It's cracked and sideways, but new well spurs investors
Technology may open huge natural gas find
Jon Harding
Calgary Herald
Tuesday, August 19, 2008
Investors piled into Fairborne Energy Ltd. Monday after the former income trust drilled a prolific horizontal well and applied fracturing technologies that analysts speculate could crack open two trillion cubic feet of recoverable gas beneath the company's west-central Alberta properties.
The billion-dollar oil and gas explorer, as measured by market value, released drilling results from a horizontal well at Harlech, an area in the west-central part of Alberta, where the foothills begin to grow towards the Rockies.
The closely watched play marked the arrival of the same drilling technologies and so-called multi-stage fracturing techniques that have helped propel a rush of companies into various shale gas plays in northeastern British Columbia, such as the Montney and Horn River.
Unlike the B.C. shales, Fairborne drilled into a shallower sand formation known as the Nordegg, which traditionally hasn't offered up prolific volumes of gas across the Western Canadian sedimentary basin.
Fracturing involves using pressure to break up rock formations underground along the horizontal well's path, thereby releasing more natural gas.
Fairborne said well testing at Harlech measured flow rates as high as 13 million cubic feet a day, 10 times the rate seen on Fairborne's three vertical natural gas wells at Harlech.
The company's total natural gas production at the end of the second quarter was about 60 million cubic feet a day.
"We drilled the three vertical producers and concluded a horizontal well could make a real difference in the production profile," said Steve VanSickle, Fairborne's CEO. "We're very pleased with this."
Shares of Fairborne Energy Ltd., traded on the TSX, climbed almost 14 per cent, or $1.42, to $11.61 with near three times the average volume changing hands.
The company owns 110 contiguous sections of land in the Harlech region and VanSickle said the company, which had already raised its capital spending program in June $38 million to $208 million, will move capital towards drilling two more wells at Harlech before year-end.
He said plans are in the works for five more horizontal wells after those two.
Analysts speculated the result, applied over Fairborne's Harlech land position, could support estimates the property holds between 45 billion cubic feet and 50 billion cubic feet of original gas in place per section. Across 110 sections, that's a jaw-dropping figure of 5.5 trillion cubic feet of original gas in place.
"The recovery is not going to be 100 per cent, so even if you assume a 25 per cent to 40 per cent recovery rate, we're talking about a range of anywhere between 1.5 tcf and 2 tcf of gas," said Brad Borggard, an analyst with CIBC World Markets. "In context to Fairborne's scale, 2 tcf is almost five-and-a-half times today's company-wide reserves."
Borggard also noted that while the Nordegg around Harlech could soon see big resource numbers attached to it, Fairborne and others in the area will face "puts and takes," just as players do in B.C.'s Montney and Horn River.
The $9 million Fairborne reported it took to drill and complete the Harlech horizontal well is roughly double the cost of a Montney unconventional well.
"So it's an issue of capitalizing the resource," Borggard said. "If they drill three or four a year, it's going to take 50 years."
jharding@theherald.canwest.com
AI
