​Seven Generations reduces drilling times and cuts costs to push production—and income—steadily higher

Seven Generations chief operating officer Marty Proctor, who will take over as CEO on June 30. Image: 7G

Despite commodity price challenges and market access issues, Seven Generations Energy (7G) continued to grow its core Kakwa River Montney production in 2016 through a combination of strategic asset acquisitions and continual adjustments to drilling and completion techniques.

The result was a 95 per cent increase in total production, to nearly 118,000 boe/d last year from 60,400 boe/d in 2015, and a 208 per cent increase in operating income, to $160.6 million in 2016 from $52.1 million in 2015, despite only an eight per cent bump in realized prices.

Barry Hucik, 7G’s vice-president of drilling, says much of the gains can be traced to ongoing adjustments in drilling and completion techniques, including a move to underbalanced drilling for horizontal segments, which allows for increased bit penetration.

“We have also optimized the path of the wells we are drilling, extending the curve of the 90-degree turn from vertical to horizontal,” he explains. “By making the turn path more gradual, there is less friction and drag on the drilling pipe, and we are able to drill faster.”

In 2016, these adjustments helped reduce lateral segment drilling costs by 13 per cent, while the overall cost to drill a well was slashed by 22 per cent to $3.9 million from $5 million in 2015.

But the cost reductions don’t stop at the drilling stage. While 7G kept its average lateral length fairly consistent in 2016, it increased its frac intensity to 32 stages per well using 5,403 tonnes of proppant from 29 stages using 4,395 tonnes of proppant. Average proppant costs fell by 35 per cent, while the average completion cost fell by 16 per cent.

And those savings just add to other moves that have helped keep 7G competitive, says Glen Nevokshonoff, senior vice-president of operations.

“With our shift from nitrogen foam fractures to slickwater, we have saved money through optimization of water sourcing and conserved more sales natural gas through flaring reductions,” he says. “These drilling and completions improvements continue to lower costs through speed of drilling and optimization—key competitive advantages for our company.”

Going forward, 7G will continue to implement the new drilling and completions strategies, Marty Proctor, president and chief operating officer, told the company’s recent annual meeting. But it will also focus on market access issues to ensure its growing production can be sold into national—and international—markets.

“That will include taking our gas to replace coal for fuel in power generation. That will include petrochemical plants, and ultimately we think that will include our gas going on the West Coast tidewaters for LNG,” he said. “It is our intent not to capitalize those West Coast developments, but to supply our gas to encourage somebody else’s capitalization of those projects.”

Seven Generations is among five leading companies profiled in Oilweek’s 2017 Top 100 feature. To read the whole issue, click here. To download the data for free, click here.

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