Core Area Review 2020-02-28T16:57:56+00:00

CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig/Fireweed 121,000 net acres / 18,500 Boe/d*

Horn River Basin 80,000 net acres / Boe/d not material

*Average daily production nine months ending September 30, 2019

Storm’s land position is prospective for liquids-rich natural gas from the Montney formation and totals 121,000 net acres (172 net sections) with 79 horizontal wells (74.4 net) drilled to date.

Fourth quarter field activity was mainly focused on the Nig Gas Plant project which included delivery of major equipment to the site along with on-site construction activities and starting construction of the sales gas and NGL pipelines.  In addition, the pipeline tie-in of a four well (4.0 net) pad at Nig was completed in late November after being delayed by rain and wet field conditions.

During the quarter, four new wells started production leaving an inventory at the end of the quarter of five (4.5 net) drilled Montney horizontal wells that had not started producing which included one (0.5 net) completed well.

Field activity in the first quarter will include completing construction of the Nig Gas Plant and associated sales gas and NGL pipelines plus the completion and tie-in of a three well pad at West Umbach.

At Umbach (100% working interest), produced raw natural gas contains 1.2% H2S with approximately 85% directed to the McMahon Gas Plant and 15% to the Stoddart Gas Plant where firm processing commitments total 80 Mmcf raw gas per day (65 Mmcf per day at McMahon plus 15 Mmcf per day at Stoddart).  Field compression capacity totals 150 Mmcf per day raw gas with throughput in the fourth quarter averaging 112 Mmcf per day (including 29 Mmcf per day from Nig which has been redirected to the recently commissioned Nig Gas Plant).  Activity in 2020 will include completing and connecting a three well (3.0 net) pad at West Umbach in the first quarter.  There remains significant capacity for future growth which is contingent on the Station 2 natural gas price.

At Nig (100% working interest), produced raw natural gas contains 0.1% H2S and is directed to the recently constructed 50 Mmcf per day sour gas plant that started up in late February 2020.  Total estimated cost of the Nig Gas Plant project remains at $86 million which includes the facility, an eight-kilometre sales gas pipeline and drilling/completing a horizontal well for acid gas injection ($11 million in 2018, $61 million in 2019, $14 million in 2020).  The estimated cost was increased to $86 million in November 2019 (from $81 million) as a result of the cost for site construction being higher than forecast and design changes.  At full capacity, incremental production from the gas plant versus processing at the McMahon Gas Plant is expected to be 1,500 Boe per day (70% liquids) given the higher NGL recovery and reduced gas shrinkage.  In addition, eliminating third-party processing fees will result in an operating cost of less than $2.00 per Boe which will reduce the corporate operating cost.  Incremental liquids are expected to include approximately 93% NGL (propane/butane) and 7% condensate with the majority of the propane being sold at the Far East Asia Index price via the Altagas Ridley Island Export Terminal (‘RIPET’).  Activity in 2020 is expected to include completing the Nig Gas Plant plus drilling and completing two to four wells (2.0 to 4.0 net).

At Fireweed (50% working interest), construction of a 50 Mmcf per day field compression facility (expandable to 100 Mmcf per day) is anticipated to begin in mid-2020 with start-up in late 2020 or early 2021.  The estimated cost for the facility, a 16-kilometre access road and sales pipeline is $38 million gross.  There is currently one standing well (0.5 net) that has been completed which averaged 10.9 Mmcf per day raw gas, 660 barrels per day of field condensate and 1,140 barrels per day of frac water over the last 12 hours of a six-day clean-up (final flowing casing pressure of 4,800 kPa).  Based on production history from offsetting horizontal wells, first year average field condensate-gas ratios are expected to be 30 to 70 barrels per Mmcf raw which is 100% to 400% higher than at Umbach.  Investment in 2020 is expected to total $36 million which will include the construction of the facility and related pipelines and roads plus drilling four wells (2.0 net) and completing three wells (1.5 net).

A summary of horizontal well results at Nig and Umbach is provided below.  Note that IP90 and IP180 rates are not reliable indicators of relative longer-term performance since wells are initially rate restricted to manage fluid rates.  Note that the 2019 wells at Nig in the upper/mid Montney were drilled on tighter interwell spacing versus the 2018 wells (400 metres versus 465 metres) which is expected to reduce longer-term rates and ultimate recovery.

 

Year of Completion

Frac

Stages

Completed

Length

 

IP90 Cal Day

 

IP180 Cal Day

 

IP365 Cal Day

Umbach 2017 – 2018

19 hz’s

34 1895 m 4.6 Mmcf/d(1)

24 Bbls/Mmcf(2)

19 hz’s

4.4 Mmcf/d(1)

20 Bbls/Mmcf(2)

19 hz’s

4.0 Mmcf/d(1)

15 Bbls/Mmcf(2)

17 hz’s

Nig 2018 upper

3 hz’s

37 2180 m 8.1 Mmcf/d(1)

29 Bbls/Mmcf(2)

3 hz’s

8.2 Mmcf/d(1)

25 Bbls/Mmcf(2)

3 hz’s

7.5 Mmcf/d(1)

21 Bbls/Mmcf(2)

3 hz’s

Nig 2019 upper/mid

3 hz’s

42 2240 m 8.1 Mmcf/d(1)

20 Bbls/Mmcf(2)

3 hz’s

Nig 2019 lower

1 hz

42 2280 m 5.5 Mmcf/d(1)

57 Bbls/Mmcf(2)

1 hz

  • Raw gas rate.
  • Bbls/Mmcf is the condensate-gas ratio or barrels of field condensate per Mmcf raw.

Based on results from the 2017 and 2018 wells, Storm management is using 8 Bcf and 14 Bcf raw gas type curves (internal estimates) to forecast production at Umbach and Nig respectively.  More detail on well performance and management’s type curve is available in the presentation on Storm’s website.

Through a predecessor company Storm began acquiring undeveloped land in the Horn River Basin of northeast British Columbia in 2008. As at December 2018, 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 6 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 2019. 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 2018 averaged approximately 51 Boe per day. No capital was invested on this property by Storm in 2017, 2018 or 2019 and no activity is planned for 2020.

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