Post on 18-Jul-2020
The AlberTA bAkken: A new, UnconvenTionAl TighT oil resoUrce PlAyocTober 2010
bMo cAPiTAl MArkeTsoil & gAs
Brian Zaitlin, Ph.D., P.Geol.Director and Chief GeologistInvestment and Corporate BankingA&D Advisory Group(403) 515-3674brian.zaitlin@bmo.com
Steven Kehoe, M.E.Sc, P.Eng. AssociateInvestment and Corporate BankingA&D Advisory Group(403) 515-3661steve.kehoe@bmo.com
Joyce Kennedy, B.Sc. Vice PresidentInvestment and Corporate BankingA&D Advisory Group(403) 515-1576joyce.kennedy@bmo.com
Summary
• TheAlbertaBakkenisanexampleofanearlyentryDeepBasin,tightoilresourceplay.
• CrescentPointEnergy,MurphyOilandBowoodEnergyhaveestablishedadominantlandpositioninthethermallymaturesourcerockfairwayinsouthwesternAlberta.
• RosettaResources,NewfieldExplorationandAnshultzExplorationarethedominantlandholdersontheBlackfeetIndianReservationinMontanajustsouthoftheAlberta–Montanaborder.
• TheAlbertaBakken typewellwith2horizontal legs,anEURof250Mbbland three-monthIPof348bbl/d (basedonaverticalproducer)haseconomicsthatarecomparabletotypicalBakkenwellsinSoutheastSaskatchewan,NorthDakota,orMontana.
BMO Capital Markets is a leading, full-service North American financial services provider, with over 2,000 em-ployees operating in 14 North American offices and 26 worldwide, offering corporate, institutional and government clients access to a complete range of investment and corporate banking products and services. BMO Capital Markets is a member of BMO Financial Group (NYSE, TSX: BMO), one of the largest diversified financial services providers in North America with US$386 billion total assets and 38,000 employees as at July 31, 2010.
AboUT bMo cAPiTAl MArkeTs
invesTMenT And corPorATe bAnking A&d Advisory groUP
The Canadian Acquisition & Divestiture Advisory team’s primary mandate is to successfully facilitate acquisition, divestiture and joint venture activity; to support BMO Capital Markets and our clients in the technical and financial evaluation of conventional and unconventional reservoirs in order to quantify existing potential; and present upside of established and emerging plays.
Ian van Staalduinen, B.A.Sc., P.Eng.Managing DirectorBMO Nesbitt Burns Inc. (Canada)BMO Capital MarketsInvestment and Corporate BankingA&D Advisory Group(403) 515-1526ian.van@bmo.com
Engineering
Wendy Smith Low, B.Sc.Director(403) 515-1528wendy.smith@bmo.com
Ryan Twa, M.Sc., P.Eng.Vice President(403) 515-1509ryan.twa@bmo.com
Steven Kehoe, M.E.Sc, P.Eng.Associate (403) 515-3661steve.kehoe@bmo.com
Geology
Brian Zaitlin, Ph.D., P.Geol.Director/Chief Geologist(403) 515-3674brian.zaitlin@bmo.com
Joyce Kennedy, B.Sc.Vice President(403) 515-1576joyce.kennedy@bmo.com
Kathleen Dixon, B.Sc., M.B.A., P. Geol. Associate (403) 515-3670 kathleen.dixon@bmo.com
Commercial
Andrew Taylor, M.Sc.Analyst(403) 515-3669andrew.taylor@bmo.com
Mandy Edwards, B.A.Coordinator(403) 515-1666mandy.edwards@bmo.com
Table of Contents
ExecutiveSummary....................................................................................................................................................... 2
Introduction................................................................................................................................................................... 5
RecentDrilling,Acquisition,Farm-inandLandSaleActivity...................................................................................... 6
GeologicalSetting........................................................................................................................................................ 10
TypeCurveDevelopment............................................................................................................................................ 16
EconomicParameters.................................................................................................................................................. 18
EconomicSummary..................................................................................................................................................... 19
SummaryandConclusions.......................................................................................................................................... 21
Page 2 The Alberta Bakken
Executive Summary
TheAlbertaBakken,composedoftheBanff–Exshaw–BigValleyFormations(Figure1),isanexampleofanearlyentryDeepBasintightoilresourceplay.Whiletheplayisstillspeculativeduetothelownumberofproducingwells,DSTs,coreorcompletionattempts,theplayisconsideredgeologicallyproven,withproductionandDSToilrecoveriesfromtheBigValley(ThreeForksequivalent),andDSTrecoveriesfromtheExshaw(Bakkenequivalent).ThemainAlbertaBakkenplayfairwayiscoincidentwiththethermallymatureExshawsourcerockfairway(Figure2).
Theadventofhorizontaldrillingandmulti-stagecompletiontechnologynowallowsfortheexploitationofAlbertaBakkenunconventionaltightoilreservoirs.Recognitionofpotential lowresistivity,overpressuredbypassedpay iscritical inthe identificationofpotentialreservoirinaDeepBasinsetting.
SignificantactivityispresentlyexpandingthelimitsoftheAlbertaBakkenPlay(Figure2):
• Approximately112,887ha(~436sections)havebeenpurchasedviacrownlandsalefortheAlbertaBakken.Theaveragepriceatcrownlandsalesin2010was$890/ha,withamaximumpriceescalatingto$4,668/ha.ThetotalbonusforAlbertaBakkenlandsin2010was~$100million.
• InsouthwesternAlberta,CrescentPointEnergy(throughtheacquisitionofDarianExplorationfor$96million)andMurphyOilandBowoodEnergy(throughfarm-insontheBloodIndianReserve)haveestablisheddominantlandpositionstotalling~1,862sectionsinthethermallymatureExshawsourcerockfairway.
• InAlberta,onehorizontalwellhasbeendrilledandcompletedtargetingtheAlbertaBakken(drilledunderbroker:AntelopeLandServices14-7-1-21W4:TD–Wabamum;results confidential).A secondhorizontalwell ispresentlydrilling (AntelopeLandServices16-24-2-25W4,licensedtotheExshaw,spuddedAugust17,2010),andathirdhorizontalwelllicensedbyAntelopeLandServiceslocatedat3-8-1-18W4hasalsobeendrilledandrigreleasedonOctober3,2010,totheExshaw.ItisbelievedthatCrescentPointEnergyistheoperatorofthesethreewells.
• In theMontanaportionof theplay,RosettaResources andNewfieldExplorationhave farmed into 512,000 net acres (800 sections), and, alongwithAnshultzExploration(undisclosedland),arethedominantlandholdersontheBlackfeetIndianReservation.
• Rosetta,NewfieldandAnshultzhavedrilledsixverticalandonehorizontalwellswithninewellslicensedofanannounced18-wellprograminnorthwesternMontana.Thehorizontalwell(TribalGunsight31-16H)isspeculatedtohavetestedsignificantoiloncompletion,but,ratesareunknown.
The Alberta Bakken Page 3
Figure 1: Stratigraphic Chart Comparing the Bakken Petroleum System in Alberta With Saskatchewan, Montana and North Dakota (Williston Basin)
Source: Modified from Corelabs
TheAlbertaBakkentypewellismodeledafteroneverticalwell.Theverticaloilwellat10-30-8-23W4hasproduced243MbblfromtheStettlerformation,hadathree-monthIPof297bbl/d,andwillhaveanEURgreaterthan250Mbbl.TheAlbertaBakkenhori-zontaltypewellusesathree-monthIPof348bbl/dwithanEURof250MbblandhasadeclinesimilartothetypewellsfoundincorporatepresentationsfortheBakkeninNorthDakota,MontanaandSaskatchewan.Sinceourtypewellassumestwohorizontallaterallegsaredrilled,withacombinedthree-monthIPof348bbl/d(174bbl/dperleg)andanEURof250Mbbl(125Mbblperleg),itisaconservativeestimateconsideringthattheverticalanalogywillexceed250Mbbl.
Also,sincemuchoftheAlbertaBakkenissituatedinaDeepBasin,overpressuredsettingwiththickpay,itisreasonabletoassumethatitwillhavehigherdeliverabilityandreservesthantheSoutheastSaskatchewanBakken.However,theAlbertabasinwillrequiremuchhigherdrillingandcompletioncoststhanSaskatchewan,sothetotalcostburdenof$4.5millionfortheAlbertatypewellissignificantlyhigherthanforaSaskatchewanwell.
BearinginmindthattheAlbertatypewellhasaconservativeestimateforIPandEUR,aswellasahighestimateforcapital,itstillgenerateseconomicresultsthatarecompa-rabletotheotherBakkencasesthatwereanalyzed.Arelativelyminorimprovementtodeliverabilityorreserves,orareductionincapitalcostswouldsignificantlyimprovetheeconomics.
Page 4 The Alberta Bakken
Figure 2: Alberta Bakken Fairway Map (inset) highlighted in green and outlined in green lines on the main map. Recent land sale activity and resultant land base are highlighted. Exact locations of the farm-in lands on the Blood Indian Reserve by Bowood and Murphy Oil are not public at this time. Stars and triangles represent recent drilling or licensing activity. The circle represents the 10-30-8-23W4 well, having ~243,000 bbl of production from the Steller/Big Valley. The diamond is the location of 2-16-3-21W4, having a straddle Drill Stem Test of 298 bbl of clean oil over the Exshaw/Bakken middle member.
Source: BMO Capital Markets; Rocky Mountain Thrust Belt and Bow Island – Sweetgrass Arch – Geoedges; Vulcan Low – Zaitlin et al., 2002
The Alberta Bakken Page 5
Introduction
TheAlbertaBakkenPetroleumSystem,consistingofDevonianandMississippianBigValley–Exshaw–Banffformations(Figure1),innorthwesternMontanaandsouthwesternAlbertaisthelatestplayareabeingevaluatedinthequesttocaptureearlyentry,contin-gentlightoilresources.OtherexamplesoflightoilresourceplaysbeingtargetedincludetheNordegg,LowerShaunavon,VikingandCardiumFormations(Figure3),andtheBakken-ThreeForksoftheWillistonBasin(Figure4).
Figure 3: Analogue Parameters for Emerging Tight Oil Resource Plays
Source: AJM Nordegg Research Study for Anglo Canadian Oil Corp.
Source: BMO Capital Markets; Sonnenberg and Pramudito, 2009; Prospect Saskatchewan, 2005; Davidson and Gomph, 2006
Figure 4: Analogue Parameters for Emerging Tight Oil Resource Plays (See Figure 12 for Locations)
Page 6 The Alberta Bakken
Horizontaldrillingandmulti-stagecompletiontechnologyhasrecentlybeenappliedtoallowfortheexploitationofunconventionaltightoilreservoirs.Variationsinfaciesandreservoirparametersmayalsorequirefurtherspecializedtechnology(fracfluids,propants,etc.)tounlocktheresource.However,toidentifyprospectivenewtightoilplaysdevelopedwithinadeepbasinsetting,oneneedstoidentifyareasthatexhibit:
i) pervasivepetroleumsaturation;
ii) abnormalpressure(high);
iii) alackofdowndipwater;
iv) updipwatersaturation;
v) low-permeabilityandlow-matrixporosityreservoirs;
vi) deliverabilityisenhancedbyfracturing;and
vii) playsthatareself-sourcingwithinamaturesourcerockfairway.
TheAlbertaBakkenisconsideredaprovengeologicalplaywithproductionfromtheStettler/ThreeForksandhydrocarbonrecoveriesfromDSTsintheBakken/Exshaw(seeFigure9).Evaluationoftheavailablegeological,production,drillstemtest(DST)andcoredataappearstoindicatethattheAlbertaBakkenisdevelopedinaDeepBasinset-ting,asitischaracterizedbythesevenkeyattributeslistedabove.However,thequestionremains:istheAlbertaBakkendevelopingintothenextsignificantunconventionaltightoilplaytobetestedintheWesternCanadaSedimentaryBasin?
Recentlarge-scalelandacquisitionanddrillingactivityintheAlbertaBakkenhasfocusedonitsDeepBasintightoilpotential(Figure2).Thisactivityinitiallyoccurredinnorth-ernMontanabyRosettaResources,NewfieldExplorationandAnshutzExploration.Noproductionresultsarepublicallyavailableatthistimeand,assuch,thisplayisatthespeculativestageofdevelopment.However,theincreasingleveloffarm-in,acquisi-tionanddrillingactivityoccurringontheAlbertasideoftheborder(seeFigure2),inconjunctionwithsomeofthepubliccorporateannouncementsfocusingontheAlbertaBakken,indicatesthereiscommonconsensusthattheAlbertaBakkenhasthepotentialtobeasuccessfulDeepBasinunconventionaltightoilresourceplay.
Recent Drilling, Acquisition, Farm-in and Land Sale Activity
IntheMontanaportionoftheAlbertaBakkenplay,RosettaResources(~291,000netacresor~455sections),NewfieldExploration(~221,000netacresor345sections)andAnshultzExploration(undisclosedlandtotal)havefarmedintolands,predominantlyontheBlackfeetIndianReservation.RosettaResourceshasdrilledtwoverticalwellsandonehorizontalwell,whichhavebeenannouncedtobetargetingtheAlbertaBakkentodate(Figure2).Thehorizontalwell(TribalGunsight31-16H)isspeculatedtohavetestedsignificantoiloncompletion,butratesareunknown.Rosettahaslicensedtwoadditionalwellsoutofanannounced10-well2010program.NewfieldExplorationhasdrilledthreewellstodatewithnoannouncementsoftheirresults.Newfielddidannounceplanstodrill
The Alberta Bakken Page 7
anadditionaleightwellsin2010,withsevenlocationslicensed.AnshutzExplorationistestingthe“Bakken-ThreeForks”attheWhiteCalf 1-4.Collectively,Rosetta,NewfieldandAnshultzhavedrilledsixverticalwellsandonehorizontalwell,withanadditionalninewellslicensedofanannouncedprogramof18wellsfor2010.AvarietyofotherU.S.-basedcompanies(e.g.,PrimaryPetroleum,QuicksilverResources,ProvidentEnergyAssociates)arealsoconsideringactivityintheplay.
InsouthernAlberta,aseriesof landsales,acquisitions, farm-insanddrillinghasoc-curredinthelast12months,appearingtofocusontheSouthernAlbertaPlay(Figure5).Specifically,threemajorfarm-ins/acquisitionshaveoccurred:
• Crescent Point, through the acquisition of a private company calledDarianExplorationfor~$96million,hasestablishedalandpositionof~1millionacres(1,565sections)andaninitialproductionbaseof900boe/d.InitspressreleaseitindicatedthatthelandsareprospectivefortheBakken/ThreeForks.CPGhasprovidedguidanceincreasingits2010capitalbudgettofocusontheAlbertaBakkenopportunitytodrill~19(net)exploratorywellsbytheendof2011.
• MurphyOil,throughafarm-inontheBloodIndianReserve,hasestablishedalandpositionof129,280acres(202sections),withacommitmentof16wellsandabonuspaymentof$36million.Theexactlocationofthelandsonthereservehasnotbeenreleasedatthistime.
• BowoodEnergyhasestablished,viafarm-inonBloodEnergyReserve,alandpositionof60,640acres(95sections)andcommitmentofeightwellsforabonuspaymentof$14.1million.Theexactlocationofthelandsonthereservehasnotbeenreleasedatthistime.
• AdditionalcompanieswithexposuretothisplayontheAlbertasideincludeDeeThreeExplorationandWildstreamExploration.OntheU.S.side,Mountainview,PrimaryandQuicksilverhaveallacquiredsignificantlandpositions.
AnanalysisoflandsaleactivityispresentedinFigures5and6.Since2004,195,682ha(~756sections)havebeenboughtatAlbertacrownlandsales.Approximately57%,or112,887ha(~436sections),hasbeenpurchasedforanaveragepriceof$890/hain2010,withamaximumpriceof$4,668/ha.TheinsetchartonFigure5displayslandsaleactivitybyquarterfor2010.Theincreasesintotalhectaressold(2,575–68,449ha),average$/ha($206–1,040)andmaximum$/ha($500–4,668)indicateincreasedcompetitivenessoverthelastthreequarters.Betweenlandsaleactivity,farm-inactivityandcorporateacquisition,themajorityofprospectivelandsfortheAlbertaBakkencanbeconsideredtohavebeencaptured.TheOctober13,2010,landsalesawtwoparcelssellfor$3.5million,orabout$1500/ha,eclipsingtheaverageQ3priceof$1,040/ha.
AntelopeLandServices(believedtobeCrescentPointEnergy)hasdrilledandcompletedthehorizontal14-7-1-21W4(TD-Wabamum;resultsconfidential).Asecondhorizontalat16-24-2-25W4wellhasalsobeenlicensedtotheExshaw,andwasspuddedAugust17,2010.Athirdwelllocatedat3-8-1-18W4hasalsobeenlicensedtotheExshaw(Figure2).If thesewellsareinfactCrescentPointwells,itconfirmsthatitdidpurchasetheselandsatthesale.
Page 8 The Alberta Bakken
Figure 5: Land Sale Map in the Alberta Bakken Core Area in Southwestern Alberta for 2010
Source: BMO Capital Markets; GeoScout
The Alberta Bakken Page 9
Figure 6: Land Sale Statistics for the Alberta Bakken for 2004–2010. Inset Map for 2010 by Quarter.
Source: BMO Capital Markets; GeoScout
Page 10 The Alberta Bakken
Geological Setting
TheDevonian-MississippianAlbertaBakkenSystemcomprisesa0–50mthickmixedcarbonate-clastic intervalof theBanff-Exshaw-BigValley/Stettler/PalliserFormations(Figures1and7).TheAlbertaBakkenisapproximatelytimeequivalenttotheBakkenPetroleumSystem(Lodgepole-UpperBakkenshale-MiddleBakken-LowerBakkenShale-Sanish/ThreeForks)oftheWillistonBasin.
Figure 7: Photograph of the Alberta Bakken Stratigraphic Succession Between the Palliser Formation (Equivalent to the Big Valley, Stettler and/or Three Forks in the subsurface) and Banff Formations at Goat Creek, Alberta. Note “Sandwiching” of the Exshaw Between Two Organicly Rich Source Rocks.
Source: Reidiger et al., 2004
Paleogeographic reconstructionsof theLateDevonian andEarlyMississippian arepresentedinFigure8.Darkerbluesrepresentdeeperwaters;lighterbluesrepresentshal-lowerwaters.InsoutheasternAlberta,theAlbertaplatform(lightblue)passedwestwardintodeeperwatersoftheProphetTrough/AntlerForelandBasin;andeastwardacrosstheAlbertaPlatformintothedeeperwatersoftheWillistonBasin,formedasanintra-cratonicsag.Thoughapproximatelytimeequivalent,theAlbertaBakkenandWillistonBasinBakkendeveloped in twoverydifferentdepositional settings: a semi-restrictedintracratonicbasin(WillistonBasin)versusawestward-facingforelandtrough(AlbertaBakken;Figure8).
The Alberta Bakken Page 11
DuringLateDevoniantime,theSouthernAlbertaBakkenisinterpretedtohavedevelopedatornearthepaleoequator(Figure8).Asshowninthepaleogeographicreconstruction,thereisnomajorsourceofdetrital input;hencetheBanff-Exshaw-BigValley/StettlerFormationsaredominatedbycarbonatedeposition.However,theWillistonBasinhasmajordetritalinputfromthenorthandeast,therebyresultinginMiddleBakkenbeingdominatedbydolomiticsandstonesandsiltstonesinthenorthandeastportionsofthebasin,andsiltycarbonatedepositioninthesouthwest.
Figure9exhibitsthemaingeologicalelementsofsouthwesternAlbertaandNorthernMontanaduringAlbertaBakkentime.ThewesternboundaryoftheAlbertaBakkenplayisdefinedbytheRockyMountainThrustBelt.TheThrustBeltisdivisibleintoaninnerFoothillsfairwaycharacterizedbylargescaleNW-SEtrendinganticlinalstructures,andanouterorforefoothillsfairwaywithsmallerscalestructures.AlbertaBakkenreservoirsareinfluencedbystructuring,enhancinginherentlowpermeabilitybynaturallyfracturingdolostonestosiltydolostones.
Figure 8: Paleogeographic Reconstructions for North America for the Late Devonian and Early Mississippian Highlighting the Position of the Williston Basin (red circle) and Antler Foreland Trough (red rectangle). Small Red Box Is Approximate Map Area Highlighted in Figure 12.
Williston Basin
Alberta Bakken
Williston Basin
Alberta Bakken
Source: http//personal.umich.edu/~sperrin/geology/northamerica.pdf
Page 12 The Alberta Bakken
Theeasternboundaryof theAlbertaBakken isdefinedby theSweetgrassArch/BowIslandArchandKevinSunburstdome.Thenorthern limitof theAlbertaBakken isdefinedbytheVulcanAeromagneticLow.TheboldedsubseacontoursontheMissis-sippianRundleFormationexhibitwidelyspacedcontourstotheeastandmorecloselyspacedcontourstothewest,indicatingahingeandchangeofslopealignednorth-souththroughthestudyarea.
BoththeExshawandBakkenshalesrepresentimportantpetroleumsourcerocksintheWesternCanadianSedimentaryBasin(AllanandCreaney,1991).Thetotalorganiccarboncontent(TOC)fortheExshawShalesrangesfrom1%to21wt%,andhydrogenindicesrangefrom100mgto1,100mgHC/gTOC(CaplanandBustin,1996).
WithintheWillistonBasin,MiddleBakkenreservoirsaresandwichedbetweentwoworld-classshalesourcerocks(UpperandLowerBakkenShales).IthasalsobeenrecognizedbyvariousworkersthattheBakkenPetroleumsystemintheWillistonBasinisdivisibleinto:
• anoverpressured(basin-centredoil)sub-systeminMontanaandNorthDakota(e.g.,ElmCouleeandParshallareas);
• anormaltounderpressuredtransitional (withinmaturesourcerocks)sub-system(e.g.,northernNeesonAnticlinearea);and
• asub-systemcharacterizedbytheupdipmigrationwhereoiloverwateristrappedbyconventionalstructuresand/orstratigraphictrapsinsoutheasternSaskatchewanandsouthwesternManitoba(e.g.,ViewfieldandSinclair/Dalyareas).
Figure9displaysthecontoursofvitrinitereflectance(Ro)valuesastakenfromGSCReportfortheAlbertaBakkenarea.OilgenerationfrommostorganicallyrichshaleunitsisconsideredtocommenceatRo~0.65,withpeakoilgenerationoccurringatRo~1.00andtheendofoilgenerationoccurringwhenRo>~1.3(Waples,1980).AsisshowninFigure9,RovaluesassociatedwiththeAlbertaBakkenrangefrom~0.6intheeastto>1.00 toward thewest and south.This indicates that theAlbertaBakkenPetroleumsystemisanactivehydrocarbonsystem,havingtheconditionsofTOCandmaturitytolocallygenerateoil.Importantpointsinsupportofthisobservationofalocallysourcingareaofmaturityare:
1. areviewofDSTrecoveriesfromtheBanff–StettlerintervalonFigure9indicatesthatallliveoilorgasrecoveriesoccuratorwestoftheRo=0.80line;
2. areviewofproductionfromtheBanff–StettlerintervalonFigure9indicatesthatnoprovenproductionoccurseastoftheRo=0.80line;
3. theAntelopeLandServiceshorizontalwells at 14-7-1-21W4, 16-24-2-25W4and3-8-1-18W4arealllocatedintheRo=1.00orgreaterareaalongtheAlberta-Montanaborder;and
4. theRosettaResources,NewfieldExplorationandAnshutzExplorationwellsarealllocatedintheRo=1.00orgreaterareainMontana.
The Alberta Bakken Page 13
Figure 9: Alberta Bakken Geology Map in Relation to Production and DST Recoveries. Highlighted Are Source Rock Maturity, Mississippian (Rundle) Subsea Structure (with dark line representing shelf break), Recent Drilling and Well Licenses and Main Structural Elements. Pressure Line is From Canadian Discovery.
Source: BMO Capital Markets; Geoedges; Zaitlin et al., 2002; Geological Survey of Canada Report 4341; Various corporate presentations, GeoScout
Page 14 The Alberta Bakken
TheregionalpaleogeographicsettingindicatedthattheAlbertaBakkeninsoutheasternAlbertapassedwestwardintodeeperwatersoftheProphetTrough/AntlerForelandBasin,i.e.,theAlbertaBakkenthickenstothewest.Atwo-wellcross-section(Figure10)from10-30-8-23W4to2-16-3-21W4showsthethinningoftheStettler/BigValley-UpperBak-kensuccessioneastwardontothePlatform.The10-30welldisplaysafullAlbertaBakkensuccession.ThesiltydolostoneoftheBigValleyhasapproximately15mofpayat12%averageporosity,andhasproduced~243Mbblofoilwithnowater.The10-30wellhasapressuregradientcalculatedatPGrad=0.65,orapproximately50%overpressure.Usingadolomitebaselineof0%andinterpretingtheMiddleBakken/Exshawasasiltydolostone,itispossibletocalculate12mofpotentialpaywithanRt~15(totalpayof27m).
ThewellsdisplayasignificantthinningoftheStettlertoUpperBakkenShalesuccession.TheBigValleyisinterpretedasatightlimestoneandformsanupdipfaciestrapfortheBigValley.TheMiddleBakken/Exshawdisplaysapproximately2mof>6%pay,andfromastraddleDSTrecovered~300ftofliveoilwithanRt~35.ThelowRtvaluesmaybeindicativeoflowresistivitypayduetothemineralogical(pyrite,dolomite,phosphate,etc.).BowoodwentbackinJune5,2010torecompletethiszoneandresultsareconfidentialatthistime.CanadianDiscoveryhascompletedahydrodynamicstudyoftheAlbertaBak-kenwhichshowsapotentialchangefromnormalpressurein2-16welltooverpressurein10-30well(purplelineonFigure9).
Summarizingtheobservationspresentedabove,theAlbertaBakkenappearstobechar-acterizedby:
• pervasivehydrocarbonsaturation(staining,DSTandproduction);
• isabnormaloverpressured(CanadianDiscovery,10-30well);
• noapparentdown-dipwater(DSTandproduction);
• apparentup-dipwater(DSTandproduction);
• low-permeabilityandlow-matrixporosityreservoirs(logs,coreandcuttings);
• localfracture,whichmayenhancedeliverability;and
• aself-sourcinghydrocarbonsystemwithmaturesourcerocksandTOCs.
The Alberta Bakken Page 15
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Page 16 The Alberta Bakken
Type Curve Development
Eachofthetypecurves(Figure11)wasselectedfromtherespectivecompanycorporatepresentations.Theywererecreatedusingtheirinitialrates,productioncurveshapesandEURs,andthenenteredintoValueNavigatorsothateconomicvariablescouldbemodi-fiedtodeterminesensitivities.Wherepossible,foreachregionalareaandcompanythatwasanalyzed,thetypecurveswerepresentedwitharange,sothateachcompany(withtheexceptionofCrescentPoint)hastwocurvesrepresentinghighandlowexpectations.ThelocationsofthetypecurvesfromtheWillistonbasinareshowninFigure12.
ThetypecurvefortheSouthernAlbertaBakkenwasbuiltusingthegeneralshapeofthesecurves,i.e.,asharpdeclineinthefirstyearfollowedbyshallow,harmonicdecline.SincetheSouthernAlbertaBakkenisdeeperandoverpressured,itisexpectedtoprovidebetterdeliverabilitythantheWillistonBasininViewfieldSaskatchewan.Forthisreason,theinitialrateisassumedtobehigherthantheViewfieldwells,butlowerthantheNorthDakotawells.Inaddition,theoneanalogywellthatisavailableinSouthernAlberta(10-30-8-23W4)showsaninitialrateof337bbl/dandanEURfromdeclineanalysisthatisgreaterthan250Mbbl(allfromaverticalwellbore).AlloftherelevantparametersusedinthetypecurvedevelopmentforeachcaseareshowninFigure13.
Figure 11: Bakken Type Curves From the Respective Corporate Presentations, as well as BMO’s Estimated Type Curve for Southern Alberta Bakken. Also Shown Are the Associated Times to Payout.
Source: BMO Capital Markets and various corporate presentations
The Alberta Bakken Page 17
Source: BMO Capital Markets; Map from Tristar 2009 Corporate Presentation
Figure 12: Relative Location of Type Wells in the Williston Basin Shown in Figure 11
Figure 13: Summary of Type Curve Parameters and Economic Results for Each Case
* The reserve life index (RLI) was calculated using the instantaneous IP rate, i.e., EUR/Inst. IP/365 = RLI (years).Source: BMO Capital Markets and various corporate presentations
Page 18 The Alberta Bakken
Economic Parameters
Wellcostsweretakenfromcorporatepresentationsandareassumedtoincludedrilling,casingandcompletioncostsonly.OperatingcostsfortheCanadiancompanieswereap-proximately$8.00/bbl,buttheAmericancompaniesdidnotdisclosetheirspecificoperatingcostsfortheseplays.Tosimplifytheanalysisandensureequalcomparisonbetweentypewells,itwasassumedthatoperatingcostsforeachcasewas$8.00/bbl.
ThewellsforCrescentPoint,Enerplus,BrighamandWhitingareallassumedtohaveonehorizontalleg.Togeneratetheirhighandlowcases,Enerplus,BrighamandWhitingvaryinthelengthsoftheirhorizontallegs,whereasthetwocasesforPetrobakken’sViewfieldwellsvary,withthelowcaseasonelaterallegandthehighcaseastwolaterallegs.ThecostsassociatedwitheachofthesecasesarelistedinFigure13.TheAlbertaBakkencaseisassumedtohavetwo1,500mhorizontallegs(onetargetingtheBakken/ExshawandonetargetingtheStettler)withtotaldrillingcostsof$2.5millionandcompletioncostsof$2.0million.AnalogywellsinalloftheareasshowGORs(gas-oilratios)thatareap-proximately700scf/bbl.Thisvaluewasusedforeachtypewellandeconomiccase.
ForthecasesinNorthDakota(Enerplus,BrighamandWhiting),theroyaltyrateisas-sumedtobe16.6%,withnodrillingorroyaltyincentiveprograms.ThecasesinViewfield(CrescentPointandPetrobakken)areassumedtoqualifyfortheSaskatchewan“Horizon-talDeepOilWell”Royaltyincentive,wherebytheownerpaysamaximumrateof2.5%onthefirst16,000m3(or100Mstb).
InAlberta, the typewell canoccuron either crownor freehold land. In the caseofcrownland,thewellisassumedtoqualifyfortheHorizontalOilDrillingCredit.Sincethemeasureddepthofthewellwillbe5.150m(2.150mTVD+2*1.500m),thecreditisamaximumrateof5%onthefirst100Mboeor48monthsofproduction(whichevercomesfirst).ForwellsdrilledoncrownlandbeforeApril1,2011,theAlbertagovernmentalsohastheDrillingRoyaltyCreditthatcanrunconcurrentlywiththeHorizontalOilDrillingCredit.ThiscasewasalsoevaluatedontheAlbertatypewell.
ItisalsolikelythattheAlbertatypewellcouldbedrilledonfreeholdland.Inthiscaseitisassumedthatthefreeholdroyaltyrateis10%.TheAlbertagovernmentalsocollectsaFreeholdMineralTaxontopofthefreeholdroyaltythatdecreaseseachyearfromaninitialrateof6.2%.Itwasassumedthatthelesseepaysallofthemineraltax.Therearenoroyaltyincentivesordrillingcreditsavailableonfreeholdlands.
The Alberta Bakken Page 19
Economic Summary
AllofthecaseswererunontheBMOResearchPriceDeckasofSeptember2,2010(Figure13).ThetypecurvesshowninFigure11showthetimetopayoutforeachcase.AllofthecasesinNorthDakota(Whiting,EnerplusandBrigham)havepayouttimesthatvaryfrom0.4yearsto2.2years.Thecases inViewfield,Saskatchewan(CrescentPointandPetrobakken)varyfrom0.6yearsto1.1years.Asexpected,whentheinitialratesarehighpayoutoccursquickly.
AlloftheresultingeconomicparametersareshowninFigure13.Figure15showstheBeforeTaxNetpresentValueata10%discountrate(NPV)andFigure16showstheIn-ternalRateofReturn(IRR)foreachcase.ItisclearthattheAlbertaBakkencasesshowNPVandIRRvaluesthatarecomparabletotheSaskatchewanViewfieldBakkenwells.
AsimilartrendcanbeseenwhenreviewingtheBreakevenSupplyCost(BESC)inFigure17,witheachoftheAlbertaBakkencasescomparingfavourablytothePetrobakken,singlelegorSaskatchewanViewfieldBakkenwells.However,thePetrobakkenbilateralwellandtheCrescentPointBakkenViewfieldwellsdooutperformtheAlbertaBakkenwellsonaBESCbasis.
Consideringthatthedeliverability,reservesandcapitalcostsfortheAlbertatypewellareallconservative,theseresultssuggestthatrelativelyminorimprovementstothetypewellinputparameterswillsignificantlyimprovetheeconomics.
Ultimately,whencomparingtheAlbertaBakkentypewelltotheSaskatchewanBakkentypewells,theAlbertaBakken—duetotheoverallthicknessofthereservoir,andtheoverpressured,DeepBasinsetting—hasthepotentialforahighlyeconomicwell.
Figure 14: Price deck Utilized in the Economic Analysis
Source: BMO Capital Markets
Page 20 The Alberta Bakken
Figure 15: Before Tax Net Present Value @ 10% Discount Rate for Each Case
Figure 16: Internal Rate of Return for Each Case
Source: BMO Capital Markets
Source: BMO Capital Markets
The Alberta Bakken Page 21
Summary and Conclusions
TheAlbertaBakkenisanexampleofanearly-entryDeepBasintightoilresourceplay.ThemainAlbertaBakkenplayfairwayiscoincidentwiththethermallymatureExshawsource rock fairway.Thoughapproximately timeequivalent, theAlbertaBakkenandWillistonBasinBakkendeveloped in twoverydifferentdepositional settings:asemi-restrictedintracratonicbasin(WillistonBasin)versusawestward-facingforelandtrough(AlbertaBakken).
SignificantactivityispresentlytestingtheAlbertaBakkenPlay,withapproximately112,887ha(~436sections)purchasedviacrownlandsalewithamaximumpriceescalatingto$4,668/hainthemostrecentlandsale,foratotalbonus~$100million.InAlberta,CrescentPointEnergy,throughtheacquisitionofDarianExploration,andMurphyOil/BowoodEnergy,throughfarm-insontheBloodIndianReserve,haveestablishedadominantlandpositionof~1,862sectionsinthethermallymatureExshawsourcerockfairway.
InAlberta,webelievethatthreehorizontalwellshavebeendrilled/licensedbyCrescentPointEnergyintheplay.InMontana,RosettaResourcesandNewfieldExplorationarethedominantlandholdersontheBlackfeetIndianReservation.FortheAlbertaBakken,weestimateanEUR/wellof250Mbblandthree-monthaverageIPof348bbl/d.ThisyieldsaBeforeTaxNetPresentValue@10%of~$4.5millionforaHorizontalOilCase,anInternalRateofReturn(IRR)of75.9–108.8%andaBreakevenSupplyCost(BESC)of$41.25–42.20/bbl.WhiletheseeconomicsarenotquiteasrobustastheparametersintheSaskatchewanWillistonBasinBakken,theydocomparefavourably.SincetheAlbertaBakkentypewellparametersarefairlyconservative,thereispotentialfortheSouthernAlbertaBakkentohaveimprovedeconomicswithonlyslightimprovementstothetypewell.
While theplay is still emerging, theAlbertaBakkenappears tobedeveloping intoapotentialnewunconventionaltightoilresourceplay.
Figure 17: Breakeven Supply Cost for Each Case
Source: BMO Capital Markets
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