​Montney vs. Deep Basin: Which of Canada’s biggest natural gas plays​​ has the edge?

The Montney and Deep Basin are the two hottest natural gas plays in western Canada, but which one has the edge?

JWN Energy and sponsor Halliburton wanted to answer this question, and leveraged the CanOils database to develop a benchmarking study based on 2016 and 2017 financial and operating data.

article continues below

Both the Montney and Deep Basin plays saw a major uptick in activity in 2017 compared to the previous year, with rig releases rising 46 per cent in the Deep Basin and 89 percent in the Montney. Activity has remained strong in early 2018.

Deep Basin has the supply cost advantage

While both Montney and Deep Basin operators continued cutting costs and improving productivity, companies in the Deep Basin were more successful, enjoying a nearly $4/boe advantage over Montney producers in 2017.

In the Deep Basin, operating costs decreased by six percent in 2017 as new facilities were brought onstream, while operating costs rose by eight percent in the Montney as producers targeted more liquids-rich areas of the field.

Montney operators have seen their three year average finding and development costs climb by 10 per cent from 2016 to 2017, while Deep Basin operators have seen their F&D costs decline by 22 per cent. In 2016, the Deep Basin had costs almost $2 per boe higher than in the Montney but now enjoys a cost advantage. Deep Basin operators had a 30 per cent full cycle cost advantage over Montney operators in 2017. Full cycle costs declined 10 per cent in the Deep Basin in 2017, while costs in the Montney climbed by six per cent.

Montney has the netback advantage

Despite much lower full cycle costs, the Deep Basin trails the Montney when it comes to operating netbacks as the mix in production outweighs Deep Basin cost efficiencies. Higher liquids production in the Montney gives it a $2.26 per boe netback advantage over the Deep Basin.

Seven Generations Energy provides an example of the liquids advantage: one-third of the company’s production is condensate, but it accounts for two-thirds of the company’s revenues.

Looking ahead

While Montney and Deep Basin operators reported improved field netbacks in 2017 compared with the previous years, they both face challenges in 2018. With lower to no condensate production, Deep Basin operators are cutting capital expenditures while waiting for higher natural gas prices to make investment viable.

For Montney operators, costs are slowly creeping up. Operators in liquids-rich areas of the play are still seeing strong netbacks but outside of these areas they are facing a similar situation to Deep Basin operators with low gas prices curtailing activity.

Click here for your complimentary copy of Montney versus Deep Basin: Which of Canada's two biggest natural gas resource plays has the edge?

© Copyright Alaska Highway News

Read more from the JWN Energy

Comments

NOTE: To post a comment you must have an account with at least one of the following services: Disqus, Facebook, Twitter, Google+ You may then login using your account credentials for that service. If you do not already have an account you may register a new profile with Disqus by first clicking the "Post as" button and then the link: "Don't have one? Register a new profile".

The Alaska Highway News welcomes your opinions and comments. We do not allow personal attacks, offensive language or unsubstantiated allegations. We reserve the right to edit comments for length, style, legality and taste and reproduce them in print, electronic or otherwise. For further information, please contact the editor or publisher, or see our Terms and Conditions.

comments powered by Disqus
Sign Up for our Newsletter!

Popular News

Lowest Gas Prices in Chetwynd, Dawson Creek, Fort Nelson, Fort St John, Tumbler Ridge
British Columbia Gas Prices provided by GasBuddy.com

Community Event Calendar


Find out what's happening in your community and submit your own local events.