Producers Still Trying To Crack The Southern Alberta Bakken/Exshaw Nut
In 2010, the Bakken/Exshaw oil play near the Canada/United States border attracted fanfare in Alberta as producers quickly snapped up Crown land, which drew great optimism for its potential.
Two years later, producers are still trying to get a handle on the best way to drill the rocks in that area by using various completion techniques, as well as testing different zones.
The Bakken shale on the Montana side of the Alberta basin and its geological equivalent, the Exshaw shale on the Canadian side, are the same age: late Devonian to early Mississippian and of similar deposition to the Williston Basin Bakken shale, but are part of a separate geological system.
Canadian-side producers, noted a report earlier this spring by Scotia Capital, include Crescent Point Energy Corp.; Canadian Natural Resources Limited; Encana Corporation; Nexen Inc.; ExxonMobil Canada Ltd.; Murphy Oil Corporation; Shell Canada Limited; Argosy Energy Inc.; Blacksteel Energy Inc.; Bowood Energy Inc. (which has since announced a deal with fellow Bakken/Exhaw player Legacy Oil + Gas Inc. (DOB, May 14, 2012); DeeThree Exploration Ltd.; Pace Oil & Gas Ltd.; and PetroSpirit Resources Ltd. (a private company).
Companies developing the play in the U.S. include Anschutz Exploration Corporation (private); Newfield Exploration Company; Quicksilver Resources Inc.; Rosetta Resources Inc.; Abraxas Petroleum Corporation; Arkanova Energy Corporation; American Eagle Energy Inc.; Canadian company Compton Petroleum Corporation; Mountainview Energy Ltd.; Passport Energy Ltd.; Calgary-based Primary Petroleum Corporation; and Stone Energy Corporation.
"The Exshaw formation in Alberta and northern Montana is a dark, organic-rich shale -- an excellent source rock that has produced much of the oil found in conventional reservoirs in Alberta," said Brad Hayes, president of Petrel Robertson Consulting Ltd.
It is the same age as the Bakken shale in the Williston Basin of Saskatchewan and North Dakota and has many of the same properties. But there are two key attributes of the Bakken that have not been demonstrated yet in the Exshaw, he noted.
"First, the Bakken has a low permeability sandstone or siltstone bed in the middle that is a great tight oil reservoir, and is the target for horizontal drilling," Hayes said. "Secondly, the Bakken is overpressured in the Williston Basin, giving the reservoir more energy to produce oil. We see a tight siltstone in the Exshaw in places, and the small amount of well control suggests overpressuring to the west, but we haven't yet demonstrated these factors to be as well developed or extensive as in the Bakken."
Hayes said that companies exploring the Exshaw in southern Alberta and to the south in northern Montana are trying a variety of drilling and completion techniques to improve their understanding of the reservoir and to work out how best to produce it.
"The best methods -- horizontal length, number of fracs, pressures, proppants, et cetera -- may vary from place to place as the reservoir conditions vary," he noted. "We can't tell yet whether the Exshaw will be as good as the Bakken. My guess is that the early signs indicate a more difficult reservoir that won't be as productive.
"Experienced companies have been working this play for a couple of years now, and the lands are pretty tied up, but we are not seeing a lot of announcements of positive results yet," Hayes added. "Contrast that with the Duvernay, where we have heard some pretty big flow rates from many of the initial wells."
But, he noted, there's "too much money into the Exshaw play to give up on it.
"I think companies will continue to experiment and assess, although the pace may slow until bigger rewards are realized," Hayes said.
Rick Morgan, consultant, senior exploration analyst, with Canadian Discovery Ltd., said that in the Williston Basin geochemical studies indicate that the voluminous hydrocarbons generated have not been expelled from the source rocks, except to occasional porous fractions of the rock immediately overlying (Lodgepole) or underlying (Torquay, Sanish members of the Three Forks) the Bakken.
This forms the Bakken Petroleum System, which includes these adjacent zones and contains a tremendous resource in-place.
"Presumably, the situation is the same in the Alberta/Montana play to the west, with the Lower Banff, Exshaw and the Big Valley and Stettler members of the Wabamun comprising an Exshaw Petroleum System," Morgan said. "In the Williston Basin, the system deepens to the south, so most of the hydrocarbons were generated in North Dakota, and most of the production has been established there. In Alberta/Montana the system deepens to the southwest so the potential for generation in Alberta and Montana is probably about the same."
He added that the play is still in the early exploration stage.
"The wells put on production to date have not really been boomers with three of 22 wells reporting February production greater than 100 bbls of oil per day ... and the rest below 50 bbls of oil per day," Morgan said. "The main optimization method to date is the stratigraphic placement of wells in the various zones that make up the Exshaw Petroleum System.
"Murphy has recently announced success by placing wells in the Wabamun/Big Valley, rather than the Exshaw. This is really the hunt for where the sweet spots are. Optimization for effective stimulation programs is just beginning."
There is currently more production and drilling activity in Alberta than just over the border in Montana, not including Elm Coulee in the Williston Basin of eastern Montana, he added.
Canadian Discovery first reviewed the Bakken in 2005 when horizontal drilling in the zone had just started. At the time, about 500 wells in Saskatchewan, Manitoba, North Dakota and eastern Montana were producing a little over 11,000 bbls of oil per day from the zone. Now, more than 7,000 wells from the same administrations are producing over 560,000 bbls per day, mostly from North Dakota.
"That will not be easy to match. There have been some recent production and test results by Murphy, DeeThree and [TORC Oil & Gas Ltd.] that suggest the Alberta/Montana Exshaw may have some substance," Morgan said. "There are currently about 22 undrilled locations in southern Alberta targeting the Exshaw and six undrilled Exshaw locations in northwestern Montana. In a year or two, we may have a better idea of just how well it is going to stack up against the Bakken of the Williston Basin."
TORC, a private company, noted in an investor presentation that it has drilled seven successful southern Alberta wells to date, with a 78 per cent success rate (seven of nine). It has over 100 net prospective sections on the primary Monarch play.
DeeThree holds 200,000 acres in the Lethbridge area prospective for the Sunburst and Bakken.
The company reported that a Bakken horizontal well this year on its eastern block had an IP30 rate of 415 bbls per day. A second well flow-tested at 800 bbls per day, while a third and fourth well tested at 940 and 960 bbls per day, respectively. A total of 11 Bakken horizontal wells are to be drilled this year.
The company acquired 1,266 hectares at a February Crown sale for Sunburst. Current Sunburst oil production is 370 bbls per day.
Shell currently holds roughly 60,000 acres in the vicinity of Del Bonita in southern Alberta, said Stephen Doolan, a company spokesperson. The multinational plans to explore the potential of the Bakken frontier light, tight oil play in this area.
"To date we've drilled five wells in the Del Bonita area and have six additional wells licensed," he said. "We are continuously looking for new exploration opportunities. Any commercial operation must be economically viable, environmental responsible and socially sustainable, but it is too early to discuss our exploration activities."
Crescent Point has access to a significant land base in southern Alberta and has been pursuing several exploration projects in the area. During the first quarter, it drilled two (two net) wells to follow up on previously drilled unconventional exploration wells in the Alberta Bakken play. The wells are currently being evaluated. Plans for 2012 include drilling up to 19 net conventional and unconventional wells on these lands.
Penn West Petroleum Ltd. has roughly 80 sections in the Alberta Bakken play, noted Jason Fleury, senior manager of investor relations.
"We entered into the play focused on a different horizon which was more conventional in nature," he said. "While our results to date have been positive, we remain cautiously optimistic; this play is showing itself to be very much acreage- and area-specific."
Trent Yanko, president and chief executive officer of Legacy, said that the Alberta Bakken has the attributes of a light oil resource play, but it is still in the embryonic stage, which is the challenge.
"It's still early but we like technically what we are seeing," he said. "Industry has started to zero in and we are all converging on a solution.
"A number of our competitors have had very good well results that are starting to build but that's very typical in these plays. I think it kind of got overheated initially. People had these high expectations but it was something that's never been tried so it takes a little while.
"We want to stay in it. We want to keep the exposure for Legacy; we want the Bowood shareholders to have a chance to realize the potential they put into it."
Yanko added that there's likely going to be multiple play types and multiple zones.
"It's all for light oil. A lot of it looks like it's overpressured so it has a lot of these things you look for," he said. "I think the main success today has been in the Big Valley."
In an update on its Pondera-Teton prospect in northwest Montana, Calgary-based Primary said it has completed five 3D seismic programs covering around 95 square miles and one additional 37 square mile program is currently being permitted.
An initial six stratigraphic wells were drilled vertically into the upper Duperow formation, ranging in depth between 4,500 to 6,500 feet. All wells were cored across various sections of the Bakken System (Lower Lodgepole, Bakken, Three Forks and Big Valley/Upper Potlatch).
Oil and gas shows were identified on logs in multiple reservoir zones in all wells. Free oil was observed in one or more of the cores. Standard log suites were acquired in all wells and advanced log suites were acquired in five of the wells.
Two wells were cased, perforated and swab tested in the Bakken System and/or secondary zones, with fluid samples currently being analyzed.
Routine core analysis has been completed on four of the six wells to-date. Porosity up to 10.4 per cent and non-fractured permeability up to 0.3 millidarcy have been reported.
Geochemical analyses have been completed on select samples with additional analysis in progress. Sample analyses indicate a thermally mature Bakken System source rock in the oil window, with some zones where total organic content (TOC) reaches up to 17 per cent.
Special core analysis for the horizontal drilling program has been completed on select samples, with additional analysis in progress.
Three supplemental vertical wells were drilled into the upper Duperow formation, with one well cored across the Nisku formation. One well was cased, perforated and is currently being swab tested in the secondary conventional reservoir zones and/or Bakken System with results pending further review and analysis.
Primary has requested and has been granted by its joint venture partner continued operatorship for the balance of the drilling and completion operations in the Phase 1 program.
The company has started the horizontal drilling program and is anticipating at this time to drill three or four horizontal wells, each targeting a specific reservoir zone by the end of September. The company is also anticipating the conclusion of completion operations by the end of October.
Production testing will continue through to the end of the year, followed by the joint venture partner's Phase 2 election to spend a further US$41 million and earn an additional 17.5 per cent working interest in 2013.
"All of our land is in the Montana side of the fairway and it is south of the Blackfeet," said Mike Marrandino, president and chief executive officer. "It starts at the southern edge of the of the Blackfeet Indian Reservation, so we butt up against Anschutz, Rosetta and Newfield and then we go south from there.
"From the drilling that we've done to date, we feel that the Three Forks/Big Valley is a thicker formation than the Bakken, and I believe some of the wells that have been identified in southern Alberta have been more productive in the Wabamun or the Three Forks/BigValley than the Bakken."
Companies are currently working to establish the right completion techniques. "For our acreage on what we're doing on a development basis, we're going to want to see our completed well costs at under $5 million," Marrandino said.
"It's really trying to find out what works and so it's still a bit of a science project."
