Western Canada is birthing a major unconventional play, and its characteristics compare favorably to the South Texas Eagle Ford. The Duvernay is a Devonian-age shale that's long been known as a rich source rock. It sprawls across northern and central Alberta, with minor overlaps into the Northwest Territories and northeastern British Columbia.

Like the Eagle Ford, the Duvernay is overpressured and exhibits a potentially lucrative rich-gas/condensate leg. It also covers a vast area—the Duvernay trend could stretch some 350 miles from Grande Prairie to southeast of Red Deer, Alberta. The play is in its early stages of delineation, but so far, so good.

A group of Calgary operators have been concentrating on the Kaybob area, where the Duvernay is some 50 meters thick and gas-in-place is estimated at 100- to 120 billion cubic feet (Bcf) per section. Interest spiked when companies began to report intriguing well results last year, and that interest has built with subsequent announcements.

Celtic Exploration Ltd. started producing its first horizontal Duvernay test in 15-33-060-20W5 in April 2011. Celtic is drilling wells in a joint venture in the Kaybob area with Trilogy Energy Corp. and Yoho Resources Inc. Each partner has a one-third interest in 30 gross sections of land.

Early rates were promising: the first horizontal flowed gas at 5.2 million cubic feet per day, and liquids yields were 75 barrels per million cubic feet.

In early January 2012, Celtic reported results of its third horizontal test, the best to date. The well flowed at a maximum rate of 7.1 million cubic feet per day during cleanup, and stabilized at 3.6 million and 339 barrels of condensate per day. After liquids extraction, total liquids yields will be more than 100 barrels per million cubic feet of raw gas, the company said. Located in 13-36-060-20W5, the well reached a measured depth of 5,157 meters, and featured a 1,727-meter lateral. It was fractured in 25 stages with slickwater treatments; total well cost came to C$10.3 million.

In general, Celtic is estimating reserves are 1.1 million barrels of oil equivalent per horizontal Duvernay producer, split 66% gas and 34% natural gas liquids.

Trilogy Energy, one of Celtic's partners in the Kaybob JV, holds more than 100 net sections of Duvernay rights in the core of the emerging play, and more than 225 net Duvernay sections in the greater Kaybob area. In a recent report, Ronny Eisemann, vice president at Dalhman Rose, said that Trilogy's results from the new play were improving: "The condensate production from each Duvernay shale well is higher than previously expected, with the yield holding between 85 to 90 barrels per million cubic feet."

That's a 35% yield, in contrast to 20% condensate yields reported in Eagle Ford wells by such well-known operators as Rosetta Resources and SM Energy, noted Eisemann.

The other JV partner is Yoho Resources. For its economics, Yoho figures a horizontal Duvernay well at Kaybob will recover 3.7 Bcf of gas and 516,000 barrels of liquids. The company holds 17.7 net sections of land, on which it could site some 125 net wells at densities of six to eight wells per section.

Outside the Kaybob JV, Yoho and Celtic are partnering on another Duvernay well. This test, in 13-22-62-21W5, is some 10 miles from the existing Duvernay horizontals. The stepout was drilled to a measured depth of 4,861 meters with a 1,460-meter lateral. The well was completed with a 10-stage frac, using the perf-and-plug method.

In mid-February, Yoho said this latest well tested gas at rates between 6- and 7.7 million per day, and at the conclusion of an 11-day flow period, it was making condensate at the rate of 658 barrels per day.

Even at low gas prices, such well results are sterling. An additional positive is a rock-bottom royalty rate. To goose activity, the Alberta government has reduced royalties for shale-gas wells to 5% for three years, with no limit on volumes produced. Given the steep declines of shale reservoirs, this helps rate of return quite nicely.

Canadian senior firms are also investigating the Duvernay: Encana Corp., ConocoPhillips, Husky Energy and Talisman Energy each have interests in the play, and activity is ramping up across its wide breadth.

Stay tuned.

For more on the Duvernay, see UGcenter.com.