CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig Creek/Fireweed 121,000 net acres / approximately 23,950 Boe/d*

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

*Average daily production Q1 2020

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 the end of the second quarter.

Field activity in the second quarter was minimal while activity in the second half of the year will include drilling four (4.0 net) horizontal wells at the Nig Creek area in the third quarter which are planned for completion and tie-in early in the fourth quarter.  In addition, there are three contingent horizontal wells (3.0 net) planned for the Umbach area in the fourth quarter depending on commodity prices and forecasted funds flow.

At the end of the quarter, there were four (2.5 net) drilled Montney horizontal wells that had not started producing which included two (1.0 net) completed wells, both at Fireweed.

At Umbach (average 90% working interest), produced raw natural gas contains 1.2% H2S with approximately 80% directed to the McMahon Gas Plant and 20% to the Stoddart Gas Plant.  Firm processing commitments total 80 Mmcf raw gas per day (65 Mmcf per day at McMahon and 15 Mmcf per day at Stoddart).  There remains significant capacity for future growth given second quarter volumes averaged 83 Mmcf per day raw which is significantly less than field compression capacity at 150 Mmcf per day raw gas.

At Nig Creek (100% working interest), produced raw natural gas contains 0.1% H2S and is directed to the 50 Mmcf per day sour gas plant that started up in February 2020.  During the second quarter, inlet volumes averaged 43 Mmcf per day raw, sales were 8,510 Boe per day with liquids at 48 barrels per Mmcf sales, the operating cost for the area was $1.03 per Boe, and the operating netback was $5.77 per Boe ($2.34 per Boe higher than the corporate average).  With the decline in the WTI crude oil price in the first half of 2020, the plant has been ‘warmed up’ since mid-April which has reduced NGL recovery by approximately 8 barrels per Mmcf sales (propane and butane).  The plant is expected to reach fully capacity in the fourth quarter after the next four wells are drilled and completed (from an existing pad which is already pipeline connected).

At Fireweed (50% working interest), there was no activity in the quarter as development was deferred on May 12, 2020 by up to one year in response to the collapse in the WTI crude oil price.  With the recent improvement in the WTI crude oil price, activity is likely to resume in the first quarter of 2021 with first production in the second half of 2021.  There are currently three standing wells (1.5 net) with two wells (1.0 net) having been completed.  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.

A summary of horizontal well results at Nig Creek and Umbach is provided below.  IP90 and IP180 rates are less reliable indicators of relative longer-term performance since wells are initially rate restricted to manage fluid rates.

 

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)

19 hz’s

Nig Creek 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 Creek 2019 upper/mid

3 hz’s

42 2240 m 8.1 Mmcf/d(1)

20 Bbls/Mmcf(2)

3 hz’s

7.9 Mmcf/d(1)

15 Bbls/Mmcf(2)

3 hz’s

 

Year of Completion

Frac

Stages

Completed

Length

 

IP90 Cal Day

 

IP180 Cal Day

 

IP365 Cal Day

Nig Creek 2019 lower

1 hz

42 2280 m 5.5 Mmcf/d(1)

57 Bbls/Mmcf(2)

1 hz

4.1 Mmcf/d(1)

49 Bbls/Mmcf(2)

1 hz

Umbach 2020

3 hz’s

38 2420 m 4.4 Mmcf/d(1)

15 Bbls/Mmcf(2)

3 hz’s

  • 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 Creek respectively.  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 2019, Storm had 100% working interest in 108 sections (72,500 net acres) 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 which was shut in for the majority of 2019. 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 78 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 2019 averaged approximately 43 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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