrease from the previous six (5.0 net) wells in the play (the previous average was $5.3 million).

“It's only 1,400 metres deep in our area, so it's a perfect for a company of our size,” Walter Vrataric, Chinook's president and chief executive officer, told the recent annual meeting.

Crew Energy is another company that recently sold non-core assets to focus on the Montney. Its Goose area of northeast British Columbia divestiture provided $49 million that it plans to deploy on its Montney-focused growth strategy.

Along with a $300 million senior debt financing in March, Crew now has the financial flexibility to execute on its longer-term, Montney-focused development strategy, including the expansion of the West Septimus processing facility to 120 mmcf per day.

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