The liquids push in Canada’s Montney along with improved economics and better completion designs are sending production higher in the unconventional play.
A report released this week from analysts at Wood Mackenzie forecasts total production at the liquids-rich play could hit 10 billion cubic feet equivalent per day, up 16% from 2018.
Liquids production could see even higher gains, up by 26%, this year.
The increase comes despite low natural gas prices and infrastructure constraints as producers with LNG exports and NGL targets work to meet goals.
Improved completion designs are leading to operational rewards, according to Nathan Nemeth, senior analyst at Wood Mackenzie, who says liquids are driving the Montney story.
“The Montney is not a true shale in a sense,” Nemeth told Hart Energy. “It’s actually a siltstone. So, the completions are not to the same extent as they are in some of the Lower 48 plays.”
Looking at proppant loads, for example, Montney operators typically pump between 1,000 and 1,200 lbs per foot, roughly the same as in the Denver-Julesburg, Niobrara and Bakken. Though the amount is less than the 2,000 to 2,200 typically seen in the Permian Basin’s Bone Spring and Wolfcamp and the Haynesville’s 3,200 to 3,300 lbs/ft.
Like other unconventional plays in North America, however, techniques are evolving.
“What they’ve been moving toward is increased stage count, tighter stage spacing,” Nemeth said. “They are trying to get more contact with the reservoir along the wellbore.”
Seven Generations Energy (7G) is among the leading condensate producers in the Montney, having produced 116.8 million barrels (bbl) of liquids per day and 483.6 million cubic feet (MMcf) of natural gas per day during first-quarter 2019.
The company attributes major changes to completions since 2014 to improved results with its Nest 1 development. In its latest earnings report, 7G pointed out IP-365 condensate/gas ratio at Nest 1 jumped to 478 bbl/MMcf, compared to 135 bbl/MMcf in 2014, while IRR increased to 83% compared to 29%.
“Strong liquids production, improving local condensate pricing and reduced operating costs are expected to generate free cash flow in excess of 7G’s $1.25 billion 2019 capital budget,” the company said in its first-quarter 2019 earnings update.
Encana Corp., the largest Montney producer with a nearly 800,000-net acre position, also is making strides. The company brought 15 wells onstream in the Montney during the first quarter and produced of 207,000 barrels of oil equivalent per day. It plans to bring 70 and 80 net wells onstream this year in the play with natural gas making up the bulk of production split at 75%, following by oil and condensate at 18% and NGL at 7%.
Meanwhile, Encana’s type curve continues to exceed expectations thanks to tighter clusters, optimized well spacing and increased frac intensity, Encana said in April. Lateral lengths average about 7,900 ft.
“First-quarter production averaged 207.3 Mboe/d (thousand barrels of oil equivalent per day), of which 24% was liquids,” Encana said. “Recent wells, drilled and completed for approximately $4.3 million per well, have significantly outperformed type curve with early flow rates of over 1,500 bbl/d of condensate.”
However, Montney first-quarter production was hit by midstream curtailments. For Encana, it meant a reduction of about 4.3 Mboe/d, the company said.
Natural gas egress, or takeaway capacity, is the biggest challenge facing Montney operators, Nemeth said.
“As that’s been constrained, we’ve seen really wide differentials between say Henry Hub and the local gas hub, AECO, in Alberta,” he said, comparing the $0.50 per thousand cubic foot (Mcf) seen in 2010-2014 to about $1.80 last year. “But as they are building more pipe to meet this growing supply coming from the Montney, we expect those kinds of differentials to tighten over time.”
Low gas prices also aren’t helping.
Wood Mackenzie said most of the play is economic at a natural gas price of C$2/Mcf (AECO). But analysts noted only two of the Montney’s 15 sub-plays account for roughly half of the liquids production. These are British Columbia’s Heritage and Alberta’s Kakwa.
The Montney Formation spans some 130,000 sq km from northeast British Columbia into northwest Alberta. Canada’s National Energy Board estimates the formation’s thick siltstones contain recoverable resources of about 449 trillion cubic feet of natural gas, 14,521 million barrels of NGL and 1.1 billion barrels of oil.
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