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The Montney could be Canada’s answer to American shale gas fields

CALGARY, A.B. — According to an article in the Financial Post, the Montney formation is gradually positioning itself as a serious rival to U.S. shale fields, as companies operating in the basin aggressively scale back their operating costs.

The unlocking of large shale gas fields in the northeastern and northern United States, namely the Marcellus and Utica fields, has created stiffer competition for Canadian gas companies in recent years, as they fight for investment dollars amid low commodity prices.

Tourmaline Oil Corp. CEO Mike Rose says that he thinks, “Canada’s got two natural gas plays that compete toe-to-toe with the best U.S. gas plays—that’s the Montney in Alberta and B.C. and the Alberta Deep Basin.” The potential of the Montney formation, due both to its size and liquids-rich geology, has been known for many years. The basin holds around 449 trillion cubic feet of marketable natural gas, which according to National Energy Board estimates is just under half of Canada’s total natural gas reserves.

Analysts say recent cost-cutting measures in the Montney have outpaced analyst expectations, and think there is room to further decrease costs.

In a recent research note, analysts at BMO Capital Markets said that, “The super liquids-rich window of the Montney in British Columbia will emerge as one of the top plays in Western Canada and perhaps in North America.”

The analysts outlined a handful of medium and small-cap companies in the region that have either met or outperformed expectations on well their results.

Rose says Tourmaline can generate returns at low-end price comparable to U.S. shale producers of $2.50 per million cubic feet of gas, which is among the lowest in the region. The benchmark Alberta natural gas price was trading at $3.28 per gigajoule on Tuesday.

Tourmaline bulked up its position in the Montney with a $1.4 billion acquisition of assets from Royal Dutch Shell in October. The company hopes to cut back operating costs at those assets from around $5.50 per barrel of oil equivalent to about $3.50 per boe, which is in line with its existing assets.

On average, wells in the B.C. section of Montney cost about half of the average well in the Marcellus gas field, at about $4.8 million per well, though Marcellus wells typically produce twice the volume over their lifetime. According to public data, wells in the Utica are roughly three times as expensive, at an average $13.7 million, and produce double the volume of a typical northern Montney well.

Story courtesy The Financial Post: http://business.financialpost.com/news/one-of-north-americas-top-plays-why-the-montney-is-canadas-answer-to-u-s-shale.


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