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Duvernay shale investments rise to $6 billion




Alberta play continuing to attract dollars, says TD report



By Dan Healing, Calgary Herald August 26, 2013 4:01 PM






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Oil and gas explorers have spend $6 billion so far on the massive Alberta Duvernay play, says a TD report.

Photograph by: KAREN BLEIER , AFP/Getty Images


CALGARY — Alberta’s early stage Duvernay resource play has already absorbed $6 billion of investment and promises to be the subject of much more, analysts say, judging by recent activity and promising results.

“The Duvernay is arguably the most exciting emerging resource play in Canada,” says a research report from TD Securities published Monday.

“We estimate that over $6 billion has been spent on the play to date: $3 billion at land sales, $2 billion of corporate acquisition and divestitures ... and $1 billion in drilling activity.”

The Duvernay was the main driver of the record $3.2 billion spent at Alberta Crown drilling rights auctions in fiscal 2011-12.

The shale marine formation is believed to be the oil and gas source rock for many adjacent conventional Devonian formations that have already been extensively drained. It is found 2,800 to 3,600 meters underground, in thicknesses of 35 to 60 meters and extends over 400 kilometres from northwest to southeast Alberta.

TD’s update report shows that 195 horizontal wells have been licensed, rig released or completed, with 49 of them producing, citing information gathered by online data handler geoScout. Development of the tight formation has only been possible with the onset of horizontal drilling in combination with multi-stage hydraulic fracturing.

The largest operator is Shell Canada, TD reported, with 54 wells located (licensed but not drilled), 24 rig-released and six on production, followed by Encana Corp. with 15 located, seven rig-released and seven on production.

Next is XTO Energy, a unit of ExxonMobil, with nine wells producing and four rig-released, according to the TD report. ExxonMobil bought Celtic Exploration Ltd. for $3.1 billion last October, taking over the Calgary company that was one of the first Duvernay explorers.

In June, Calgary-based Peters & Co also concluded the Duvernay, while early in its development, is very promising.

Peters predicted in a report that drilling companies might have to invest $1 billion in new equipment to keep up with demand from producers in the play, noting that 100 wells will be drilled in 2013 and as many as 200 wells in 2014.

It forecast the activity to could grow to 500 to 600 wells per year, representing annual demand for over 60 rigs.

TD pointed out that most of the Duvernay activity so far has been at Kaybob, on the northern end of the play near Fox Creek, with 80 per cent of the wells.

It added Duvernay well volumes aren’t outstanding but the liquids proportion is “robust,” although that varies significantly from one well to another.

The play has been much in the news this summer, with Chevron Canada Ltd. buying an additional 27,000 hectares in the play earlier this month from Alta Energy Luxembourg and affiliates.

No purchase price was released but TD said an affiliate on the selling side implied a price of $8,550 per acre ($21,400 per hectare) in line with Encana’s metrics of $9,000 per acre in its Duvernay joint venture with Petro-China signed in December 2012.


“To date, we have been encouraged by the reservoir data and production performance from our exploration drilling program on our Kaybob Duvernay leases,” said Chevron Canada president Jeff Lehrmann in a statement.

Chevron spokesman Leif Sollid said Monday the company has a total of 132,000 hectares in the play now, with most of the land purchased during the Alberta land sales of 2011-12.

TD reported the company has production from two wells; Sollid said that’s actually now four wells. He said the company has drilled 11 of 13 horizontal appraisal wells it began drilling in 2011 and hopes to complete the program in the first half of 2014 but wouldn’t say how much the wells cost or give specific results for competitive reasons.

In other news, Athabasca Oil Corp. has recently opened a data room as it seeks a joint venture partner for its Duvernay assets. TD said there are between 20 and 30 parties interested in taking up what is thought to be a 40 per cent working interest.

Meanwhile, Penn West Petroleum Ltd., which last week announced it had laid off 25 per cent of its staff this year, is looking to sell Duvernay acreage to pay down debt, and Talisman Energy Inc. is seeking a buyer or joint venture partner on its 63,000 hectares of Duvernay for the same reason.