February 23, 2021
Each week, XI Technologies scans its unique combination of enhanced industry data to provide trends and insights that have value for professionals doing business in the WCSB. If you’d like to receive our Wednesday Word to the Wise in your inbox, subscribe here.
M&A announcements are dominating the headlines in the oil and gas industry. Scoping and evaluating corporate and asset A&D opportunities is one of XI’s specialties, so we are pleased to offer some high-level summaries of a recent agreement between ARC Resources Ltd. (“ARC”) and Seven Generations Energy Ltd (“Seven Gen”).
What do the companies look like now prior to completing the agreement? What do we know about each companies’ assets, core areas, and recent activity? How might this combination affect others in the area? We’ve looked at both companies through a few different lenses to allow you to compare the companies and gain some insight of your own.
The announcement release mentioned the strategic combination would enhance existing commodity and geographic diversification for both companies which can easily be seen by the map below.
There is essentially no direct overlap in the two companies’ land positions, but the combination of complementary assets makes them the largest landholder of Montney rights.
It becomes possible to then look further at the new Seven Gen/ARC core area to see other players and establish stronger area metrics. Above is an area snapshot with the top 10 companies in this area. It’s possible to further limit this to just Montney production to really understand the metrics of the area.
With XI’s AssetSuite tools you can dig into pools, undeveloped land holdings and other parameters to assist you with finding and evaluating acquisition and divestiture deals like this one. XI also allows you to look at overall risk with inactive wells and ARO obligations to ensure red flags are identified and analysis time is prioritized.
For the last 2 years, ARC’s drilling activity has been primarily focused on Montney production in both NE BC and Grande Prairie, but they have dabbled a bit elsewhere, in Cranberry (Slave Point) and Pembina (Cardium). Seven Gen, on the other hand, has stayed firm in their pursuit for Montney production in the Grande Prairie region.
Montney drilling in this region is no walk in the park, so there’s much to be said for experience. XI’s data mining of drill records identified that 11% of the 1,047 wells drilled in the last 3 years experienced a circulation loss event. Though many of these were relatively minor (<1 day of downtime), over 50 wells had between 2 and 15 days of NPT on account of drilling fluid losses and recovery time.
Using data from Offset Analyst, you can continue to explore best practices in drilling and analyze drill curves to predict and optimize your costs.
As shown in the Production by Field breakdown above (Fig 1), both companies narrow their production focus very distinctly. The two fields that stand out clearly are: Kakwa (Seven Gen) and Heritage (ARC).
Let’s look at each of these fields, and the various players who will be paying close attention to these latest developments:
Heritage – In 2017, Ovintiv spiked to become the dominant driller in the area, but the gap has significantly lessened in the last two years while other operators remained consistent with their drill counts. As you can see with ARC’s trendline, in 2020 while everyone scaled back activity, they stayed firmly committed to their Montney development strategy.
Kakwa – In contrast to Heritage, drilling activity saw a much steeper decline in 2020 in Kakwa. Seven Gen is clearly the premier driller in the area, by both volume and performance (drill times). Note Tourmaline’s presence in in terms of production, yet no Montney-drilling. Kakwa (and area) is a diverse field with several productive zones, and although Tourmaline is a highly active drillers in the area, they don’t appear to be after Montney resources.
**Note: Only wells within XI’s Drilling Database/TourXchange included