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Horn River Basin Second-Quarter Update
Development of the Horn River basin in Canada moved incrementally forward in the second quarter of 2010 as the exploration and production industry focused mostly on oil and liquids plays in the lower 48 states.
The Horn River basin is located in British Columbia and has attracted a host of exploration and production looking to increase natural gas production and reserves. The basin has multiple formations that are prospective for natural gas and oil.
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EnCana (NYSE:ECA) reported average production from the Horn River of 24 million cubic feet equivalent per day during the second quarter of 2010. EnCana has drilled 10 net wells here in 2010, and is in discussion with the China National Petroleum Corporation for a joint venture on its acreage here and in other areas of Canada.
Progress in the Horn River
Some of the companies developing acreage in the Horn River are looking at the Exshaw formation since this zone produces oil. Quicksilver Resources (NYSE:KWK) will start completion operations on its third horizontal well in the Horn River basin in the third quarter of 2010, and will have a fourth well before 2010 is over. Although most of these wells are targeting the Muskwa zone, Quicksilver Resources is also reentering an existing vertical well to test the oil potential of the Exshaw formation.
Nexen Inc. (NYSE:NXY) reported "substantial progress" on its operation in the Horn River Basin in the second quarter of 2010. The company is currently completing eight wells in the play. Nexen Inc. considers the company's Horn River properties to be among the best natural gas shale plays in North America, and believes that wells here can earn a 10% rate or return even at a $4.00 price for natural gas. Nexen Inc. is also looking at developing the Exshaw formation on its acreage.
New Wells
Devon Energy (NYSE:DVN) has 170,000 net acres under lease in the Horn River area, and is working to hold its acreage here. The company has drilled four of the seven horizontal wells planned for 2010, but hasn't reported the completion results of these four wells.
Devon Energy estimates that based on the performance of previous wells drilled here, its horizontal wells have an estimated ultimate recovery (EUR) from seven to eight BCF per well. The company is still tinkering with the optimum completion design for Horn River wells, but is currently using up to 11 fracturing stages and laterals of 4,600 to 6,000 feet.
Increasing Production
EOG Resources (NYSE:EOG) is working on completing 11 wells drilled last winter and expects to have results by the third-quarter conference call. The company is focusing mostly on increasing its oil and liquids production and may not focus too much capital on this play going forward.
Another reason for the slow pace of development besides the natural gas orientation of the Horn River is the lack of infrastructure in the area to process and transport the gas, and operators might not want production to move higher before the infrastructure is ready.
Bottom Line
The Horn River basin saw a slight amount of development in the second quarter of 2010, as operators focused mostly on developing assets with high proportions of oil and liquids. (To learn more, see our Oil And Gas Industry Primer.)
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EnCana (NYSE:ECA) reported average production from the Horn River of 24 million cubic feet equivalent per day during the second quarter of 2010. EnCana has drilled 10 net wells here in 2010, and is in discussion with the China National Petroleum Corporation for a joint venture on its acreage here and in other areas of Canada.
Progress in the Horn River
Some of the companies developing acreage in the Horn River are looking at the Exshaw formation since this zone produces oil. Quicksilver Resources (NYSE:KWK) will start completion operations on its third horizontal well in the Horn River basin in the third quarter of 2010, and will have a fourth well before 2010 is over. Although most of these wells are targeting the Muskwa zone, Quicksilver Resources is also reentering an existing vertical well to test the oil potential of the Exshaw formation.
Nexen Inc. (NYSE:NXY) reported "substantial progress" on its operation in the Horn River Basin in the second quarter of 2010. The company is currently completing eight wells in the play. Nexen Inc. considers the company's Horn River properties to be among the best natural gas shale plays in North America, and believes that wells here can earn a 10% rate or return even at a $4.00 price for natural gas. Nexen Inc. is also looking at developing the Exshaw formation on its acreage.
New Wells
Devon Energy (NYSE:DVN) has 170,000 net acres under lease in the Horn River area, and is working to hold its acreage here. The company has drilled four of the seven horizontal wells planned for 2010, but hasn't reported the completion results of these four wells.
Increasing Production
EOG Resources (NYSE:EOG) is working on completing 11 wells drilled last winter and expects to have results by the third-quarter conference call. The company is focusing mostly on increasing its oil and liquids production and may not focus too much capital on this play going forward.
Another reason for the slow pace of development besides the natural gas orientation of the Horn River is the lack of infrastructure in the area to process and transport the gas, and operators might not want production to move higher before the infrastructure is ready.
Bottom Line
The Horn River basin saw a slight amount of development in the second quarter of 2010, as operators focused mostly on developing assets with high proportions of oil and liquids. (To learn more, see our Oil And Gas Industry Primer.)
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by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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