Calgary-based consulting group Ziff Energy analyzed cost and reserve data from 77 producing companies and royalty trusts in its most recent study of finding and development (F&D) costs for western Canada. The firm used changes in proven reserves and actual capital costs to calculate the results.
F&D costs have tripled due to smaller reserve targets and higher outlays for land, drilling and development. The most costly areas are the most remote, and generally are those with limited access and infrastructure.
Ziff Energy estimates full-cycle costs for 2008 will rise to C$9. For the first 10 months of 2008, producers received C$7.50 per thousand at the Alberta Gas Plant Gate. “In the last three years, the gas price Canadian producers received has generally been lower than the full-cycle cost for new gas, so producers will earn a lower, or even no, return on this new gas,” said Ziff.
Industry response to these economics has been swift. In the first 10 months of 2008, Canadian gas completions dropped 19% as compared with 2007’s 12,635 total, and 2007 completions were down 17% from 2006. Ziff found that costs were up across all types of plays, from conventional to unconventional, but that the range among plays varied by as much as C$4 per thousand.
During 2007, most wells were drilled in central and southern Alberta, the latter for shallow-gas objectives. Both conventional plays, they accounted for 40% and 23%, respectively, of the year’s drilling.
?daunting economics
Canada’s unconventional plays offer some relief. Small but growing slices of activity, these plays are characterized by high production growth, reserve replacement and reinvestment with low F&D costs. Major unconventional plays include Horn River shale gas, Greater Sierra tight gas, extended Deep Basin tight gas, Manville and Horseshoe Canyon coalbed-methane, and shale gas.
Recommended Reading
SilverBow Resets Shareholder Meeting After $2.1B Crescent Deal
2024-05-16 - SilverBow Resources said it will adjourn its May 21 shareholders’ meeting until May 29 following Crescent Energy’s agreement to buy the Eagle Ford operator.
Blue Racer Midstream Prices Senior Notes Offering
2024-05-15 - Net proceeds from the sale of senior notes will be used to pay off debt and other general corporate purposes.
Petrobras CEO Prates to Step Down
2024-05-15 - Brazil’s President Luiz Inácio Lula da Silva has requested that Petrobras CEO Jean Paul Prates resign following a dispute over dividend payments.
Pembina Pipeline to Renew Share Repurchase Program
2024-05-14 - Pembina Pipeline has approval from the Toronto Stock Exchange to purchase up to 5% of its outstanding common shares.
ProPetro Adds Exxon Designee Volkov to Board
2024-05-14 - Alex Volkov is currently the transition executive tasked with planning the integration of Pioneer Natural Resources and Exxon Mobil.