A new chirping sound emanating from either side of the Alberta-Montana border has nothing do with the birds of spring and a lot to do with fledgling E&P companies living in hopes that the “big” Bakken in Saskatchewan and North Dakota has extended its wingspan.
The juniors are already raising quite a flap as they poke and scratch around in the Alberta Bakken tight oil play which straddles the international border to background noises that the Exshaw component of the play is close to the Bakken.
For the Calgary-based companies, who are coming under pressure from their lenders to get out of dry natural gas, the prospect of crude oil and natural gas liquids development in the so-called Exshaw/Bakken is a godsend.
“We maintain the productivity potential of the Alberta Bakken is comparable to what we’re seeing in the Williston basin,” said Robert Mercier, president and chief executive officer of Bowood Energy, which holds a net 110,000 acres in the fairway and is in the forefront of advancing the play.
He described the Alberta Bakken as straddling the 49th parallel, extending over 110 miles north-and south and stretching across 25 miles.
Bowood is involved in a joint venture with Legacy Oil + Gas, which itself is immersed in the Spearfish play at the eastern end of the Williston basin.
“What has the industry excited is the potential and similarities between the Alberta Bakken and Williston basin,” said Mike Marrandino, president of Primary Petroleum, which holds 170,000 acres of mainly freehold land in the Pondera and Teton counties of Montana.
He said the Alberta Bakken reservoir size sprawls over such a large land area the potential is huge.
Some C$500 million spent
Primary estimates the broader oil industry has spent about C$500 million on the Alberta Bakken, including investments in land, joint ventures, exploration and drilling.
It believes C$230 million has been spent on land alone at an average price of C$2,000 per hectare (C$812 per acre).
Bowood reported earlier this year that a test well on Blood First Nation land in southern Alberta started production in December, but that it had been unable to establish a stabilized production rate due to the high-pressure, multiphase influx of oil, water and gas that was hampering pump performance during early-stage production. However, the company indicated the problems were being resolved.
Mercier told investors and analysts at a Calgary conference late last year that Bowood has light oil recovery between 35 and 40 degrees API, but cautioned that the sparse information issued by other producers has ranged from “quite encouraging to discouraging.”
He said the shortage of solid news stems from the fact that most wells remain classified as confidential.
Murphy encouraged
Of the larger operators, Murphy Oil, said a year ago that it had drilled the first two Exshaw/Bakken appraisal wells of its six-well program, and has since disclosed that it hit oil in the Three Forks zone.
“At this early stage, from what we have seen, it’s encouraging but it’s not an Eagle Ford,” he told a conference call, estimating that about 87 wells have been drilled — 36 of them in Montana and 51 in Canada, with 27 drilled horizontally and 20 classed as producing wells.
David Wood, Murphy’s chief executive officer, shed some light on the precise nature of the Exshaw play, when asked if it was similar to the Bakken.
“It’s a geological equivalent,” he said. “If you look at the make-up in terms of how it looks as a section, it’s about 10 percent thinner overall than the sweet spots of the Bakken.
“It does have the same carrier bed in the middle. So, given the results of the Bakken where that is a key contributor to how wells perform … it has very similar geologic characteristics,” Wood said.
“The oil that was recovered from the two wells on acreage we have is good quality oil, low-30 gravity. The section is over-pressured. So it is quite analogous.
“I don’t want us to stop calling it back because we don’t have enough data yet and geologically things change over these long distances, but it does have a lot of very similar characteristics,” Wood said.
Murphy said it is trying to grow its position which is now close to 150,000 net acres, encouraged that two old wells on some of its acreage have recovered oil “so we have a good place to start.”
Although the company’s results have been mixed, initial production from one well exceed 300 bpd and flowed for 42 successive days on a small choke. Murphy’s budget provides for two more wells this year.
Early-entry tight oil play
BMO Capital Markets has described the Alberta Bakken as an early-entry tight oil resources play, with the main Alberta Bakken fairway coinciding with the thermally mature Exshaw source rock fairway.
“Though approximately time equivalent, the Alberta Bakken and Williston basin Bakken developed in two very different depositional settings: a semi-restricted intracractonix basin (Williston) versus a westward-facing foreland trough (Alberta Bakken),” said the report.
Geoff Ready, a research analyst at Haywood Securities, said the C$150 million in successful Alberta land auction bids in 2010 for 280,000 acres was “an extraordinary amount considering the negligible horizontal drilling that has taken place to date.”
In addition to Murphy, Shell Canada, Nexen, Crescent Point Energy and Penn West Petroleum are among the big-names that have staked claims along with a number of little-known juniors, including Bowood, Legacy and DeeThree Exploration.
DeeThree, backed by a C$17.3 million financing and a successful drilling program, hiked its 2012 capital budget to C$82 million from C$57 million, primarily to capitalize on Bakken success in the Lethbridge area, where 11 net wells are scheduled.
The company’s current overall production is 4,000 barrels of oil equivalent per day (63 percent crude and natural gas liquids). Initial production from the Lethbridge discovery well was 415 bpd with an average water cut of 3 percent. A second well has been drilled this year to a planned total horizontal length of 4,700 feet.
Emerging light-oil development
GMP Securities analyst Peter Doig said Shell, Nexen and Crescent Point operators have “let it be known that they are chasing an emerging new light-oil development.”
Macquarie analyst Ray Kwan suggests the play could help rescue the Western Canada Sedimentary basin, WCSB, from its conventional oil and natural gas decline.
He said the Exshaw/Bakken formation is the largest of four that extend into northern Alberta and British Columbia and are estimated to have more than 40 billion barrels of original oil in place.
“Even at a 1 percent recovery factor, they would go a long way” towards prolonging WCSB production.
Brad Hayes, president of Petrel Robertson Consulting, said the Exshaw/Bakken is “regionally very extensive,” stretching more than 800 miles north into the Horn River basin of northeastern British Columbia, the Yukon Territory and the Northwest Territories.
Primary Petroleum said the list of U.S. producers to have joined the Bakken hunt in western Montana include Rosetta Resources, Newfield Exploration, Mountainview Energy, Stone Energy, Anschutz Exploration, Quicksilver Resources, Fairways Offshore Exploration, Arkanova Energy, FX Energy and American Eagle Energy.
According to a Rosetta presentation the Alberta Bakken is found at depths of 4,500 feet to 7,500 feet and where it operates in Montana’s Pondera County the Bakken is at 6,200 feet.
On the Alberta side, activity is gathering pace, with Shell licensing four new wildcat horizontal wells in the Del Bonita area, with one drilled. The terminating zone is listed as the Big Valley formation, just below the Exshaw/Bakken.
