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Energy & Mines

August 2018

BC Land Sales

Alberta Land Sales

ARC Resources

License Count

Cenovus

Aitken Creek Section Pipeline

Rig Release

Enbridge

Trans Mountain

AltaGas

Top Licensee Tally


BC Land Sales

The BC government had another uneventful land sale, bringing in $201,872 in bonus bids thanks to one parcel sold.

Industry picked up 777 hectares at an average price of $259.81 at its August sale. This came off of the lowest bonus of the year of $24,090 last month. Year-to-date, the government has taken in $59.67 million on 55,543 hectares at an average price of $1,074.31. To the same point last year, $158.43 million had rolled into provincial coffers on 58,418 hectares at an average price of $2,712.03.

Three licences were up for auction—two received no bids or no acceptable bids; Stomp Energy Ltd. picked up the lone parcel at the sale. The parcel included section 33 at 85-18W6 and sections 4 and 5 at 86-18W6 for all zones.

JuneWarren-Nickle's Energy Group

Alberta Land Sales

By Richard Macedo

The Alberta government attracted $10.56 million in bonus bids on August 08, in an auction that attracted a swath of very low bids, and a few that received no bids.

Industry purchased 78,614 hectares at an average price of $134.31. Year-to-date, the province has collected $231.4 million on 743,062 hectares at an average price of $311.42.

Some of these parcels attracted bids of just $2.50/hectare.

The land sale bonus high was paid by Buffalo Hill Resources Ltd.


By Richard Macedo

The Alberta government generated $25.44 million in bonus bids, with large Duvernay parcels central to the auction, which is a recurring theme.

The province sold 92,442 hectares at an average price of $275.24. Year-to-date, the province has taken in $256.85 million on 835,504 hectares at an average price of $307.42.

Duvernay driver

The more substantial bonus bids were laid down for Duvernay land in Alberta. Three parcels around acquired by Brio Energy Corporation, Contiguous Resources Ltd. and NRG Landsolutions Inc. parcels combined for $13.54 million.

Another parcel, was acquired by Antelope Land Services Ltd. for $1.13 million at a low average price of $144.98.

Britt Resources Ltd. purchased a licence for $1.25 million at an average price of $2,779.81.

Also, Badger Pass Minerals Inc. acquired a license for $380,920 at an average of $1,487.97.

A two-section license was purchased by Britt Resources for $1.06 million at an average price of $2,077.77.

Meanwhile, Millennium Land Ltd. acquired a licence for $1.05 million at an average price of $455.73, while Ascensun Oil and Gas Ltd. picked a license for $852,456 at an average price of $369.99.

JuneWarren-Nickle's Energy Group

ARC Resources

ARC Resources Ltd.’s production surged in the second quarter to 127,879 boe/d, climbing from 113,410 for the April-June period of 2017.

Funds from operations during the Q2 period of 2018 climbed to $204.4 million from $169.8 million.

ARC's position in the Montney is made up of approximately 1,160 net sections of land (approximately 754,000 net acres), with production from ARC's Montney assets representing approximately 90 per cent of total corporate production.

ARC continues to optimize well designs and maximize well value, pursue new technologies, and work with service providers to preserve its competitive cost structure.

ARC invested $164.8 million of capital, before land and net property acquisitions and dispositions, in the second quarter of 2018, bringing the total to $378.5 million invested in the first half of 2018. Second quarter 2018 capital activity included drilling 11 natural gas wells at Sunrise, completion activities at Ante Creek, Dawson, Sunrise, and Tower, and finishing completion activities on 13 wells in the Dawson and Tower fields.

Capital investment in the period was also focused on various infrastructure initiatives in northeast British Columbia, including progressing construction of the Sunrise Phase II gas processing facility expansion, completing electrification activities at ARC's Parkland/Tower gas processing and liquids-handling facility, and continued activity on ARC's water handling and recycling infrastructure at Dawson, Parkland/Tower, and Sunrise. Approximately 95 per cent of capital invested in the first half of 2018 was directed towards ARC's Montney assets.

As part of its ongoing commitment to responsible water management and reducing its overall freshwater dependency, ARC is investing in strategic water infrastructure in northeast British Columbia. ARC has invested approximately $15 million on these projects to-date. At Sunrise, ARC has completed the construction of a 200,000 cubic metre freshwater storage reservoir ahead of completion operations for the first multi-well pad that will supply gas to the expanded Sunrise Phase II gas processing facility.

This project will generate strong economic returns with an expected 80 per cent reduction in water handling costs in the Sunrise area. At Dawson and Parkland/Tower, construction of the water recycling and re-use facility continued in the second quarter of 2018. With pipelines connecting the three assets, the water hub facility will reduce ARC's dependency on freshwater used for hydraulic fracturing operations and will result in significant completion cost savings. ARC anticipates that the project will be in service by year-end 2018.

Lower Montney

Successful 2017 appraisal activities resulted in the delineation of a significant portion of ARC's Montney lands and moved a substantial amount of ARC's drilling inventory into the development stage. Based on encouraging results, ARC is pursuing opportunities in the Lower Montney by reallocating a portion of its 2018 capital budget to drill incremental Lower Montney liquids-rich wells. ARC will continue to expand production from the Lower Montney to increase liquids volumes across ARC's lands at Attachie, Dawson, and Parkland/Tower.

Encouraged by the successful Lower Montney appraisal activities conducted at Parkland in 2017, ARC is piloting dual-layer Lower Montney development at Parkland and has commenced the construction of a pipeline that will connect ARC's Parkland and Dawson assets. Interconnecting these assets gives ARC the ability to invest in light oil and liquids-rich natural gas opportunities across the Parkland/Tower and Dawson fields on the basis of highest profitability, gives ARC the ability to accelerate its development of the Lower Montney at Parkland, and takes advantage of unutilized liquids processing capacity at the Dawson Phase III gas processing and liquids-handling facility. The project will also allow for the transfer of produced water from Parkland to Dawson for completion operations. The interconnection is planned to be in service by late 2018.

JuneWarren-Nickle's Energy Group

License Count

By Stephen Marsters

Operators across Canada licensed 873 new wells in July, a three per cent decrease from 898 licences approved a year ago.

Permitting counts declined in Alberta and Manitoba last month compared to July 2017, but were up in B.C. and Saskatchewan.

Overall, to the end of July, 5,331 new wells have been permitted compared to 5,413 a year ago (down almost two per cent). Year-over-year licensing counts for the seven-month period are up in Alberta, B.C. and Manitoba, but down in Saskatchewan.

Provincial stats

In Alberta, the 445 well authorizations issued in July were down 12 per cent from last year’s 507 licences. The province has licensed 2,753 wells to the end of July, up four per cent from 2,640 permits in the first seven months of 2017.

Saskatchewan issued 302 well permits last month compared to 292 in July 2017 (up three per cent). To the end of July, the province has permitted 1,909 new wells compared to 2,221 a year ago (a decrease of 14 per cent).

British Columbia approved (input) 104 wells in July, up from 65 a year ago. In the first seven months of the year, the province has approved 518 licences, up 22 per cent from 426 in January-July 2017.

Manitoba granted 21 well authorizations last month compared to 32 well permits issued in the year-ago period. To the end of July, Manitoba has authorized 139 new wells compared to 116 wells a year ago (up 20 per cent).

In July, 573 oil and bitumen wells were licensed, down from 592 a year ago. Over the first seven months of the year, 3,501 oil and bitumen wells have been permitted compared to 3,674 a year ago.

There were 202 gas wells licensed last month in Alberta, Saskatchewan and B.C. compared to 193 a year ago. To the end of July, 1,058 gas wells have been authorized compared to 867 in the comparable period of 2017.

Through the first seven months of the year, excluding experimental wells, operators have licensed 4,472 horizontal wells (88 per cent of the total) compared to 4,593 horizontal wells permitted to the end of July 2017 (86 per cent of the total).

Operators licensed one oilsands evaluation hole in July. Producers have licensed 199 oilsands evaluation wells to the end of July compared to 64 a year ago.

The top five licensees of new wells in July (same result whether including or excluding experimental wells), were Encana Corporation (98 wells), Canadian Natural Resources Limited (75), Crescent Point Energy Corp. (73), Raging River Exploration Inc. (45) and Teine Energy Ltd. (39).

JuneWarren-Nickle's Energy Group

Cenovus

Cenovus Energy Inc. and one of its subsidiaries have entered into an agreement to sell the general partnership that holds the Pipestone and Wembley natural gas and liquids business in northwestern Alberta for cash proceeds of $625 million.

NuVista Energy Ltd. in a separate release said it was the buyer.

The transaction also includes the Pipestone Business’s 39 per cent operated working interest in the Wembley gas plant. The sale is expected to close in the third quarter of 2018, subject to customary closing conditions.

JuneWarren-Nickle's Energy Group

Aitken Creek Section Pipeline

Macro Enterprises Inc. has commenced construction of the Aitken Creek Section – Spread 2 of the North Montney Mainline project.

The North Montney Mainline comprises 301 kilometres of 42-inch diameter pipeline, which will also include metering facilities, valve sites and compression facilities and will provide added capacity needed to ship natural gas southward. The pipeline will be owned and operated by NOVA Gas Transmission Ltd. (NGTL) a subsidiary of TransCanada Corporation.

The Aitken Creek Section – Spread 2 is approximately 67 kilometres of NPS 42-inch pipeline and related facilities. Contract value is approximately C$200 million. The construction contract is a unit rate type contract with upfront milestone payments to fund initial working capital requirements.  Substantial completion is planned for Q1 2019.

Macro is working with Spiecapag Canada Corp. on this project.  Spiecapag is a subsidiary of Vinci S.A., a French based company with worldwide operations. As part of its contribution to this project, it will provide certain personnel and equipment; however, its financial interest will be nominal.

JuneWarren-Nickle's Energy Group

Rig Release

By Stephen Marsters

Rig release counts have declined in British Columbia and Saskatchewan to the end of July, excluding experimental wells, compared to last year’s tally over the first seven months of the year.

In Saskatchewan, however, total meterage for January-July remains ahead of last year’s total.

Overall, excluding experimental wells, there were 3,877 wells rig released to the end of July, down three per cent from last year’s count of 4,011 in the comparable period.

Producers across Canada drilled 11.04 million metres in the January-to-July period, excluding experimental hole, a slight increase of one per cent from 10.90 million metres in the first seven months of 2017.

Provincial breakdown – excluding experimental wells

Operators in British Columbia have drilled 258 wells in the province to the end of July, off 24 per cent from 340 a year ago. Metres drilled declined 16 per cent to 1.2 million metres in the January-July 2018 period from 1.43 million metres a year ago.

Saskatchewan’s rig release count to the end of July has declined by six per cent to 1,397 compared to 1,488 a year ago. But operators in the province drilled 3.01 million metres over the first seven months compared to 2.96 million metres to the end of July last year (an increase of two per cent).

In Alberta, a total of 2,090 wells were rig released over the seven-month period, up about two per cent from 2,054 a year ago. Metres drilled improved five per cent to 6.55 million metres this year from 6.26 million metres in January-July 2017.

In Manitoba, 126 wells were rig released to the end of July, up three per cent from 122 a year ago, while metres drilled increased 14 per cent to 253,132 from 221,750 metres.

Of the wells drilled to the end of July, 1,632 still have no final status (oil, gas, dry or service). Of those with a final status designation, 1,883 (or 84 per cent) were reported as an oil well and 300 were reported as a gas well (about 13 per cent).

July stats

Operators rig released 735 wells in July, excluding experimental wells, up six per cent from 693 a year ago.

In Alberta, there were 393 wells rig released last month compared to 326 a year ago (up 21 per cent).

Producers in Saskatchewan drilled 280 wells, off six per cent from 297 wells a year ago. B.C. operators drilled 34 wells last month compared to 42 in July 2017 (down 19 per cent).

Manitoba operators rig released 28 wells compared to 27 a year ago (an increase of four per cent).

Rig release counts, including experimental wells

Including experimental wells, operators drilled 4,385 wells to the end of July compared to 4,553 in the first seven months of 2017 (a decrease of four per cent).

For July, 741 wells were drilled compared to 701 a year ago (up six per cent).

JuneWarren-Nickle's Energy Group

Enbridge

Westcoast Energy Inc., doing business as Spectra Energy Transmission (Enbridge), has applied to the National Energy Board (NEB) for the Tank 51 and 52 replacement project at the McMahon Gas Plant.

The existing Tanks 51 and 52 at the McMahon Gas Plant have reached the end of their service life. Westcoast proposes to replace the existing tanks with one larger capacity tank. The existing tanks being replaced are proposed to be cleaned and abandoned in place.

JuneWarren-Nickle's Energy Group

Trans Mountain

The National Energy Board (NEB) released a condition compliance letter report that gives Trans Mountain Pipeline ULC NEB approval to start construction of its expansion project on Segments 1-4, from the Edmonton Terminal to its Darfield Pump Station north of Kamloops in the B.C. Interior.

Letter Report No. 21, addresses a number of remaining pre-construction engineering conditions for the project. When considered in conjunction with Letter Report No. 20, released on Aug. 3, 2018, which approved the Environmental Alignment Sheets and Resource-specific Mitigation Tables for Spreads 1-4, Trans Mountain has now met all applicable pre-construction condition requirements for Spreads 1 through 4.

The NEB has also approved more than 96 per cent of the detailed route for those segments of the pipeline. Subject to other federal, provincial and municipal permits and regulations, the company can now begin construction in these segments of the pipeline, which includes clearing of the right-of-way.

Of the 50 detailed route hearings that were granted for Segments 1-4, 36 were withdrawn by the applicants. Thirteen hearings went before an NEB panel, 11 decisions have been released and one landowner withdrew after their hearing. Two active hearings remain for Segments 1 through 4 and no construction work related to these hearings is permitted while they are pending.

For the entire pipeline route, 72 per cent of the entire detailed route has now been approved. Hearings for the final segment — Segment 6 — are scheduled to begin in Chilliwack in October 2018.

JuneWarren-Nickle's Energy Group

AltaGas

AltaGas Ltd. has entered into definitive agreements with Kelt Exploration (LNG) Ltd. to provide an energy infrastructure solution for the liquids-rich Inga Montney development located in northeast British Columbia.

The commercial arrangements underpin the expansion of the Townsend Complex, including the addition of a 198 mmcf/d of C3+ deep cut gas processing capacity. The additional natural gas liquids will increase utilization in AltaGas's existing liquids pipelines, positions the company well for an expansion of the North Pine fractionator to 20,000 bbls/d which already has regulatory approval, and provide additional propane supply to the Ridley Island Propane Export Terminal (RIPET).

The expected commercial operations date of the Townsend Deep Cut Facility is expected in the fourth quarter of 2019. The infrastructure investment for expansion and increasing the capture area of the Townsend site is estimated to be $180 million. The economies of scale and synergies at the Townsend Complex will result in capital efficiencies approaching $750,000 per million cubic foot of deep cut capacity. The total value proposition delivers attractive returns for AltaGas that exceed standalone gas processing projects.

Raw gas processing

AltaGas will construct 198 mmcf/d of deep cut natural gas processing capacity at the Townsend Complex.

JuneWarren-Nickle's Energy Group

Top Licensee Tally

Top Five Licensees - January to July

Includes exp. wells

2018

 

Includes exp. wells

2017

Canadian Natural

478

Crescent Point

548

Crescent Point

462

Canadian Natural

428

Encana

274

Teine

308

Raging River

246

Raging River

224

Teine

228

Tourmaline

216

Canadian Natural Resources Limited and Crescent Point Energy Corp. are running neck-and-neck as top licensees of new wells in 2018, including experimental wells, through the first seven months of the year.

Encana Corporation is a new entrant in 2018 onto the list of the Top 5 licensees, while Tourmaline Oil Corp. has fallen out of the Top 5 this year.

JuneWarren-Nickle's Energy Group