Current ECA Stock Info

Condensate wells producing 1,200 BPD; ECA will have seven rigs targeting 70-80 Montney wells in 2017

Encana (ticker: ECA) is on track for developing its Montney assets, according to a Wednesday release from the company.

Encana owns 384,000 net acres in British Columbia and Alberta in the heart of the Montney core. The company is prioritizing condensate-rich wells for future development, as high-margin condensate protects operations from natural gas price risk.

Encana expects to spend about $250 million developing its Montney assets in 2017. Seven rigs will drill a total of 70-80 wells this year. Well cost is low, with an average 9,000 foot lateral well costing $4.5 million, comparable to or less than similar wells in major U.S. basins.

Encana reports that its latest completion designs are delivering strong production rates. Wells in the company’s condensate-rich northern acreage are coming online with up to 1,200 BPD of condensate, and some wells IP at 2.5 MBOEPD of total production.

Condensate production to increase fourfold through 2019

The company seeks to quickly grow its Montney activities.

Current net production is about 675 MMcf/d of gas and 14 MBPD of liquids. Encana expects to double its liquids production by the end of 2017, with growth continuing to 70 MBPD of liquids and 1.2 Bcf/d of gas by the end of 2019. This program is self-funding, with estimated margins of $14.00/BOE.

Montney liquids provide hedge against falling gas price

Encana is looking to reduce its exposure to the AECO gas price, the Albert gas trading price. Nearly one third of all Canadian natural gas demand comes from oil sands extraction, which creates an unstable price environment. The AECO gas price dropped sharply to record lows in May 2016, when wildfires near Fort McMurray shut down activity. According to the Alberta Department of Energy, the average gas sale price in May 2016 was CD$0.94/GJ, compared with CD$2.39/GJ in February 2017.

Shipping gas out of Alberta

Encana is avoiding such price uncertainty by shipping gas to other markets via pipelines. The company reports 100 MMcf/d is being shipped to the Pacific Northwest, 80 MMcf/d to Chicago and 316 MMcf/d to Dawn Ontario. Encana states that additional hedging activity has locked in 475 MMcf/d of AECO gas at prices that support development.

Encana Sees Liquids-Rich Montney as Key to its Gas Development

Source: Alberta Department of Energy

Centralized processing under construction

Encana is currently developing infrastructure to support this planned development, with several facilities currently under construction. Instead of the standard “unbundled” infrastructure model typically used by the industry, Encana is planning larger “bundled” processing designs.

This design utilizes fewer, larger, more efficient gas processing plants over many small gas plants. According to Encana, using centralized infrastructure will allow it to decrease costs from $2 million/MMcf/d to $1.6 million/MMcf/d. Three plants are slated for expansion or construction, with a combined capacity of 1 Bcf/d of gas and 27 MBOPD of condensate processing.

Others also developing Montney liquids

Blackbird Energy (ticker: BBI) is a small Montney player working in the same liquids-rich neighborhood as Encana.

As of Feb. 2017, Blackbird had assembled roughly 97 net sections in the Elmworth / Pipestone region of northwest Alberta in the liquids-rich corridor of the Montney. Blackbird and others are seeing impressive results in the area, with 660 feet of stacked pay in the Montney often compared to the Permian. Subsequently the company entered an agreement to acquire additional Montney acreage that when final will take its total holdings in the Montney to 115 sections.

“We saw the last two years as an opportunity to increase our acreage in the liquids-rich corridor of the Montney, build out our infrastructure, roll out our Stage Completions system, and build value for investors,” Blackbird CEO Garth Braun told Oil & Gas 360®.

Encana Sees Liquids-Rich Montney as Key to its Gas Development

Source: Blackbird Energy


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