This is the second part of our series covering oil production from the Viking formation; the first post covered the Viking oil play in Saskatchewan. Today’s post will cover the Viking oil play in Alberta along with the notable players involved.?? The Viking light oil fairway is a trending porous sandstone/conglomerate with 6-12 million barrels of original oil in place (OOIP) per section. While several Viking oil pools lie scattered in Alberta, this will be an overview of Viking oil production in the Redwater and Halkirk-Provost areas.
Viking well productivity in Alberta varies from one area to another due to several factors mainly related to reservoir parameters such as pressure, permeability, thickness and depth. Furthermore, the type of drilling and completion used on a well should also be considered especially when it comes to completion ie fracturing techniques. In general, well production rates in Alberta exceed those seen in WC Saskatchewan due to better reservoir quality.
Viking oil production in Alberta is predominantly light sweet oil (35??-39?? API) which fetches Edmonton Par pricing (Canadian light oil benchmark). Newly drilled Viking wells enjoy a beneficial crown royalty treatment of 5.0% and low operating costs per barrel in general. However, the gas to oil ratio varies from one area to another from 5-10% at Redwater to more than 25% in the Harmattan and Halkirk areas. All in costs per well also varies from $1M to $1.9M depending on the formation depth, completion method used and the type of the horizontal well drilled (longreach or monobore).
When it comes to the Viking, Westfire Energy is the??premier??Viking player with land in both Alberta and Saskatchewan having drilled more than 200 Viking oil wells.??At Redwater, Westfire Energy holds 62 net sections of land. In Q1 of 2012, the company drilled 32 Viking wells achieving a marked improvement in IP rates thanks to its modified completion methods. ??Recall that Westfire Energy is now applying a completion process known as ‘modified hot frac’ on its wells which enhances well productivity by??mitigating waxy buildup in the lateral portion of the well during initial flow back.??. The process is multifaceted as it involves the makeup of the frac fluids and heating to the right temperature. The industry’s move to drill more wells per section provide a hidden upside to many of the players that is seldom discussed. For instance, WestFire has recently received approval for downspacing to 32 Viking hz wells/section, the end result is a substantial increase of the company’s inventory of locations and recovery rates.
Based on WestFire’s graph above, the type curve for a Viking well at Redwater assumes an IP30 rate of 80 bbls/d paying out in about 5 months. In the first quarter of 2012, WestFire achieved IP30 rates of 96 bopd based on a 12 well average with peak IP rates exceeding 250 bbls/d. These rates are 50% higher than the typical Viking well rates in WC Saskatchewan for similar capital costs per well. In March of 2012, Westfire recorded IP30 rates of 157 bbl/d and 106 bbl/d on 2 of its wells! However, variability in rates is to be expected in Redwater based on the type of well drilled (longreach or monobore), the completion method and the reservoir parameters in sub-regions of Redwater. For example, in North Redwater Sure Energy recorded initial production rates in excess of 300 boepd but its IP30 rates fluctuate between 60bbls/d and 100 bbls/d.
Average IP30 rates at Halkirk-Provost have been higher than at Redwater. Privately held Cutpick Energy achieved above average IP30 rates of 150 boepd. Cutpick, recently acquired by Crescent Point, was one of the top active operators in the area enjoying a 300+ net section position. Overall IP30 rates fall in the range of 100-150 bbls/d averaging about 80% in oil and liquids with estimated ultimate recoveries in the 75,000-125,000 boes range. Other players in Halkirk include Charger Energy with 110 net sections.
The Viking at Harmattan is still an emerging play; Angle Energy is the only major player in this area with more than 60 net sections of land that has done some experimentation. However, following a few test wells Angle reoriented its capex into other targets with a higher rate of return. The Viking formation is much deeper at 1,800-2,500m compared to the 700-900m depth which translates into expensive wells. Angle identified a few sweet spots producing oil at low gas-oil ratio but with current gas prices, the payout is way too long for these wells so Angle’s move is understandable.
There is a large number of oil companies operating in Alberta both private and public. Let’s focus on the public companies which include junior, intermediate and senior producers:
|Angle Energy||TSX:NGL||249 net sections|
|ARC Energy||TSX:ARX||30 net sections|
|Baytex Energy||TSX:BTE||48 net sections|
|Birchlake Energy||TSX:BLK||5 net sections|
|Bonavista Energy||TSX:BNP||240 net sections|
|Charger Energy||TSXV:CHX||110 net sections|
|Crescent Point||TSX:CPG||437+ net sections|
|Equal Energy||TSX:EQU||29 net sections|
|FairWest Energy||TSXV:FEC||16 net sections|
|Kallisto Energy||TSXV:KEC||30 net sections|
|Husky Energy||TSX:HSE||500 net sections|
|Marquee Energy||TSXV:MQL||43 net sections|
|Nextraction Energy||TSXV:NE||3.25 net sections|
|Redwater Energy||TSXV:RED||26 net sections|
|Pengrowth Energy||TSX:PGF NYSE:PGH||350+ net sections|
|Penn West Petroleum||TSX:PWT NYSE:PWT||1170 net sections|
|Sure Energy||TSX:SHR||26 net sections|
|Tamarack Valley||TSXV:TVE||63 net sections|
|Twin Butte||TSX:TBE||121 net sections|
|WestFire Energy||TSX:WFE||232 net sections|
The acreage above includes land prospective for Viking oil in Saskatchewan. Companies with no exposures to the Viking in Alberta have not been included in the list.??The Viking oil play in a few areas such as Halkirk and Redwater have mainly entered development mode while in other areas remains in exploration mode. Given the strength of oil prices in this market, the Viking will be targeted by more and more operators providing new well data and evolving the play in Alberta.
Who would be your top pick from the list for Viking oil exposure?
This list was compiled by??BeatingTheIndex.com??from the latest presentations and company news releases. I do not guarantee the accuracy of the data so if you spot an error in the data or know of a company that I missed from the list, please do not hesitate to contact me.