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Energy & Mines

November 2017

BC Land Sales

Alberta Land Sales

Licence Counts

ARC Resources

Birchcliff Energy

Fort Nelson First Nation & Geoscience BC

Murphy Oil

NGTL Towerbirch Pipeline

CAODC Predicts Increased Drilling For 2018

Wells Drilled

AltaGas Propane Export Facility


BC Land Sales

By Richard Macedo

BC attracted its lowest land sale bonus haul at a single sale for 2017, taking in $656,309 at its November auction.

Industry purchased the rights to 3,975 hectares at an average price of $165.11. A total of 12 parcels were offered, and eight received no bids or no acceptable bids.

Despite this low watermark for the year so far (there’s one sale left in December), the province likely won’t be too dismayed.

Sale revenue has roared back this year after an anaemic 2015 and 2016.  Last year in particular was a rough year, with a record yearly low established, which included a land sale in February 2016 that attracted zero dollars.

From January to December 2017, the province has collected 172.37 million in bonus bids on 73,573 hectares at an average price of 2,342.84, with interest in the Montney sparking the resurgence in Crown land buying this year.

JuneWarren-Nickle's Energy Group

Alberta Land Sales

By Richard Macedo

The Duvernay drove interest in Alberta’s November 8th sale — a common narrative this year — as industry spent $44.95 million on Crown land.

A total of 79,701 hectares exchanged hands at an average price of $563.98.

Year-to-date, the government has attracted $481.77 million in bonus bids on 1.18 million hectares at an average price of $409.10 per hectare.

Stomp Energy Ltd. paid $1.32 million, at an average of $2,583.11 for several sections.

The Soo Line Resource Group Ltd. paid $2.2 million at $779.97 per hectare for several sections.

Windfall Resources Ltd. picked up a pair of parcels that generated average bids above $3,000.

The Alberta government attracted $11.4 million in bonus bids at its land sale on November 22, with the top parcels bought for interest in the Spirit River.

A total of 24,411 hectares exchanged hands at an average price of $467.19.

Year-to-date, the province has attracted $493.17 million in bonus bids on 1.2 million hectares at an average price of $410.26. 

Highlights of the Nov. 22 sale included four parcels that combined for total bids of $6.39 million.

JuneWarren-Nickle's Energy Group

Licence Counts

By Stephen Marsters

Operators across the country licensed 884 wells in October, with British Columbia reporting a monthly high for 2017 and Saskatchewan recording a year-over-year decline for the period.

Over the first 10 months of the year, a total of 7,757 wells across Canada have been permitted compared to 4,437 in the year-prior period (up about 75 per cent).

British Colombia approved (input) 130 new licenses in October — a monthly high for 2017 — and up from 38 approved a year ago. To the end of October, BC has approved 718 new wells compared to 237 in the January-to-October period last year (an increase of 202 per cent).

In Saskatchewan, 253 well permits were issued in October, down about five per cent from 267 in the year-prior period. The province has licensed 2,899 wells in the first 10 months of the year versus 1,685 a year ago (up about 72 per cent).

Alberta approved 478 new licenses last month compared to 436 a year ago — an increase of almost 10 per cent. To the end of October the province has permitted 3,938 wells, up about 62 per cent from 2,431 wells a year ago.

Manitoba granted 23 well authorizations last month compared to six in October 2016. Over the first 10 months of the year, the province has licensed 190 new wells compared to 76 a year ago (up 150 per cent).

Operators across Western Canada licensed 515 oil and bitumen wells last month, up from 428 in October 2016. Over the first 10 months of the year, 5,046 oil and bitumen wells have been authorized compared to 2,642 a year ago.

In October, 187 gas wells were permitted in Alberta, BC and Saskatchewan compared to 149 last year. In the first 10 months of 2017, operators in these three provinces have licensed 1,389 gas wells compared to 1,102 gas permits in the comparable period last year.

There were 10 oilsands evaluation holes permitted in October. Operators have licensed only 95 oilsands evaluation holes in the January-to-October period compared to 325 a year ago.

Over the first 10 months of the year, operators have licensed 6,307 horizontal wells, or about 86 per cent of the total wells authorized across Canada (excluding experimental wells).

Last year, to the end of October, about 85 per cent of the permitted wells were horizontals.

Including experimental wells, Crescent Point Energy Corp. led producers by permitting 85 wells in October.

Raging River Exploration Inc. licensed 38 wells, followed closely by Seven Generations Energy Ltd. with 37, Canadian Natural Resources Limited with 36 new wells licensed and Devon Canada Corporation with 35.

At the 10-month mark, including experimental wells, Crescent Point has licensed 710 wells, followed by Canadian Natural (549) and Teine Energy Ltd. (364).

Cenovus Energy Inc. and Tourmaline Oil Corp. have each licensed 326 wells to the end of October.

JuneWarren-Nickle's Energy Group

ARC Resources

ARC Resources Ltd. laid out a $690 million capital program for 2018 that focuses on balance sheet strength, sustainable dividend payments, and the profitable development of ARC's Montney crude oil, liquids-rich natural gas, and natural gas assets.

The 2018 budget supports the orderly pace of development of ARC's core Montney assets through sustained production and the integration of learnings, and funds the construction of the Sunrise Phase II gas processing facility expansion. Annual average production is expected to be in the range of 130,000 to 134,000 boe/d.

2018 capital budget highlights

ARC's $690 million capital program for 2018 is focused on keeping ARC's core Montney areas operating at capacity and profitably investing in crude oil, liquids-rich natural gas and natural gas development.

Annual average crude oil and liquids production are forecast at 37,500 to 40,500 bbls/d, of which approximately 85 per cent is crude oil and condensate. Annual average natural gas production is expected to be in the range of 555 to 565 mmcf/d.

The company expects to drill 64 gross (64.0 net) wells including: 16 gross crude oil wells at Tower and Ante Creek; and 46 gross liquids-rich natural gas and natural gas wells primarily at Sunrise, Dawson, Parkland, and Attachie.

ARC will invest approximately $565 million in northeast British Columbia Montney assets in 2018, consistent with 2017 investment levels and keep gas plants in core Montney areas, including Ante Creek, Dawson, Parkland/Tower and Sunrise, at or near capacity through 2018.

ARC will advance the Sunrise Phase II gas processing facility, expected to be at full capacity by mid-year 2019, which includes repatriation of gas from third-party facilities, thereby reducing operating expenses and increasing netbacks.

ARC will progress the Dawson Phase IV gas processing and liquids-handling facility, expected to come onstream in 2020. It will advance towards commercialization by expanding the Upper Montney production at Attachie with six liquids-rich natural gas wells at Attachie West.

ARC plans to expand its Lower Montney production in Dawson, Parkland/Tower, and Sunrise, and pilot the Lower Montney horizon in Attachie.

As part of ARC's ongoing commitment to responsible water management, a portion of the 2018 capital program will be invested in the construction of strategic water infrastructure at Parkland/Tower. The water hub facility will be used to service frac operations in Dawson, Parkland and Tower. This regional water strategy will allow ARC to reduce its need for freshwater in its operations in an environmentally-responsible and cost-effective manner.

JuneWarren-Nickle's Energy Group

Birchcliff Energy

Birchcliff Energy Ltd. has released preliminary 2018 capital spending guidance of between $250 million and $450 million.

That compares with projected spending of $404 million this year.

Commenting on the relatively wide range for its 2018 spending guidance, the company said it hasn’t finalized plans for next year. It said 2018 spending will depend on commodity prices and other factors.

Birchcliff expects its 2018 capital program will continue to focus on its Pouce Coupe and Gordondale assets, including completion of the Phase VI expansion of its Pouce Coupe gas plant which will increase the total processing capacity to 340 mmcf/d from 260 mmcf/d.

Assuming a $250 million capital budget, Birchcliff expects to have average 2018 production of 80,000 boe/d and be able to complete construction of Phase VI.

Assuming a $450 million capital program, Birchcliff expects to be able to drill the necessary wells to fill Phase VI and achieve exit production of about 100,000 boe/d.

Birchcliff drilled a total of nine wells in the third quarter of 2017, consisting of six horizontal gas wells in Pouce Coupe, one vertical science and technology well in Pouce Coupe and two horizontal oil wells in Gordondale.

Pouce Coupe gas plant Phase V

In the third quarter the 80 mmcf/d Phase V expansion of Birchcliff's 100 per cent owned and operated gas plant in Pouce Coupe was successfully brought onstream ahead of schedule and on budget, increasing the plant’s processing capacity to 260 mmcf/d from 180 mmcf/d.

Birchcliff said the Pouce Coupe gas plant is currently running efficiently at near-maximum design throughput.

Pouce Coupe gas plant Phase VI

Engineering and licensing work has been completed for the 80 mmcf/d Phase VI expansion, which will increase the total processing capacity to 340 mmcf/d from 260 mmcf/d.

Fabrication of the major components is underway and Phase VI is currently expected to be brought onstream in October 2018. The total estimated cost for the Phase VI expansion is $46 million, of which $26 million has already been incurred and $20 million is expected to be spent in 2018.

Pouce Coupe gas plant Phases VII and VIII

Birchcliff has started the planning and initial work to further expand the total processing capacity of its Pouce Coupe complex by 150 to 490 mmcf/d (Phase VII) and by 100 to 590 mmcf/d (Phase VIII).

It is currently expected that Phases VII and VIII will be brought onstream in 2020 and 2021, respectively.

JuneWarren-Nickle's Energy Group

Fort Nelson First Nation & Geoscience BC

Fort Nelson First Nation (FNFN) and Geoscience BC have signed a new agreement which will see FNFN take over four hydrometric water monitoring stations in its territory.

FNFN will use the stations at D’Easum Creek, Dilly Creek, Kiwigana River and Sahtaneh Creek to monitor water flow as part of its Liard River Basin Monitoring Initiative project. Previously, the stations have been part of Geoscience BC’s Horn River Basin Aquifer Project.

Data from the monitoring network will be independently verified by a qualified professional. As part of the two-year agreement, FNFN will then add the information to the Mackenzie DataStream (www.mackenziedatastream.ca) water data website. This allows anyone to explore and share water data relating to the Mackenzie River Basin stretching from BC and Alberta all the way to the Arctic Ocean.

JuneWarren-Nickle's Energy Group

Murphy Oil

By Paul Wells

Murphy Oil Corporation continues to ramp-up activity at its Tupper Montney play in northeastern British Columbia and production from the play is set to increase once recently completed wells come online.

Murphy recently drilled a five well pad with lateral lengths averaging over 10,000 feet. The company expects to bring these wells online in the fourth quarter of 2017.

In total, Murphy will drill 16 Duvernay wells this year, complete 12 and bring 11 wells online. The company will continue to optimize completion designs and test well placement, lateral length, frac design, and flow-back strategy.

Currently, Murphy has three drilling rigs and one frac crew executing the company’s appraisal plans in the Duvernay. For the remainder of 2017, the company expects to drill six wells and bring three wells online, consistent with the previously disclosed 2017 plan.

JuneWarren-Nickle's Energy Group

NGTL Towerbirch Pipeline

Montney natural gas producers in northeast British Columbia now have access to the NOVA Gas Transmission Ltd. system and North American markets on TransCanada Corporation’s Towerbirch Pipeline expansion which entered service today.

The Towerbirch expansion includes the construction and operation of approximately 87 kilometres of new natural gas pipeline and associated facilities, consisting of the Tower Lake Section (roughly 32 kilometres of 30-inch pipeline) and the Groundbirch Mainline Loop (approximately 55 kilometres of 36-inch pipe).

Downstream of the new Towerbirch facilities, TransCanada is nearing the completion of the $1.3 billion 2017 NGTL expansion program, which will add significant capacity to the move gas from the Peace River area to downstream markets connected to the NGTL system.

JuneWarren-Nickle's Energy Group

CAODC Predicts Increased Drilling For 2018

The Canadian Association of Oilwell Drilling Contractors (CAODC) is projecting that 2018 wells drilled will total 6,138, an increase of 107 from 2017 (6,031).

Projected 2018 operating days are 70,587 — an increase of 1,234 from 2017 (69,353), the industry group said in its annual forecast. The rig fleet is expected to decrease by 19 (634 drilling rigs in 2017 to 615 drilling rigs in 2018).

One of the Canadian oil and gas industry’s biggest hurdles continues to be lack of market access and regulatory stability. Two major energy infrastructure projects — the Pacific NorthWest LNG plant and the Energy East pipeline — have been cancelled in the past six months and the federally-approved Trans Mountain pipeline to the west coast could be delayed.

The CAODC forecast focuses on operating days as a key economic indicator of the health of the sector. While there are signs that the drilling and service rig market has bottomed out, meaningful upward movement of day rates remains a struggle.

In 2018, the CAODC is hopeful that some stability — albeit, a “muted stability” — may return for member companies.

JuneWarren-Nickle's Energy Group

Wells Drilled

By Stephen Marsters

Operators across Canada rig released 6,017 wells in the first 10 months of 2017, excluding experimental wells, a 102 per cent increase from 2,981 wells drilled in the comparable period last year.

Industry drilled 16.13 million metres of hole to the end of October (excluding experimental wells).

This year’s rig released meterage is up 98 per cent from 8.16 million metres drilled in last year’s January-to-October period.

Alberta’s rig release count is up 111 per cent at 3,088 wells in the 10-month period compared to 1,463 a year ago. Operators working in the province have drilled 9.19 million metres to the end of October, an increase of 103 per cent from 4.52 million metres a year ago.

In Saskatchewan, operators drilled 2,203 wells in the first 10 months of the year, up 88 per cent from 1,171 a year ago. A total of 4.31 million metres were drilled compared to 2.36 million metres in the year-prior period (an increase of 83 per cent).

In the January-to-October period, 512 wells have been rig released in B.C. compared to 270 a year ago (up 90 per cent). Operators drilled 2.2 million metres compared to 1.11 million metres a year ago (up 98 per cent).

In Manitoba, the province’s drilling tally has increased 220 per cent to 202 wells after 10 months compared to 63 in the year-prior period, while metres drilled lifted to 379,469 metres from 113,820 metres a year ago (an increase of 233 per cent).

Across Canada, of those wells with a reporting status, 74.86 per cent of the wells drilled to the end of October are listed as oil or bitumen wells (compared to 64 per cent last year), while 21.04 per cent of the rig released wells have gas as an objective (compared to 25.92 per cent last year).

In Alberta, oil or bitumen is listed as the objective for 1,930 wells rig released over the first 10 months of the year, compared to 749 a year ago. Wells targeting gas or CBM increased to 942 to the end of October from 555 in 2016.

Oil is listed as an objective of 1,961 wells in Saskatchewan (compared to 1,120 in January-October 2016), while no gas wells have been rig released, either this year or last.

In October, operators rig released 644 wells across Canada compared to 416 a year ago (up 55 per cent).

Operators working in Alberta rig released 373 wells versus 248 in October 2016 (up 50 per cent).

There were 183 wells drilled in Saskatchewan last month, up 39 per cent from 132 in October 2016, while there were 60 wells drilled in B.C. last month, up 107 per cent from 29 a year ago.

In Manitoba, 27 wells were drilled in October, up 350 per cent from six wells in the year-prior period.

Rig release counts, including experimental wells

Operators drilled 6,569 wells, including experimental wells, over the first 10 months of 2017, up 87 per cent from 3,519 rig releases in January-October 2016.

In October, there were 649 wells rig released compared to 417 a year ago (up 56 per cent).

JuneWarren-Nickle's Energy Group

AltaGas Propane Export Facility

By Jim Bentein

In what might be the Canadian corporate version of the sporting world’s “home field advantage” Calgary-based AltaGas Ltd.’s substantial British Columbia presence played a significant role in the company’s development of Canada’s first propane export terminal, at Ridley Island, B.C.

While there were several factors that led to development of the $500 million project, now under construction, Dan Woznow, vice-president of energy exports at AltaGas, said it was the company’s deep roots in the province which played a role in the project going ahead —  in a Canadian energy space filled with the casualties of a challenging regulatory environment and Aboriginal and environmental opposition.

In fact, the company, which has grown from a tiny company with seed capital of $37,000, founded by current company chairman David Cornhill in 1994, to a midstream energy giant with a market capitalization of $10 billion and with a three-pronged strategy focused on the natural gas, power and utility businesses, has a significant presence in the province.

For instance, it owns the Bear Mountain Wind Park, a 102 megawatt (MW) plant near Dawson Creek, the 84 mmcf/d Blair Creek natural gas plant and gathering system near St. John, the 195 MW Forrest Kerr Hydroelectric plant in northwestern B.C., the 66 MW Mclymont Creek hydro plant, also in the northwest, the 16 MW Volcano Creek hydro plant, also in the northwest, the 750 mmcf/d Younger natural gas extraction plant, near Taylor, and the Townsend facility, which processes 198 mmcf/d, as well as the related Townsend 2A sweet gas plant, which processes 99 mmcf/d.

The company is also developing other facilities in the province.

It is building a 30,000 gallon/d LNG liquefaction plant, along with storage, loading and distribution capacity, near Dawson Creek. It is examining the feasibility of building a network of small and medium sized LNG plants to service BC, Yukon and the Northwest Territories as well.

It is also developing the North Pine Gas Liquids (NGL) Facility, located 40 kilometres northwest of Fort St John. That facility, under construction, will have two separate NGL separation trains, each capable of processing 10,000 bbls/d of propane plus NGLs, for a total of 20,000 bbls/d. The first phase will also include 6,000 bbls/d of condensate terminal capacity, with the ultimate capacity for 20,000/d. In addition, a second 10,000 bbl/d NGL separation train is planned.

The company is also building two eight-inch diametre pipelines, each about 40 kilometres long, to connect with its existing Alaska Highway truck terminal. A new rail siding has been built at North Pine that can handle 25 cars per day.

JuneWarren-Nickle's Energy Group