No let-up in Canada’s Horn River

Gary Park

For Petroleum News

What’s good for EnCana is apparently just as good for the legion of smaller operators active in British Columbia’s Horn River basin.

The big independent keeps making gains as it probes the shale gas play that it figures will unlock trillions of cubic feet of resources. And others are delivering similarly bullish results and forecasts.

EnCana executives said Horn River well costs have been trimmed by 25 percent over the past year to about $2.5 million-$3 million and drilled days have been almost halved to 16 to 30 days, with the number of fracture stages per well climbing to 20.

EnCana’s latest wells, with 12 to 14 fractures, are testing at about 10 million cubic feet per day.

And, as the skill level builds, the horizontal length of its Horn River wells is stretching to 2,500 meters from 1,000 meters.

To date, EnCana (in partnership with Apache) has drilled 47 gross wells in the basin and the performance from 13 wells is “very positive.”

However, only about four of the 21 wells EnCana expects to complete this year are actually producing, said Mike Graham, executive vice president of the Canadian Foothills division, adding: “This year we actually spent a lot more money just drilling wells.”

The budget allocation for Horn River in 2010 will be about $350 million and commercial development is also scheduled for next year, but Chief Executive Officer Randy Eresman said construction capital is earmarked more for 2011.

Other plans

• Quicksilver Resources said it plans to invest $50 million in the basin next year, including infrastructure costs and two wells.

Discussions have also taken place in recent months with possible joint-venture partners.

“We’re not in a big hurry,” said Chief Executive Officer Glen Darden. “The more we learn about Horn River, the more we like it. Obviously, a lot of activity is happening around us, which makes us even prouder of our position.

“If we can get the right structure and the right price, we’d be willing to do something (on the joint-venture front), but at this point there’s no big hurry.”

Quicksilver has 127,000 net acres in Horn River, “surrounded by significant production from other producers,” Darden said.

It has to drill eight wells over the next three years to convert exploratory licenses to leases and then has 10 to 12 years to develop the entire acreage.

Transportation agreements are in place to ramp up volumes over the next five years, Darden said.

He said Horn River could be “several times larger than our current reserve base. We can grow production organically at 20 percent over the next several years and stay well within cash flows. We will keep pushing.”

• TAQA North, the subsidiary of state-owned Abu Dhabi National Energy Co., said it will drill three exploration shale wells this winter on its newly acquired Horn River holdings.

The company invested C$63.3 million earlier this year to secure 32,000 acres on two blocks north of Fort Nelson.

Carl Sheldon, recently appointed general manager, said Horn River is one of many global organic growth prospects for the parent company as it concentrates more on exploration than mergers and acquisitions.

“We will continue to look to acquisitions to enhance our portfolio where that makes sense, (but) tight cost control remains the focus of our leadership,” he said.

• EOG Resources said it expects to drill 12 wells in Horn River this winter, having completed seven wells last winter in a program focused on improving operations and completion techniques along with determining optimum spacing between wells, Chief Executive Officer Mark Papa said.

He said three wells in one pattern tested at 17.2 million to 23.4 million cubic feet per day, while four wells in the second pattern tested at rates of 16 million to 18 million cubic feet per day. EOG will now produce the wells this winter to evaluate the ability of each pattern to achieve the desired result.

“We believe the three high-rate wells are among the best in the play, topping our 16 million cubic feet per day well completed last year,” Papa said.

He said EOG was also able to reduce its drilling days by 42 percent and well costs by 35 percent over 2008 results.

Horn River is the underpinning of EOG’s memorandum of understanding to supply 200 million cubic feet per day of gas to Kitimat LNG for its proposed LNG export terminal at Kitimat, on the northern British Columbia coast.

Papa said that each year between 2010 and 2013, EOG plans a slow ramp up of production with the aim of reaching 200 million cubic feet per day by the planned terminal startup date.

He said EOG’s strategy for Horn River involves “slowly increasing our activity and really not just get in a big hurry on this asset, similar to what we are talking about in the Marcellus shale (in Pennsylvania) … particularly in a gas market that is uncertain for us right now.”