Canada’s Montney shale play, which stretches from Western Alberta northwest into British Columbia, has traditionally been gas focused, but a liquids- and condensate-rich window in the Montney has been attracting the attention of major names in the oil and gas industry. Companies like Shell (ticker: RDSA), Encana (ticker ECA), Apache (ticker: APA) and CNRL (ticker: CNQ) have all been building positions in the Elmworth area of the Montney, looking to further delineate the resources in place.
In close proximity to the positions being built up by these international E&Ps are 81 sections owned by Canadian small-cap Blackbird Energy (ticker: BBI). Oil & Gas 360 spoke with Blackbird’s CEO, Garth Braun about the play.
An Oil & Gas 360® exclusive with Blackbird CEO Garth Braun
“In this over-supplied oil market, and a gas market that appears to be perpetually collared, the oil giants have begun to focus on highly economic liquids-rich resource plays in order to drive shareholder value,” Braun told OAG360®. “We believe we are right inside that liquids-rich window in the Montney.”
“The Montney, like the Eagle Ford, has very specific sweet spots where the resource transitions from a dry gas play to a highly liquids-rich/free condensate play,” said Braun. “The results from our first two wells, the 6-26 middle Montney well and the 5-26 upper Montney well, indicate we’re in that sweet spot.” The 6-26 well tested at over 130 bbls/mmcf and the 5-26 well tested at over 340 bbls/mmcf, according to the company.
“These liquids-to-gas ratios can make or break a well’s economics,” explained Braun, “Our two wells in Elmworth have a liquids-to-condensate ratio that puts breakeven costs in the mid-$40 per barrel range, meaning they are economic even in the current price environment.”
Blackbird has been able to build its 81 section position in this liquids-rich window for approximately $6.9 million (about $85,000 per section), lower than other companies now moving into the play. Most recently, Nuvista Energy (ticker: NVA) purchased 12.5 sections located two and half miles from Blackbird’s acreage for $35.5 million (about $2.9 million per section).
“Being a smaller company in the Montney has proven to be an advantage in building our land position from 27 to 81 sections in the past year,” Braun said. “We built up our position one or two blocks at a time. The larger companies usually have to buy several sections at a premium. The Nuvista acquisition is case in point.”
According to the company’s investor presentation, Blackbird plans to continue its drilling program in 2015 in order to further delineate and de-risk the project. “We are planning to drill our third well in late summer 2015, to delineate a significant number of sections and take us one step closer to initiating a large scale development program,” said Braun.
According to the company’s monthly executive letter, Encana’s 13-22 Upper Montney well, which was drilled just 3 miles west of BBI’s acreage, tested at approximately 350 bbls/MMcf of free condensate.
The company currently has zero debt. “Keeping strength in our balance sheet is absolutely critical,” said Braun. “We would only go into debt after establishing reliable cash flow.”
Blackbird plans to drill two more wells before the end of the year, Braun told OAG360. The company plans to fund its drilling program from the approximately $24.5 million in cash on its balance sheet following the completion of its previous wells.