british columbia’s montney play - clean energy bc · wood mackenzie™, a verisk analytics...
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woodmac.comTrusted commercial intelligence
British Columbia’s Montney play
Mark Oberstoetter, Generate 2017
More growth on the way
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before anyone else
Agenda
1 The high-level. Does the world even want gas anymore?
2 Trends and activity levels in the Montney
3 Forecasting activity by sub-play and operator
woodmac.com 4
British Columbia gas production
Province-level forecast
BC Montney production surpasses 4.5 bcfd in 2025 and 5.4 bcfd in 2030
Source: Wood Mackenzie – North America Gas Service
Wood Mackenzie’s base case outlook
-
1.0
2.0
3.0
4.0
5.0
6.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Ga
s p
rod
uc
tio
n b
cfd
British Columbia - conventional British Columbia - other British Columbia - Montney
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Canada’s gas production
Country-level forecast
Alberta’s Montney, Deep Basin and Duvernay contributions add to British Columbia’s growth
Source: Wood Mackenzie – North America Gas Service
Wood Mackenzie’s base case outlook
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Ga
s p
rod
uc
tio
n b
cfd
British Columbia - conventional British Columbia - other Alberta - conventional
Alberta - other Rest of Canada Alberta - Montney
British Columbia - Montney
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North America gas production
North America-level forecast
Lots of competition!
Source: Wood Mackenzie – North America Gas Service
Wood Mackenzie’s base case outlook
-
20.0
40.0
60.0
80.0
100.0
120.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Ga
s p
rod
uc
tio
n b
cfd
Other US Lower 48 Marcellus / Utica Haynesville Permian Rest of Canada BC Montney
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Together, wind and solar grow more than threefold to 2035
Source: Wood Mackenzie
Emerging markets, led by China & India, will see greatest capacity build
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2017 2021 2025 2029 2033
TW
h
Other Renewables Geothermal
Solar Wind
Other Solid Fuels Hydro
Nuclear Gas
Oil Coal
World power output by fuel, 2017 – 2035 Global wind & solar capacity growth, 2017 – 35
0
500
1,000
1,500
2,000
2,500
2017 2021 2025 2029 2033
GW
South America
Russia and Caspian
North America
Middle East
Europe
Asia Pacific
Africa
South America
Russia and Caspian
North America
Middle East
Europe
Asia Pacific
Africa
So
lar
Win
d
Wood Mackenzie’s base case outlook
woodmac.com 8
0
10,000
20,000
30,000
40,000
50,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
World PV bid prices vs. project size, 2009 – 2017
Renewable costs are falling fast & surprising to the downside
Growth in China’s manufacturing capacity is the critical factor for solar markets
Wood Mackenzie’s base case outlook
Source: GTM Research
World solar module production, 2008 - 2016
0
50
100
150
200
250
300
350
400
450
Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17
Ave
rag
e b
id p
ric
e (
US
D / M
Wh
)
Auctioned capacity (MWdc)
Nam
ep
late
MW
dc
China 2016 panel manufacture 50%
greater than rest of world combined
2016 capacity approaching 90,000 MW
(vs. 50,000 MW production)
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Agenda
1 The high-level. Does the world even want gas anymore?
2 Trends and activity levels in the Montney
3 Forecasting activity by sub-play and operator
woodmac.com 10
2014 well locations
Montney by vintage year: 2014 vs. 2016
2014 marked the peak of drilling activity thus far, led by Northern BC LNG-aspirants and increased activity due to strong commodity prices
Trends and activity levels in the Montney
2016 well locations
Source: Wood Mackenzie
woodmac.com 11
Operators have refined drilling and completion techniques
All or a combination of increased proppant placement, longer laterals and a greater number of more targeted frac stages has resulted in significantly improved recoveries
Trends and activity levels in the Montney
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The trend of longer laterals
Operator preference and geology is responsible for the varying lengths of laterals
Trends and activity levels in the Montney
Source: Wood Mackenzie
Lateral lengths by year
0
500
1,000
1,500
2,000
2,500
3,000
3,500
No
rth
ern
BC
South
ern
BC
Sund
ow
n G
round
birch
He
rita
ge L
iqu
ids
Da
wso
n C
ree
k
Sw
an
AB
San
ds
Mu
llig
an
Pouce C
oup
e
Gra
nd
Pra
irie
Ante
Cre
ek
Kaybob
Elm
wort
h/K
arr
Kakw
a C
ore
Dry
Ga
s
Kaybob
Fox C
reek
Kaybob
Sim
onett
e
Kaybob
We
st
Nort
h
Oil
Pem
bin
a
Late
ral
len
gth
(m
etr
es)
2011 2012 2013 2014 2015 2016
Montney Duvernay
woodmac.com 13
Operator reported frac stages per well
Frac stages, the more the better?
Refined completion techniques have seen a marked increase in frac stages per well
Trends and activity levels in the Montney
British Columbia’s top performing wells based
on IP30 rates
0
10
20
30
40
50
60
70
80
90
100
Av
era
ge
nu
mb
er
of
fra
c s
tag
es p
er
we
ll
2013 2017
Source: Wood Mackenzie
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
- 20 40 60 80 100
Pro
pp
an
t (t
on
ne
s)
Number of frac stages
Bottom 75% Top 25% Top 10%
Source: Wood Mackenzie, BCOCG, IPS ranged by mmcfe
woodmac.com 14
Rig counts versus total gas production
Fewer rigs are drilling more productive and cheaper Montney wells
Lowered costs are due to structural shifts in drilling and completion techniques, along with depressed service costs
Trends and activity levels in the Montney
Movements in well costs since 2012
Source: Wood Mackenzie, Nickles RigLocator
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
10
20
30
40
50
60
70
80
2014
2015
2016
2017
Pro
du
ction
(b
cfd
)
Ave
rag
e m
onth
ly r
ig c
oun
t
BC gas production BC rig count
0
2
4
6
8
10
12
14
16
18
20
2012
2013
2014
2015
2016
2017
Co
mp
an
y c
ite
d w
ell
co
st (C
dn$
mm
)
Seven Generations Delphi
Cequence Black Swan
Tourmaline Birchcliff (compl. cost only)
Storm Resources
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Swan BC
Heritage Liquids BC
Sundown Groundbirch BC
Kakwa Core AB
Dawson Creek BC
Pouce Coupe AB
Southern BCNorthern BC
Elmworth/Karr AB
Grande Prairie AB
Ante Creek AB
Kaybob ABSpirit River Tier 1
Notikewin AB
Falher AB
Bluesky AB
Dunvegan AB
Susquehanna Core
Bradford Area
Northeast PA
Lycoming Area
Greene Dry Gas Area
Southwest Rich Gas
WV Rich Gas
Ohio
Lean gas core
Lean Gas SWPA
Northern wet gas
Southern wet gas
Tioga County
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
-1,000 1,000 3,000 5,000 7,000 9,000 11,000 13,000
Local hub b
reakeven (
US
$/m
mbtu
)
Remaining well locations
Montney Deep Basin Marcellus Utica
Montney and Deep Basin hold significant low-cost gas resource
At a wellhead breakeven, WCSB production is competitive with the Marcellus and Utica, but top tier areas lack in repeatability
Trends and activity levels in the Montney
Source: Wood Mackenzie
woodmac.com 16
Agenda
1 The high-level. Does the world even want gas anymore?
2 Trends and activity levels in the Montney
3 Forecasting activity by sub-play and operator
woodmac.com 17
Remaining value split 50/50 between AB and BC
Liquids-rich gas areas including Kakwa Core, Heritage
Liquids and Pouce Coupe hold 53% of remaining value
Wood Mackenzie’s Montney sub-plays
Forecasting activity by sub-play and operator
Source: Wood Mackenzie
NPV split by sub-play
Northern BC (1),
Cdn$6.72 bn
Sundown
Groundbirch (3),
Cdn$3.87 bn
Heritage Liquids (4), Cdn$13.32 bn
Dawson Creek (5),
Cdn$0.71 bnSwan (6),
Cdn$2.48 bn
Southern BC (2), Cdn$0
Mulligan (8), Cdn$0
AB Sands (7),
Cdn$0.49 bn
Pouce Coupe (9),
Cdn$6.29 bn
Grande Prairie (10),
Cdn$2.54 bn
Kakwa Core (14),
Cdn$8.34 bn
Kaybob (12),
Cdn$1.14 bn
Ante Creek (11),
Cdn$2.43 bn
Elmworth Karr (13),
Cdn$4.54 bn
woodmac.com 18
Sub-play area 1 – Northern BC
Activity has shifted from LNG linked drilling to pure-play producers
» Near-term growth driven by investments in processing infrastructure
Forecasting activity by sub-play and operator
Source: Wood Mackenzie, XI Technologies
0
50
100
150
200
250
300
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2010 2014 2018 2022 2026 2030 2034
Wells
dri
lled
pe
r ye
ar
Su
b-p
lay p
rod
uctio
n (
mm
cfe
/d)
Gas Oil/condensate NGLs Wells drilled
0
50
100
150
200
250
300
350
0
500
1,000
1,500
2,000
2,500
3,000
2010 2014 2018 2022 2026 2030 2034
Wells
dri
lled
pe
r ye
ar
Su
b-p
lay p
rod
uctio
n (
mm
cfe
/d)
Gas Oil/condensate NGLs Wells drilled
6.5 6.1 5.9 5.9 5.2 4.7 4.7 4.5 4.3 4.3 3.5 3.2
2.8
1,165
02004006008001,0001,2001,4001,6001,800
0
2
4
6
8
10
12
14
16
Unco
nve
ntio
nal
Res.
Bla
ck S
wa
n
Sto
rm R
es.
Pa
inte
d P
on
y
To
dd
En
erg
y
CN
RL
Can
bri
am
En
erg
y
Ke
lt E
xplo
ratio
n
Sa
gu
aro
Res.
Ch
ino
ok E
nerg
y
Su
nco
r
Pro
gre
ss
Cre
w
IP3
0 r
ate
(b
oe
/d)
IP3
0 r
ate
(m
mcfe
/d)
mmcfe/d IP Average gas well IP
boe/d IP Average oil well IP
woodmac.com 19
Sub-play area 4 – Heritage Liquids
High value British Columbia acreage given condensate and NGL yields
» Highest IRR (post-tax) of British Columbia sub-plays at 62%
Forecasting activity by sub-play and operator
Source: Wood Mackenzie, XI Technologies
0
50
100
150
200
250
300
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2010 2014 2018 2022 2026 2030 2034
Wells
dri
lled
pe
r ye
ar
Su
b-p
lay p
rod
uctio
n (
mm
cfe
/d)
Gas Oil/condensate NGLs Wells drilled
$4.3
$14.6$21.5
86
295
1,094
Oil
NGL
Gas
EUR (mmboe)
Revenue (C$M))
woodmac.com 20
Over 6,790 wells have been drilled in the Montney since 2013
We forecast over 10,000 more will be drilled in 2018-2026. Four areas stand out –Northern BC, Heritage Liquids, Kakwa and Pouce Coupe
Forecasting activity by sub-play and operator
Source: Wood Mackenzie, XI Technologies. Note this is our Canada Upstream unconstrained outlook, our markets teams take a risked view on these development levels.
Sub-play drilling history and forecast
0
200
400
600
800
1,000
1,200
1,400
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
202
2
202
3
202
4
202
5
202
6
We
lls
dri
lle
d
Northern BC (1) Southern BC (2) Sundown Groundbirch (3) Heritage Liquids (4)Dawson Creek (5) Swan (6) AB Sands (7) Mulligan (8)Pouce Coupe (9) Grande Prairie (10) Ante Creek (11) Kaybob (12)Elmworth Karr (13) Kakwa Core (14)
woodmac.com 21
Disclaimer
Strictly Private & Confidential
This report has been prepared by Wood Mackenzie Limited. The report is intended
solely for the benefit of its subscribers and its contents and conclusions are confidential
and may not be disclosed to any other persons or companies without Wood Mackenzie’s
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expressed in this report are those of Wood Mackenzie. They have been arrived at
following careful consideration and enquiry but we do not guarantee their fairness,
completeness or accuracy. The opinions, as of this date, are subject to change. We do
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