Core Area Review 2018-11-28T10:57:43+00:00

CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig/Fireweed 113,000 net acres / 19,900 Boe/d*

Horn River Basin 80,000 net acres / 0 Boe/d*

*Average daily production nine months ending September 30, 2018

Storm’s land position at Umbach is prospective for liquids-rich natural gas from the Montney formation and currently totals 113,000 net acres (161 net sections).  During the third quarter, two sections of land were acquired.

Third quarter field activity included completing five horizontal wells (5.0 net), adding compression and twinning part of a gathering pipeline to Nig that will reduce wellhead flowing pressure and increase capacity.  One horizontal well started production on September 19th and there remains an inventory of six horizontal wells (5.5 net) that had not started producing at the end of the quarter which includes four completed wells.

Fourth quarter field activity is expected to include drilling five wells (5.0 net) and completing three wells (2.5 net) which includes the standing well (0.5 net) at Fireweed.

The drilling program for this winter and into 2019 will generally target areas where higher field condensate-gas ratios are expected.  In the fourth quarter of 2018, two wells (2.0 net) will be drilled at Umbach and three wells (3.0 net) at Nig.  During 2019, four wells (4.0 net) will be drilled at Nig including an acid gas disposal well and three wells (1.5 net) at Fireweed.  One of the wells at Nig will be drilled into the lower Montney.

At Umbach, approximately $115 million has been invested since 2013 to build infrastructure (pipelines and facilities) with current field compression capacity totaling 150 Mmcf per day raw gas after additional compression was installed at the end of the third quarter.  Throughput in the third quarter averaged 107 Mmcf per day raw gas.  Current compression capacity supports growth in corporate production to approximately 27,000 Boe per day with growth dependent on the Station 2 price (incremental natural gas production would be directed to Station 2).  Produced raw natural gas is sour (approximately 1.2% H2S) with approximately 85% directed to the McMahon Gas Plant and 15% directed to the Stoddart Gas Plant.  Firm processing commitments are 65 Mmcf raw gas per day at McMahon (5 to 15 year terms) and 15 Mmcf per day at Stoddart (1 year term).

At Nig, the regulatory application for the planned 50 Mmcf per day gas plant (100% working interest) was submitted in mid-September.  Depending on when approval is received, site preparation would occur in the first half of 2019, construction in the second half of 2019, and start-up is anticipated to be between the fourth quarter of 2019 and the first quarter of 2020.  The main benefits from the gas plant are a forecast operating cost of $2.00 per Boe (reduces the corporate operating cost to approximately $4.25 per Boe) and incremental production totaling approximately 1,500 Boe per day which comes from improved liquids recovery (adds 1,100 barrels per day with 90% NGL) plus a 5% reduction in process shrinkage.  The total cost of the project is estimated to be $81 million which includes $73 million for the gas plant, $4 million for an acid gas injection well and $4 million for a sales pipeline.  During the third quarter, $2.5 million was invested primarily for equipment deposits and, in the fourth quarter, $11 million is expected to be invested for equipment deposits.

At Fireweed, engineering and design is underway for the planned 50 Mmcf per day field compression facility (50% working interest).  The expected cost of the facility is $34 million gross and it is designed to be expandable to 100 Mmcf per day.  Depending on when regulatory approvals are received, construction is expected to start later in 2019 or early in 2020 with start-up in the second half of 2020.  Based on the production history from offsetting horizontal wells, field condensate-gas ratios are expected to be approximately 25 barrels per Mmcf higher than Umbach over the life of a well and up to 60 barrels per Mmcf higher in the first year.  The first phase of development will include drilling and completing up to 12 horizontal wells (6.0 net) which are expected to add 4,000 to 5,000 Boe per day on a net basis (25% liquids) once the facility is completed in the second half of 2020.  

Initial flow results after completing the standing well (0.5 net) at Fireweed are encouraging.  The well is located at C-74-G/94-A-13, has a completed length of 1,420 metres and was completed using the ball drop hydraulic fracturing method with 2,300 tonnes of proppant pumped into 35 stages using slick-water.  After flowing the frac fluid back on a six-day cleanup, the flow rate averaged 10.9 Mmcf per day raw gas plus 660 barrels per day of 54 degree field condensate and 1,140 barrels per day of frac water over the last 12 hours while flowing up the casing with a final flowing pressure of 4,800 kPa.  The well was shut in after recovering 23% of the frac water and is expected to remain shut in until the Fireweed field compression facility is completed.

Initial rates from the wells completed in 2018 (all on the Nig land block) have been very strong with no decline to date.  Rates over the first 120 calendar days have averaged 8.2 Mmcf per day raw gas plus 225 barrels per day of field condensate (average 1,600 Boe per day sales with 23% liquids including NGL recovered at the gas plant).  The field condensate-gas ratio is 50% higher than the average well at Umbach.  Current rates are averaging approximately 8.0 Mmcf per day plus 150 barrels per day of field condensate.

Given the improvement in rates that has been realized from longer horizontal wells, Storm management is now using an 11 Bcf raw gas type curve (internal estimate) to forecast production from new wells.  Previously, management used a 9 Bcf raw gas type curve (internal estimate).  The revised type curve is based on the performance of the wells completed in 2017 which have a shallower decline than previously forecast.  Future wells will be materially longer (2,400 metres) and have more frac stages (40 to 46) than the 2017 wells.  A summary of horizontal well results is provided below with more information on well performance and management’s type curve being available in the presentation on Storm’s website.

Year of Completion Frac

Stages

Completed

Length

Actual Drill & Complete Cost IP90 Cal Day

Mmcf/d Raw

IP180 Cal Day 

Mmcf/d Raw

IP365 Cal Day

Mmcf/d Raw

2014 – 16

33 hz’s(1)

22 1270 m $4.3 million

$3,400 per metre

4.9 Mmcf/d

12 hz’s

4.3 Mmcf/d

12 hz’s

3.4 Mmcf/d

12 hz’s

2017

12 hz’s

34 1750 m $4.2 million

$2,400 per metre

5.0 Mmcf/d

12 hz’s

4.5 Mmcf/d

12 hz’s

4.3 Mmcf/d

10 hz’s

2018

8 hz’s

35 1970 m $5.0 million

$2,540 per metre

8.1 Mmcf/d

3 hz’s

  • 2014 wells exclude a middle Montney well (this table provides analysis of upper Montney wells only).

Through a predecessor company Storm began acquiring undeveloped land in the Horn River Basin of northeast British Columbia in 2008. As at December 2017, Storm had 100% working interest in 80,000 acres (119 net sections) which are prospective for natural gas from the Muskwa, Otter Park and Evie/Klua shales. Storm has one producing horizontal well in this area with cumulative production of 5.8 Bcf raw. A core area totaling 30 sections has been proven to be productive through drilling of this well plus two vertical wells that were completed with final test rates of 900 Mcf per day over the final 24 hours of each flow test. Lands within the 30 section area have been continued through drilling and are not subject to expiry. The remaining 89 sections may be subject to expiry over a period of several years beginning in 2020. Storm has no plans for additional activity in the area until there is evidence of a substantial and sustainable increase in natural gas prices.

ALBERTA

The majority of the properties in this area were sold on July 15, 2015 and there remains only one property.  Production in 2017 averaged approximately 60 Boe per day. No capital was invested on this property by Storm in 2017 or 2018 and no activity is planned for 2019.

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