Canadian Producer Betting on Higher Gas Prices
Calgary-based Montney producer Tourmaline Oil said May 29 it is betting on a near-term increase in western Canadian natural gas prices by directing most of its growth capital in 2020 and 2021 into its Gundy Phase 2 deep cut expansion in the BC Montney field.
The expansion will double the capacity of the Gundy deep cut facility to 400mn ft3/day, with projected completion in 2Q 2021.“The incremental gas volumes will be delivered into what the company believes will be a period of improved natural gas prices,” Tourmaline said, adding it has sufficient egress capacity to handle the increased production volumes.
The company’s other core regions, the Alberta Deep Basin and the Peace River High, will see only maintenance capital expenditures, it said, with an aggregate $430mn (US$318.5) of future facility expenditures removed from its most recent five-year plan.
Tourmaline said the combination of high-deliverability, liquids-rich gas (up to 100 bbls/mn ft3 of condensate and natural gas liquids), ongoing drill/complete cost reductions and very low operating costs (less than $3.00/boe) make Gundy “one of the most profitable Montney sub-plays in the entire basin.”
The $150mn Gundy expansion will be spread over 2020 and 2021, with about $40mn to be spent in 2020.
In its contiguous Deep Basin acreage – which Tourmaline characterises as the largest current gas field in Alberta – production reached a record 205,000 boe/day in March 2019, but is expected to remain in the 180,000-185,000 boe/day range in the second half this year.
“The company believes it is prudent to defer significant gas volume growth from the Deep Basin until there is a sustained improvement in prevailing natural gas prices,” Tourmaline said. In the event that there is rapid shorter cycle gas price improvements, the company will maintain an inventory of between 15 and 20 drilled but uncompleted wells in the Alberta Deep Basin.