Analyst Takes Energy Analytics

A tale of 2 Canadian plays: Untapped value still remains

byChris Griggs

The Wild West: Reporting Canadian liquids

The Wild West spirit lives on in Western Canada, at least when it comes to reporting condensate volumes in gas wells. Operators in the Western Canadian Sedimentary Basin (WCSB) do not consistently report these volumes due to the existing measurement and reporting guidelines for Alberta and British Columbia. This results in public disclosures that can be misleading and hinder a proper understanding of wellhead liquids production in some of the most important Canadian plays. Operators can interpret the guidelines as reporting “gas equivalent volume” in certain operating conditions, creating the appearance of a dry gas production stream.

For investors who rely on public production data for analysis, such reporting inconsistencies can lead to an underestimation of wellhead liquids, negatively affecting net present value calculations. This renders the data useless for meaningful analysis. Currently, there are limited solutions available at scale in the market, leaving customers with no way to perform meaningful well analytics unless they use production data from their own wells. These flawed systems and processes can impede progress and success, leading to frustration, cynicism and a lack of trust in the effectiveness of institutions. It highlights the need for transparency and accountability in both government and industry.

As a result, some prominent Canadian plays are receiving less attention and investment, which leads to reduced exploration, delayed technological development and fewer optimization opportunities. In this blog, we will focus on two Canadian plays that Enverus Intelligence® | Research (EIR) considers highly competitive and among the most profitable plays in North America: the Montney and the Duvernay.

The two plays: Montney and Duvernay

The Western Canadian sedimentary basin is renowned for its diverse endowment of unconventional oil and gas resources. The Montney play is found in Northeast British Columbia and Northwestern Alberta, while the Duvernay is situated in Central Alberta. Both plays are highly sought after by the Canadian unconventional oil and gas industry, with Montney being rich in natural gas, oil and natural gas liquids from the Early Triassic period, and Duvernay boasting high-quality light oil and liquids-rich natural gas from the Devonian age. Their abundant resources and potential for growth have made Montney and Duvernay the primary drivers of unconventional oil and gas production in Canada, making them the industry’s focal points.

Want to learn more about how to optimize and monetize your Canadian portfolio?
Click here to watch a free webinar from Enverus.

The misunderstood play: The Montney

EIR reported at the beginning of 2023 that despite its high profile, the Montney play, a significant unconventional play, remains the least delineated across North America. Despite being well-known and highly regarded in the oil and gas industry, its potential reserves and economic extents are not well understood or well defined. This lack of knowledge contrasts with other similar plays in North America. Over time, EIR has developed its own liquid correction models to provide a more precise estimation of the actual liquid composition and estimates that around 40% of Montney wellhead liquids production has been underreported in raw data since horizontal well development began almost two decades ago. This underreporting has led to an overestimation of the breakeven price in some areas of the play, potentially by up to 50%. However, if this issue is resolved, the entire Montney fairway is considered highly competitive and among the most profitable plays in North America.

“We estimate that approximately 40% of cumulative Montney wellhead liquids production, equivalent to approximately 302 MMbbl, has been underreported in raw public production data since the start of horizontal well development. After correcting for the underreporting, the entire Montney fairway emerges as an extremely competitive and profitable player among North America’s top plays,” said Trevor Rix, senior vice president at EIR.

Enverus can improve your well analytics and reporting in Canada by providing accurate condensate allocation to wellbores. This precise allocation allows for a comprehensive analysis of all available analytics in Enverus PRISM®, making the data more meaningful. Enverus uses proprietary variables derived from in-depth analysis to fuel its model-based allocation process. This process is calibrated to real-world data from clients, ensuring greater consistency and accuracy in reporting.

Want to learn more about how to optimize activity in the Montney Basin?
Click here to watch a free webinar from Enverus.

The smaller, but still strong, Duvernay play

On April 17, the EIR team released a report titled “Duvernay economics | Better, not the best,” which acknowledges the challenges of extracting oil from the Duvernay Shale in central Alberta but highlights its significant value. Unlike the Montney Formation, the Duvernay is composed of deeper, less-porous rock, making oil extraction more capital intensive. However, the belief that these challenges are insurmountable can hinder innovation and risk taking, limiting the potential of the industry and the Duvernay play to achieve its goals.

“Duvernay economics have been quietly improving throughout the last few years, but they still lag behind that of the Montney because of the greater depth of the formation and the proppant required for hydraulic fracturing,” said Rix.

In the last eight years, the Duvernay Shale has seen a reduction of around one-third in its median half-cycle breakeven, making it more competitive against other plays. Additionally, recent mergers and acquisitions involving major operators in the play suggest that the Duvernay will likely experience more substantial growth in the medium term.

Canadian basins still have a lot to offer

Unfortunately, due to the higher costs, the Duvernay has some ground to make up if it is going to catch up to the Montney. However, with investors seeking long-term exposure to deep natural gas inventory and the increasing accessibility of North American LNG egress, the basin’s growth will be profitable. Despite advancements in play understanding, drilling and completion technologies, and cost efficiencies, the Duvernay still falls behind the Montney in terms of half-cycle discounted well economics. Additionally, based on analog well cost data from U.S. plays, it seems unlikely that the length-normalized capital costs will decrease any further in the Canadian play.

In conclusion, the inconsistent reporting of condensate volumes in gas wells in the WCSB has a significant impact on the analysis and evaluation of wellhead liquids production. This problem is compounded by the lack of meaningful solutions available in the market, leaving investors with limited options for reliable data analysis. The implications of this flawed reporting system can have a significant impact on the success and progress of plays in the region, leading to less investment in exploration, technological development and optimization. While the Montney and Duvernay plays are highly competitive and profitable plays in North America, the current reporting guidelines and measurement systems must be improved to promote further investment in these two areas.

About Enverus Intelligence Research
Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts,

Chris Griggs

Chris Griggs

Chris Griggs is the product marketing manager for Enverus Intelligence® | Research (EIR) and Trading & Risk at Enverus, where he leads the development and communication of the value these products provide various industries, including oilfield services, investment funds, wealth management departments, banks, E&P oil and gas departments, and midstream operators. Chris helps provide customers across the energy ecosystem with the intelligent connections and actionable insights that allow them to uncover new opportunities and thrive. 

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Energy Transition
ByKevin Kang

The levelized cost of energy (LCOE) serves as a valuable measure for assessing the economic viability of a specific project or energy source.

Energy Transition
ByCarson Kearl

Questions around the relationship of data centers to energy demand are very quickly etching themselves onto the minds of industry and technology participants alike.

Enverus Press Release - Enverus adds Energy Transition solutions around $3.5T/year sector
Power and Renewables
ByEric Palmer

Over the last seven days, the Enverus ERCOT P&R forecast has accurately predicted the 630__B constraint (KLNSW-HHSTH 138 kv with contingency DSALKLN5) in ERCOT.  While it is fundamentally driven by high wind and solar generation, there were two transmission outages...

Enverus Press Release - The surprisingly balanced global LNG market
Business Automation

Being a supplier in the oil and gas business is hard. You must ride the cycle of boom and bust, differentiate yourself in an incredibly competitive market and make sure your financial fundamentals are sound.

Enverus News Release - Banking on Buzios’ oil supply
Intelligence Trading and Risk

Enverus Intelligence® Research holds the position that global oil demand will not peak or decline before the end of this decade. EIR’s analysis offers a distinct and unbiased viewpoint, diverging from the two benchmarks forecasters; OPEC and the International Energy...

Enverus Press Release - From insights to injections: CCS Class VI permit applications surged 500%
Energy Analytics Energy Transition
ByGraham Bain

The Enverus Intelligence® Research (EIR) Subsurface Innovation Team attended AAPG’s CCUS 2024 conference in Houston March 11-13. The conference, which also brought together SPE and SEG membership, hyped up the need for CCUS to offset the demand for fossil fuels,...

Intelligence Operators
ByErin Faulkner

E&P activity targeting the Cleveland formation in the Anadarko Basin more than doubled in 2023 with 46 new wells reaching first production, compared to 20 in 2022 and similar levels the previous two years.

Energy Transition
ByRyan Notacker

Renewable fuel uptake has surged in California in recent years, contributing to a 141% increase in the California Low Carbon Fuel Standard (LCFS) credit bank surplus and resulting in a drop in credit prices from ~$185/tonne to $75/tonne from 2019...

Enverus Blog - Coterra’s big Permian projects defy degradation worries
Intelligence Oilfield Services
ByJoseph Gyure, Editor, Enverus Intelligence

In the biggest oilfield services transaction since 2016, SLB agreed to acquire ChampionX Corp. for $7.76 billion in stock, bringing an industry leader in production chemicals into the OFS giant’s fold. ChampionX’s $420 million in net debt brings the transaction...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert