Core Area Review 2019-08-16T12:16:55+00:00

CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig/Fireweed 121,000 net acres / 19,873 Boe/d*

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

*Average daily production six months ending June 30, 2019

Storm’s land position is prospective for liquids-rich natural gas from the Montney formation and totaled 121,000 net acres (172 net sections) at the end of the quarter.

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 horizontal wells in the area have been drilled in the upper part of the Montney formation.

Second quarter field activity included commencing construction of the Nig gas plant and starting the completion of a pad with four horizontal wells (4.0 net) at Nig.  The four-well pad at Nig is testing different intervals in the Montney with two wells in the upper, one well in the mid and one well in the lower.

At the end of the quarter, there was an inventory of nine drilled Montney horizontal wells (8.5 net) that had not started producing which included one completed well (0.5 net).  During the quarter, one well (1.0 net) started production.

Field activity in the second half of 2019 will be focused on the Nig area and will include constructing the 50 Mmcf per day sour gas plant, drilling and completing an acid gas injection well, constructing a sales gas pipeline and finishing the completion and tie-in of a four-well pad at Nig.

At Umbach (100% working interest), production in the quarter averaged 16,494 Boe per day with 18% liquids and was reduced by 12 days of planned third-party outages.  There are currently four standing wells (4.0 net) with none having been completed.  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 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 second quarter reduced by 12 days of outages and averaging 106 Mmcf per day raw gas (includes 18 Mmcf per day raw from Nig).  Growth at Umbach, where there is unused field compression capacity, depends on the natural gas price at Station 2.

At Nig (100% working interest), production in the quarter averaged 3,362 Boe per day with 18% liquids and was reduced by 12 days of planned third-party outages plus 12 days where the wells were shut in for completion of the adjacent four-well pad.  There are currently four standing and completed wells (4.0 net) which will be pipeline connected by the end of September.  Produced raw natural gas contains approximately 0.2% H2S.  The 50 Mmcf per day sour gas plant that is currently under construction is expected to be completed in January 2020 with the total estimated cost being $81 million ($11.4 million invested in 2018 and the remainder to be invested in 2019).  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 less than $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 $7 million (net) will be invested in 2019 primarily to drill and complete one horizontal well (0.5 net) and for equipment deposits for a field compression facility.  Depending on the timing for regulatory approvals, construction is anticipated to begin in 2020 with start-up in the second half of 2020. Total estimated cost of the facility is $34 million (gross) and it is designed to be expandable to 100 Mmcf per day.  Preliminary planning for 2020 includes net investment of approximately $50 million to $55 million to drill and complete eight horizontal wells (4.0 net) and construct the field compression facility.  There is currently one standing well (0.5 net) that was completed in 2018 with a length of 1,520 metres (36 frac stages) that 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 over the last 12 hours of a six day clean-up.  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).

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 performance as wells are initially rate restricted for several months to manage fluid rates.  In addition, recent wells have been affected by outages totaling 43 days to date in 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 – 2018

19 hz’s

34 1895 m 4.6 Mmcf/d(2)

24 Bbls/Mmcf(3)

18 hz’s

4.3 Mmcf/d(2)

20 Bbls/Mmcf(3)

16 hz’s

4.3 Mmcf/d(2)

14 Bbls/Mmcf(3)

12 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

7.5 Mmcf/d(2)

21 Bbls/Mmcf(3)

3 hz’s

(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 8.5 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 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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