Betting on gas recovery

Two years after making its initial footprint in the Western Canadian Sedimentary basin, junior producer Pine Cliff Energy has joined those who believe natural gas prices are on the verge of a rebound.

It has taken a C$100 million plunge by acquiring shallow gas holdings in Alberta and Saskatchewan from an unnamed “senior producer,” gaining 5,300 barrels of oil equivalent per day and a base that is 100 percent weighted to gas.

The transaction, due to close by Nov. 1, is consistent with Pine Cliff’s existing 460,000 gross acres in the southeast corner of Alberta that it describes as strongly leveraged to a gas price recovery.

The company is also producing from multi-zone plays covering 35,260 gross acres in west-central Alberta, where it has a working interest of 56 percent and a 90 percent operating role. That output is weighted 23 percent to oil and natural gas liquids.

It produced 6,272 boe per day in the first quarter compared with 2,536 boe per day a year earlier, and has set a 2014 outlook of 6,100-6,500 boe per day.

Pine Cliff said the acquisition will allow it to build base production to more than 11,000 boe per day, with a combined decline rate of 14 percent from its new proved plus probable reserves of 15.5 million boe.

A number of “potential low risk growth opportunities” have been identified on the properties, including the use of infill drilling, recompletions and well reactivations, it said. The acquisition costs are calculated at C$18,870 per flowing boe of production and C$6.45 per boe of proved plus probable reserves.

- Gary Park