Core Area Review 2019-05-22T17:13:11+00:00

CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig/Fireweed 121,000 net acres / 20,538 Boe/d*

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

*Average daily production year ending December 31, 2018

Storm’s land position is prospective for liquids-rich natural gas from the Montney formation and currently totals 121,000 net acres (172 net sections). During the first quarter, five sections of land were acquired.

Most of the land position is delineated with the 78 horizontal wells (73.9 net) drilled to date by Storm and by multiple producing horizontal wells on adjacent lands.  The majority of the producing horizontal wells in the area have been drilled in the upper part of the Montney formation.  Storm’s future drilling will also test the mid and lower Montney in certain areas where higher field condensate-gas ratios are expected based on offsetting producing wells.

First quarter field activity included drilling four horizontal wells (4.0 net) on one pad at Nig and one horizontal well (1.0 net) at Umbach which was the last well on a three-well pad.  Two horizontal wells (2.0 net) started production in the quarter, both at Umbach.

Field activity in the second and third quarters will be focused on the Nig area and is expected to include completion of a four-well pad, drilling and completing an acid gas injection well and starting construction of the sour gas plant.  The four-well pad to be completed at Nig includes two wells in the upper Montney, one in the mid and one in the lower.

At Umbach (100% working interest), production in the quarter averaged 15,870 Boe per day with 19% liquids and is currently approximately 17,500 Boe per day.  Activity during the remainder of 2019 is expected to include the completion of three horizontal wells (3.0 net) in the fourth quarter.  Field compression capacity totals 150 Mmcf per day raw gas and throughput in the first quarter averaged 125 Mmcf per day raw gas excluding the 17-day period where the McMahon Gas Plant was shut in (includes 25 Mmcf per day raw from Nig).  Produced raw natural gas is sour (1.2% H2S) with approximately 85% directed to the McMahon Gas Plant and 15% to the Stoddart Gas Plant.  Firm processing commitments are 65 Mmcf raw gas per day at McMahon (10 Mmcf per day ending 2022, 55 Mmcf per day ending 2031) and 15 Mmcf per day at Stoddart.

At Nig (100% working interest), production in the quarter averaged 3,872 Boe per day with 20% liquids and is currently approximately 4,200 Boe per day.  Activity during the remainder of 2019 is expected to include the construction of a 50 Mmcf per day sour gas plant, installing gathering and sales pipelines, drilling and completing an acid gas injection well (1.0 net) and completing and equipping four horizontal wells (4.0 net).  In April, regulatory approval was received for the sour gas plant and site construction is expected to start in May with start-up anticipated in early 2020.  Produced raw natural gas contains approximately 0.2% H2S.  Total estimated costs associated with the sour gas plant are $81 million (gross) with $11.4 million invested in 2018 and the remainder to be invested in 2019 ($3.4 million to the end of the first quarter).  This includes $73 million for the gas plant, $4 million for an acid gas injection well and $4 million for a sales pipeline.  Total sales from the gas plant are expected to be 10,500 Boe per day with an estimated operating cost of $2.00 per Boe (reduces corporate operating cost to approximately $4.25 per Boe).  Liquids is forecast to be 27% of total production (43% condensate, 57% NGL).

At Fireweed (50% working interest), approximately $15 million (net) will be invested in 2019 to drill and complete three horizontal wells (1.5 net) and for equipment deposits for a field compression facility.  Depending on the timing for regulatory approvals, construction is anticipated to begin in late 2019 with start-up in the second half of 2020.  Total estimated costs associated with the facility are $34 million (gross) and it is designed to be expandable to 100 Mmcf per day.  Preliminary planning for 2020 includes investment of approximately $50 million (net) to drill nine horizontal wells (4.5 net), complete six horizontal wells (3.0 net) and construct the field compression facility.  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.  Production exiting 2020 is forecast to be over 4,000 Boe per day net to Storm with 25% liquids (67% condensate, 33% NGL).

The first horizontal well (0.5 net) at Fireweed was completed in the fourth quarter of 2018 with encouraging results.  The C-74-G/94-A-13 well has a completed length of 1,520 metres and, after flowing on a six-day cleanup, rates over the last 12 hours averaged 10.9 Mmcf per day raw gas, 660 barrels per day of field condensate and 1,140 barrels per day of frac water with a final flowing casing pressure of 4,800 kPa. The well is expected to remain shut in until the field compression facility is completed.

A summary of horizontal well results at Nig and Umbach is provided below.  Note that IP90 and IP180 rates are not meaningful indicators of performance as wells are initially rate restricted for several months to manage fluid rates.  In addition, the 2018 horizontal wells were affected by the 17-day outage at the McMahon Gas Plant in January 2019.

Year of Completion Frac

Stages

Completed

Length

 

IP90 Cal Day

 

IP180 Cal Day

 

IP365 Cal Day

Umbach 2014 – 2016

33 hz’s(1)

22 1350 m 4.9 Mmcf/d(2)

19 Bbls/Mmcf(3)

33 hz’s

4.3 Mmcf/d(2)

16 Bbls/Mmcf(3)

33 hz’s

3.4 Mmcf/d(2)

13 Bbls/Mmcf(3)

33 hz’s

Umbach 2017

12 hz’s

34 1830 m 5.0 Mmcf/d(2)

24 Bbls/Mmcf(3)

12 hz’s

4.5 Mmcf/d(2)

20 Bbls/Mmcf(3)

12 hz’s

4.3 Mmcf/d(2)

14 Bbls/Mmcf(3)

12 hz’s

Umbach 2018

7 hz’s

35 2005 m 3.9 Mmcf/d(2)

23 Bbls/Mmcf(3)

5 hz’s

3.4 Mmcf/d(2

16 Bbls/Mmcf(3)

3 hz’s

Nig 2018

3 hz’s

37 2180 m 8.1 Mmcf/d(2)

29 Bbls/Mmcf(3)

3 hz’s

8.2 Mmcf/d(2)

25 Bbls/Mmcf(3)

3 hz’s

7.8 Mmcf/d(2

24 Bbls/Mmcf(3)

1 hz

(1)  2014 – 2016 wells exclude a middle Montney well (this table provides analysis of upper Montney wells only).

(2)  Raw gas rate.

(3)  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 an 11 Bcf raw gas type curve (internal estimate) to forecast production which represents an average of the expected result at Umbach and Nig.  Future wells will be longer (2300 to 2400 metres) and have more fracture stages (41 to 47) which is expected to result in further improvement to rates and reserves.  More detail on well performance and management’s type curve is available in the presentation on Storm’s website at www.stormresourcesltd.com.

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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