​Top 100: Canada’s Cardium tight oil play rebounding with new drilling approaches

The Cardium tight oil play in central Alberta, which was basically shut down when oil prices collapsed in 2015, is rebounding as operators have rejigged their technologies to make the play profitable at current prices.

Junior producer Yangarra Resources has been a leader in this technological revolution.

Almost all of Yangarra’s Cardium activity is concentrated in a 40 by 60 mile area west of Red Deer. The company drilled five two-mile horizontal wells and five one-mile horizontal wells in the first quarter of 2018, with completions intensity of around 80 stages per mile with 20 tonnes of sand per stage, says president and chief executive officer Jim Evaskevich.

Yangarra has now drilled 33 wells into the bioturbated Cardium zone after first targeting it in 2016. Previously, it had targeted the upper Cardium.

“We had tried it in previous wells a couple of times and we hadn’t been able to frack it using open-hole completions. We just couldn’t get enough energy into the fracks to break up the sand,” Evaskevich says.

“Once we discovered that we could frack it, and cemented liners and sliding sleeves really helped that process, we brought on the higher pressure equipment. We use 15,000 pound equipment to frack it, and what we found was just remarkable results from a production perspective.”

The company is now working to determine what ultimate recoveries will be.

The Oilweek 2018 Top 100, sponsored by KPMG, is the latest annual rankings of publicly traded Canadian oil and gas producers and major service and supply operators, based on financial and operational data.

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“We have reduced our inter frack spacing significantly over time. We use a lot more sand, we are bringing the wells closer together, and we are accumulating a tremendous amount of data that will ultimately help us determine what the optimum financial outcome is — and that will dictate what the new program looks like. We are getting closer but we are not there yet.”

Yangarra’s strategy starts with low operating costs, Evaskevich emphasized.

“We are going to be profitable even in a very low cost environment. One of the great secrets to Yangarra’s success is our capital allocation process,” he noted. “We use a full cycle capital allocation model which we have found is a very powerful tool to forcing us to make really good decisions when we allocate capital.”

The company has achieved essentially 30 per cent full cycle rates of return in previous years. “That process drove us very quickly to the realization that our best results, our best ability to generate wealth, came from the Cardium, and we accelerated acquisition of land” in

the area, he added.

While Yangarra has driven costs down to among the lowest in the industry, the company expects oil prices will further recover eventually, Evaskevich said. “We have had several years with very little investment in the oilpatch around the world and my view is that ultimately, that

will affect supply, and consequently price. So, it’s going to go up at some point, I don’t know when, and my job is to manage what we can manage, which is the cost,” he said.

Obsidian Energy

Obsidian Energy Ltd. is ready to “fast track” development of its Cardium light-oil with a $50 million inventory of “near-term” drilling locations, said David French, president and CEO.

While the company plans to just drill two primary Cardium wells in the second half of this year, 15 primary locations are “prepped and ready,” said French.

Obsidian has been preparing to move from testing wells in the area to a fullscale, manufacturing-style approach, French told shareholders.

“We have worked to rank and prove our platform of growth in terms of where we should spend our money and how best to deliver. It is time for us to fast track the Cardium,” he said.

He described the Willesden Green Cardium as “a clear and straightforward investment, a repeatable, predictable development program and with torque to rising commodity price.”

“The trends ... improve every year, for ourselves and for the industry. It takes less time for each drilling year to get to higher reserves,” he said. “This trend comes from better frack design, better horizontal wells and the design of the wells. But it’s also evident that this play is in the middle of a renaissance. And we sit in the middle of it.”

Peyto Exploration

Peyto Exploration is also part of the Cardium renaissance, with plans to drill around 40 wells in the second half of 2018. Only Peyto is targeting condensate and NGLs rather than oil in the play.

“We’re obviously very excited about the potential of the Cardium again,” Darren Gee, president and CEO, said.

The “new” angle for the Cardium relates to Peyto’s optimization of stimulation design. The company employs a model of continuous improvement and recently has significantly increased stage counts in Cardium wells.

“Last year we drilled two horizontal wells in the Cardium with a different approach to the completion design whereby we applied smaller-size slickwater fracks across more stages,” said JP Lachance. “The outcome of these two wells, which have been on stream for several months now, have yielded superior performances compared to the 48 wells drilled in this area prior. In fact, one of these wells appears to be trending

towards being our best well in the Sundance area, while the other is solidly in the top 10.”

While Lachance said Peyto doesn’t want to give “too much away” on the completion design changes, he noted the company has moved from an average of eight stages and 150-metre spacing on wells prior to 2017 up to about 30 stages and less than 50-metre spacing most recently.

And while an increase in stage counts will lead to an increase in expenses, Peyto is also looking at ways to reduce costs.

“The big carrot in this play will be the ability to confidently execute with multiwell pad operations…,” Dave Thomas, vice-president of exploration, said.

Multi-well pads eliminate all the “burdens” associated with physically picking up rigs — moving well to well — along with significant efficiency improvements associated with batchstyle completions and batch-style tie-in operations, which have the potential “to more than offset the incremental cost associated with this increased stage count,” Thomas said.

Development of the shallow, sweet Cardium is a focus now for other reasons.

First, the opportunity fits among Peyto’s vast, existing infrastructure network of leases, roads, pipes and plants. Second, the Cardium gas comes with liquids ratios of between 40 and 60 bbls/ mmcf, with a large portion of that in valuable condensate and pentanes-plus form.

The Oilweek 2018 Top 100, sponsored by KPMG, is the latest annual rankings of publicly traded Canadian oil and gas producers and major service and supply operators, based on financial and operational data.

Click here to download the report.

The supporting data files are available exclusively to Daily Oil Bulletin subscribers. Click here for a DOB trial.

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