On the border of eastern British Columbia and northwestern Alberta, there is a field with high extraction rates and large marketable reserves. This area, dubbed the Montney Play, saw a record high in natural gas production last year. However, because of numerous factors, such as pipeline fatigue, companies are already looking to maximize on their drilling endeavors. This coming year, companies will focus on higher-value condensates.
Natural Gas Production In Montney
According to Peters & Company, Montney saw huge natural gas production rates in October 2017. It was estimated that natural gas production averaged 6.3 billion cubic feet per day that month, much of this occurring on the British Columbia side of the Montney. The National Energy Board estimated that the total Canadian natural gas production in October was 15.59 bcf/d.
This means that Montney was responsible for 40% of the country’s total natural gas output. Montney can also be credited with doubling British Columbia’s condensate production in the last two years. The scope of the project is impressive, especially when considering the amount of pipeline fatigue that has had to have occurred.
Focused Activity Levels
Because of pipeline fatigue and other economic factors, it’s been predicted that companies’ activity-levels will be more focused in the Montney Play this year. Companies will seek to move away from natural gas production, instead focusing on liquid production.
For example, it was estimated that Encana would double its liquid production in the last quarter of 2017 compared to the last quarter of 2016. This move was expected to increase the company’s operating margin by more than 50%. Encana said that doubling liquid production would create over $200 million in annualized operating cash flow.
This is a trend seen throughout the industry, as Peters & Company said that a number of liquid-rich producers operating in Montney had seen strong operating cash flows, if for no reason other than the higher number of condensate volumes.
Condensate prices are expected to average approximately $75/bbl this coming year. Peter & Co has predicted condensate volume operating netbacks would represent $53/bbl of the predicted 2018 prices.