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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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A Gas Company Revolutionizes Canadian Oil

The next big thing is here in the Canadian oil patch.

I wrote a few weeks ago that a number of new Alberta and Saskatchewan petroleum plays are being poked at using multi-stage fracturing technology. One being the Cardium oil play of western Alberta.

The Cardium went "prime time" this week.

On Monday, PetroBakken Energy announced a $350 million takeover bid for smaller rival Berens Energy. On the surface, the deal looks like an odd marriage.

Berens produces 3,600 barrels of oil equivalent per day. 80% of this is gas, mostly from the Pembina area of western Alberta.

PetroBakken is predominantly an oil producer. The company pumps over 45,000 barrels per day. As the name suggests, most of this output comes from the Bakken play of southeastern Saskatchewan.

The Bakken was a big story over the last few years. Multi-stage fracking completions on horizontal wells here have increased production rates dramatically. Taking the play's economics from subpar to stellar.

PetroBakken has been at the forefront of this revolution. The company is recognized as one of the leaders in using multi-stage fracs.

And with this week's Berens acquisition, PetroBakken is moving into new ground in west Alberta. The Cardium play is the reason.

Over its years of producing gas in west Alberta, Berens became very familiar with the Pembina region. The company noticed that the Cardium play here might be amenable to multi-stage fracs that have been so successful in the Bakken.

Berens assembled a large land position in the Cardium play. Fully 70 sections of land (45,000 acres), at an average 60% working interest.

This is what interests PetroBakken. This week's acquisition is a vote of confidence in the Cardium play from one of the better technical teams in the business. PetroBakken sees the Cardium as an area they can run with their fracking expertise.

The results to date from Cardium fracked horizontals have been encouraging. Initial production rates can run in the thousands of daily barrels. This flush production trails off quickly, but even at stabilized production rates of a few hundred barrels per day, the economics on these wells are good.

Costs to drill and complete a Cardium fracked horizontal are running around a few million. Making for a significant return on investment at today's oil prices. Even at $50 crude, the numbers look decent.

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The Berens acquisition had an immediate impact on other Cardium players. Most are up 40 to 50 percent this week. The play is real, and it's happening now.

If the Cardium does prove out over the coming months and years, this is the second Canadian play to be revolutionized by multi-stage fracturing. Raising the question: what's next?

Here's to new frontiers,

By. Dave Forest of Notela Resources


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