Download - 2015 Cardium Production
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Please refer to page 93 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
CANADA
Inside
Searching for value in a low price environment 2
Setting the stage 3
Aggregate Cardium Performance 4
Activity Ten core areas 7
Economics 17
Appendix Area breakdowns 22
Lochend 23
Garrington 30
Willesden Green Ferrier 37
Alder Flats 44
East Pembina 51
Central Pembina 58
Brazeau 65
West Pembina 72
Pine Creek Kaybob 79
Wapiti 86
Analyst(s) Ray Kwan, CFA +1 403 539 4355 [email protected] Chris Feltin +1 403 539 8544 [email protected] Brian Bagnell, CFA +1 403 539 8540 [email protected] Mike Murphy +1 403 539 8514 [email protected] Ali Ladha, CFA +1 403 218 6659 [email protected] Cara O'Byrne +1 403 218 6655 [email protected]
29 January 2015 Macquarie Capital Markets Canada Ltd.
Dude, Wheres My Cardium? Searching for value in a low price environment Total Cardium oil production over 180,000boe/d
The Cardium Formation has been one of the most actively targeted plays in Western
Canada. Over 2,900 horizontal Cardium oil wells have been placed on production in
Alberta since 2009, translating into current production of over 180mboe/d and
absolute growth of >200% over that time frame. With oil prices hovering around
US$50/bbl WTI, we thought it would be interesting to provide an update of the entire
Cardium oil trend to determine the area of highest productivity and those producers
most efficient in their respective regions.
Needless to say: economics challenged at todays prices
In todays pricing environment, we can safely say the sustainability of the Cardium
play is severely challenged or uneconomic. Out of the ten Cardium regions in our
study, the highest return areas are in Lochend, Willesden Green, and Brazeau.
We calculate after-tax IRRs of greater than 20% for each of these regions assuming
flat prices of C$70/bbl Edmonton Par and C$3.50/mcf AECO. Based on these
economics, our expectation is that activity will be fairly subdued and has the
potential to fall by 3050%.
but improves with lower service costs and recovery in oil prices
Notably, our well cost assumptions are still based on 2014 actuals; we fully expect
service costs to drop between 1030% over the year. The potential for lower service
costs will no doubt boost the overall economics of the play; however, sustained oil
prices above C$60/bbl Edm Par are required to economically justify drilling, in our
view. Assuming a 30% drop in capital costs and C$70/bbl Edm Par, our Cardium
economics for Lochend, Willesden Green, and Brazeau jump to over 50% IRR(AT).
For the greater Pembina region, the type well economics move to greater than 36%
IRR (AT) or simple paybacks of around 2.0 years.
Stick to the efficient producers: ARC, Bellatrix, Tamarack, TORC, and Whitecap
Efficiency is key in any resource play; accordingly, producers that are the most
resourceful in terms of lower than average well costs, highest productivity, or
quickest cycle times will be the potential winners, in our view. The worst positioned
in the Cardium, such as Lightstream and Penn West, will likely have to dispose of
quality assets because of their above-average leverage situation resulting from their
poor capital efficiencies in the play. The winners out of this situation could be
Whitecap, TORC Oil & Gas, Bellatrix, ARC Resources, and Tamarack Valley, as
they are the most efficient operators along the Cardium trend and have the capability
to sift through the wreckage for a number of distressed assets. In addition, with lower
service costs on the horizon, we suspect these producers will be among the few to
capitalize on the current deflationary cycle and benefit on the other side assuming a
modest price recovery scenario.
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 2
Searching for value in a low price environment The Cardium Formation has been one of the most actively targeted plays in Western Canada.
Over 2,900 horizontal Cardium oil wells have been placed on production in Alberta since 2009,
translating into current production of over 180mboe/d and absolute growth of >200% over that
time frame. With oil prices hovering around US$50/bbl WTI, we thought it would be interesting to
provide an update of the entire Cardium trend to determine the area of highest productivity and
producers most efficient in their respective regions. We believe understanding the differences will
help investors identify those producers that can thrive through this low price environment.
A summary of our conclusions is provided below:
Production over 180mboe/d and declines at 34% per annum. Total production from oil
wells in the Cardium has reached >180mboe/d as of September 2014, from only
60mboe/d in early 2009. We estimate aggregate base declines of ~34% over the entire
play, indicating that about one-third of current production needs to be replaced each year
in order to hold production flat. Based on the severe drop in commodity prices in 2015,
our expectation is that activity will be fairly subdued. Accordingly, we see the potential for
production in this play to fall through the year.
Willesden Green, Wapiti, and Brazeau have highest peak rates. Of the ten core
regions, Willesden Green (including Ferrier) still has among the highest peak IP30 rates
for wells put on production post 2013 at 322boe/d (60% liquids). That said, the higher
rates do come with a higher capital cost (on average) and higher gas content. Wapiti and
Brazeau have the second- and third-highest peak rates among the Cardium trend at
321boe/d (~61% liquids) and 308boe/d (4050% liquids), respectively.
Economics challenged at todays prices... At the current strip, we can safely say the
sustainability of the Cardium play is severely challenged or uneconomic. Out of the ten
Cardium regions in our study, the highest return areas are in Lochend, Willesden Green,
and Brazeau. We calculate after-tax IRRs of greater than 20% for each of these regions
assuming flat prices of C$70/bbl Edmonton Par and C$3.50/mcf AECO. Based on these
economics, our expectation is that activity will be fairly subdued and has the potential to
fall by 3050%.
but improve with lower service costs and recovery in oil. Notably, our well cost
assumptions are still based on 2014 actuals; we fully expect service costs to drop between
1030% over the year. The potential for lower service costs will no doubt boost the overall
economics of the play; however, sustained oil prices above C$60/bbl Edm Par are
required to economically justify drilling, in our view. Assuming a 30% drop in capital costs
and C$70/bbl Edm Par, our Cardium economics for Lochend, Willesden Green, and
Brazeau jump to over 50% IRR(AT). For the greater Pembina region, the type well
economics move to greater than 36% IRR (AT) or simple paybacks of around 2.0 years.
Top ways to play. The worst positioned in the Cardium, such as Lightstream and Penn
West, will likely have to dispose of quality assets because of their above-average leverage
situation resulting from their poor capital efficiencies in the play. The winners out of this
situation could be Whitecap, TORC Oil & Gas, Bellatrix, ARC Resources, and
Tamarack Valley, as they are the most efficient operators along the Cardium trend and
have the capability to sift through the wreckage for a number of distressed assets. In
addition, with lower service costs on the horizon, we suspect these producers will be
among the few to capitalize on the current deflationary cycle and benefit on the other side
assuming a modest price recovery scenario.
Whitecap Resources (WCP CN, C$11.99, Outperform, TP: C$19.00)
TORC Oil & Gas (TOG CN, C$8.15, Outperform, TP: C$12.00)
Bellatrix Exploration (BXE CN, C$2.99, Neutral, TP: C$4.25)
ARC Resources (ARX CN, C$23.09, Outperform, TP: C$28.00)
Tamarack Valley Energy (TVE CN, C$3.60, Outperform, TP: C$4.75)
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 3
Setting the stage We have broken down the Cardium oil resource play into ten distinct areas: Lochend, Garrington, Willesden Green-Ferrier, Alder Flats, East Pembina, Central Pembina, Brazeau, West Pembina,
Pine Creek-Kaybob, and Wapiti. We acknowledge that there are large geological variations in each
of these regions, but believe that segregating the data into smaller areas will allow producers and
investors alike to better understand the quality and top performers within each region.
Fig 1 Cardium focus areas
Source: geoSCOUT, Macquarie Research, January 2015
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 4
Aggregate Cardium Performance Production has been steady, but will it continue in 2015?
Production from the Cardium has been on a steady increase for the past several years. Total
production from oil wells in the Cardium has reached ~180190mboe/d as of September 2014,
from only 60mboe/d in early 2009. Fig 2 shows the vintage of Cardium production by year.
We estimate aggregate base declines of ~34% over the entire play, indicating that about one-third
of current production needs to be replaced each year in order to hold production flat. Based on
the severe drop in commodity prices in 2015, our expectation is that activity will be fairly subdued.
Accordingly, we see the potential for production in this play to fall through the year, as the current
activity outlook is unlikely to replace the 3035% annual production decline.
Fig 2 Cardium oil production vintage by year
Source: geoSCOUT, Macquarie Research, January 2015
By region. In 2010, the West Pembina region saw the largest increase in activity and production
(See Fig 3). Since then, activity at Garrington, East Pembina, and Willesden Green-Ferrier has
ramped up considerably, driven by the likes of Whitecap, Vermilion, Penn West, and Lightstream.
Next to see an increase in activity was Lochend and Alder Flats, followed by Pine Creek-Kaybob
and Brazeau. In our view, Wapiti is still an emerging region for the Cardium, with the lowest
activity out of all the regions in this study.
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 5
Fig 3 Cardium production history by area
Source: geoSCOUT, Macquarie Research, January 2015
The number of wells targeting oil peaked in 2012, with 733 new wells brought on production in
that year (See Fig 4). In 2013, wells brought on production dropped by nearly 15% YoY, though
gross Cardium oil production for the basin has stayed relatively flat at around 170180mboe/d.
We attribute this flat growth to the type of producers dominating the Cardium landscape.
Specifically, High Yield (or former Yield) producers (ie, Whitecap, Penn West, and Lightstream)
are the most active and generally focus their capital and efforts on sustainability rather than
production growth. In addition, more productive Cardium wells have resulted in fewer wells
required to keep overall production flat in the trend. Year-to-date for 2014 (through September)
the amount of wells brought on production has been over 400 wells. We suspect drilling activity
through 2015 will fall by nearly 3050%, given the drop in commodity prices.
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 6
Fig 4 Wells on production by year
*2014 year-to-date until September 2014
Source: geoSCOUT, Macquarie Research, January 2015
Lightstream is by far the top producer within the greater Cardium trend at nearly 18mboe/d of
current production. Next in line is Whitecap Resources, which catapulted into second place after
the acquisition of Imperial Oils Pembina assets in early 2014. In third place is Bellatrix, followed
by Penn West.
Fig 5 Gross September production by operator (Top 10)
Source: geoSCOUT, Macquarie Research, January 2015
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 7
Activity Ten core areas Licences/drilling. Fig 6 shows producing Cardium oil horizontal wells and current outstanding
Cardium oil licences issued in Alberta. In total, 2903 Cardium horizontals (oil) have been drilled
and placed on production since 2009. Separately, there are 306 Cardium wells that have been
licensed (included drilled and cased). The concentration of wells that have been spud and/or
licensed are generally focused in Greater Pembina (East, West, and Central), Garrington,
Willesden Green and Lochend.
Fig 6 Cardium producing and licensed wells
Source: geoSCOUT, Macquarie Research, January 2015
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 8
Cardium producers/licences by core area. Of the ten main focus areas described in Fig 1, West
Pembina has the most producing horizontal wells at 765, followed by East Pembina and Garrington
at 536 and 481, respectively. The areas attracting the highest number of future horizontal locations
are: Willesden Green (80), West Pembina (53), and Lochend (32). Drilling activity in these areas is
largely dominated by mid-cap and high-yield producers, including Penn West, Whitecap, and
Lightstream.
Fig 7 Cardium oil producing horizontals by area Fig 8 Cardium oil horizontal licences by area
Source: geoSCOUT, Macquarie Research, January 2015
Cardium producers/licences by producer. Lightstream and Whitecap have been the most active
companies in the Cardium Formation, particularly in the West Pembina, East Pembina, and
Garrington regions. Lightstream has 331 producing horizontal wells. Similarly, Whitecap operates
~326 producing horizontals. In third place is Penn West, which has a significant chunk of
production in Greater Pembina as well as Willesden Green. Note that Whitecap Resources
acquired Imperial Oils West Pembina assets last year in early 2014, which catapulted the
company to one of the largest operators along the Cardium trend. Due to the fall in commodity
prices, a number of producers have set austere budgets. Whitecap has plans to drill less than 19
gross wells in 2015 following its budget reduction to C$200m (from C$245m). Penn West has
allocated a total of C$625m in capital to drill only its Cardium and Viking plays; however, we
suspect this capital program could decrease, given its balance sheet issues. Lightstream is also
capital constrained because of its balance sheet issues; therefore, we suspect activity to be fairly
muted for the company in 2015.
Among the small- to mid-cap producers, we highlight Bellatrix, TORC Oil & Gas, and Tamarack
Valley as some of the more active producers along the Cardium trend. TORC had plans to drill 15
(12.8 net) wells in the Cardium, though this may change with WTI prices below US$50/bbl.
Notably, the company has more than 290 net undrilled light oil focused development locations
identified. Tamarack has recently set its 2015 budget at C$47m for 2015 (in line with cashflow),
of which a large portion will be focused at Wilson Creek after acquiring assets from Suncor in late
2014. Notably, Bellatrixs Cardium activity will be tempered and will only be focused on expiring
leases and commitment wells.
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 9
Fig 9 Horizontal producing Cardium wells by producer
Source: geoSCOUT, Macquarie Research, January 2015
Fig 10 Cardium licences by producer
Source: geoSCOUT, Macquarie Research, January 2015
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 10
Gas-Oil Ratios (GORs) by region
To give a sense of the various oil/gas producing ratios, we have provided a GOR map along the
Cardium trend (in Fig 11). As can be seen, Greater Pembina, Garrington, and Lochend all have
the lowest GORs between 01,000 mcf/bbl (>80% oil); these areas represent the oilier portions of
the play. Willesden Green, Wapiti, Alder Flats, Brazeau, and Pine Creek are generally gassier
regions at GORs between 100010,000mcf/bbl (
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 11
Peak rates
Willesden Green, Wapiti, and Brazeau. Of the ten core regions, Willesden Green (including
Ferrier) still has among the highest peak IP30 rates for wells put on production post 2013 at
322boe/d (60% liquids) across 165 horizontals wells. That said, the higher rates do come with a
higher capital cost (on average) and higher gas content. Note the average depth at Willesden
Green is around 2,100m. Wapiti and Brazeau have the second- and third-highest peak rates
among the Cardium trend at 321boe/d (~61% liquids) and 308boe/d (4050% liquids),
respectively. Average TVD for the Cardium is ~1,600m at Wapiti and ~2,000m at Brazeau.
Garrington, Lochend, and Alder Flats. The Garrington, Lochend and Alder Flats regions have
average IP30 rates post 2013 of 233boe/d (82% liquids), 279boe/d (7085% liquids), and
234boe/d (85% liquids), respectively. Interestingly, results from all three regions have improved
since 2013, driven by enhanced completion techniques as well as longer lateral wells. Note that
the average TVD for the Cardium at Garrington, Lochend, and Alder Flats are ~2,000m, ~2,300m,
and ~1,700m, respectively.
Central Pembina, East Pembina and West Pembina. The Pembina halo regions have
demonstrated fairly close average 30-day peak rates post 2013, ranging between 184186boe/d
(7585% liquids). Though similar in rates, we emphasize that the depth of the Cardium in West
Pembina is greater at ~1,800m, compared to Central Pembina at ~1,600m and East Pembina at
~1,300m.
Fig 12 Average Cardium peak rate by area
Source: geoSCOUT, Macquarie Research, January 2015
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 12
Peak rate by producer. In Fig 13, we present the average peak rate achieved by each operator
with at least one producing Cardium well since 2013. Note that this metric can be misleading, as
capital costs within each of the ten core areas vary considerably; therefore, higher IP rates do not
always translate into better economics. Nevertheless, producers with at least 15 producing wells
such as Long Run, Bellatrix, Whitecap, Tamarack, Pengrowth, ARC and TORC have all
demonstrated 30-day peak rates above 200boe/d on average post 2013.
Fig 13 Average Cardium peak rate (all) by operator and number of wells (since 2013)
Source: geoSCOUT, Macquarie Research, January 2015
Variability. To get a sense of the variability within each region, we have generated a P90-to-P10
ratio for the average first 90 days of production (ie, IP90). The higher this ratio is, the greater the
variability in initial production rates. As shown in Fig 14, results in Pine Creek, Wapiti, and Central
Pembina have the highest variability among the ten Cardium core areas. Regions that have
exhibited fairly consistent results are Brazeau, West Pembina, Garrington, and Lochend.
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 13
Fig 14 P90-to-P10 by area (variability)
Source: geoSCOUT, Macquarie Research, January 2015
Cycle times
Cycle time is the number of days necessary to bring a well on production from the initial spud
date. The median cycle time for all Cardium wells is around 39 days, with some producers taking
over 150 days (TAQA, EOG, Conoco) down to
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 14
Fig 15 Number of days from spud to production by producer
Source: geoSCOUT, Macquarie Research, January 2015
East Pembina continues to show the quickest tie-in times with an average of 51 days from spud
to first production, followed by Brazeau at 54 days and Garrington at 60 days (see Fig 16). The
longest cycle times have been in the Wapiti and Alder Flats regions, followed by Pine Creek-
Kaybob. Wapiti, Pine Creek-Kaybob, and Alder Flats are the less developed regions for the
Cardium, in our view, and thus are sometimes lacking (or restricted) in infrastructure; therefore,
cycle times are typically longer in those regions.
Fig 16 Number of days from spud to production by area
Source: geoSCOUT, Macquarie Research, January 2015
0
20
40
60
80
100
120
140
Exo
ro
Jo
urn
ey
Hitic
Hyp
erio
n
Reg
ent
Eclip
se
Bayte
x
And
ers
on
Whitecap
Lo
ng
Run
OM
ER
S
Baccalie
u
Canam
ax
To
urn
am
ent
Tim
berr
ock
Bo
navis
ta
AR
C
Bo
nte
rra
TO
RC
Bella
trix
Penn W
est
Verm
ilio
n
Yang
arr
a
Lig
hts
tream
Fre
eho
ld
Tam
ara
ck
Peng
row
th
Sp
ry
Sin
op
ec
Exxo
n
TriO
il
Inp
lay
Husky
CN
RL
Westb
rick
Co
no
co
EO
G
TA
QA
Da
ys
fro
m S
pu
d to
Prr
od
uc
tio
n
Post 2013
Pre 2013
Post 2013 Median
0
20
40
60
80
100
120
140
160
Wapiti
Ald
er F
lats
Pin
e C
reek
Centr
al
Pem
bin
a
Will
esd
en
Gre
en
Lochend
West
P
em
bin
a
Garr
ingto
n
Bra
zeau
East
Pem
bin
a
Days fro
m S
pu
d t
o P
rod
ucti
on
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 15
Top wells on entire Cardium trend
For curiositys sake, we scanned the entire Cardium region to highlight the top wells in the play.
Interestingly, Bellatrix dominated the rankings, with 10 of the top 20 wells by IP30 rate; however,
most of these wells were brought on production in 2012/2013. Notably, the region with the largest
IP rates was in Willesden Green, followed by Brazeau.
Fig 17 Top 20 wells by peak rate
Source: geoSCOUT, Macquarie Research, January 2015
In terms of cumulative production rankings, ConocoPhillips, Bellatrix, Penn West, and TORC
dominate the top 20. A majority of these wells have been on production for the past 34 years.
Once again, the Willesden Green region has some of the highest cumulatively produced wells.
Fig 18 Top 20 wells by cumulative production
Source: geoSCOUT, Macquarie Research, January 2015
Well ID Operator Peak Rate (boe/d) On Production Date Area
1 100/16-28-050-06W5/00 Sinopec Daylight 1,204 2010-03 East Pembina
2 100/13-15-064-05W6/00 ConocoPhillips 1,103 2012-11 Wapiti
3 100/16-28-044-10W5/00 Bellatrix 1,099 2012-02 Brazeau
4 100/04-01-045-11W5/00 Bellatrix 1,038 2012-03 Brazeau
5 100/13-30-042-08W5/00 Bellatrix 979 2010-11 Willesden Green
6 100/15-15-038-08W5/00 Bellatrix 877 2013-09 Willesden Green
7 100/12-02-046-11W5/00 Bellatrix 836 2012-09 Brazeau
8 100/15-25-044-11W5/00 Bellatrix 822 2013-12 Brazeau
9 102/16-24-044-10W5/00 Bellatrix 781 2011-11 Willesden Green
10 100/14-20-027-03W5/00 Pengrowth 757 2011-09 Lochend
11 100/13-26-038-08W5/00 Bellatrix 754 2012-11 Willesden Green
12 100/12-13-043-09W5/00 Penn West 753 2010-07 Willesden Green
13 100/16-31-043-09W5/00 Bellatrix 739 2012-10 Willesden Green
14 100/13-32-038-05W5/00 Anderson Energy 739 2014-03 Willesden Green
15 100/13-24-038-08W5/00 Baccalieu Energy 735 2013-11 Willesden Green
16 100/03-31-027-03W5/00 Pengrowth 734 2013-06 Lochend
17 100/13-33-048-06W5/00 ARC Resources 734 2012-02 East Pembina
18 100/01-15-038-08W5/00 Bellatrix 728 2013-02 Willesden Green
19 100/03-26-038-08W5/00 Bellatrix 718 2011-12 Willesden Green
20 100/13-36-054-18W5/00 Long Run 715 2012-08 Pine Creek
Well ID Cum. Production (boe) On Production Date Area
1 100/13-15-064-05W6/00 ConocoPhillips 443,470 11/1/2012 Wapiti
2 100/16-28-044-10W5/00 Bellatrix 348,032 2/1/2012 Brazeau
3 100/16-28-050-06W5/00 Sinopec Daylight 320,604 3/1/2010 East Pembina
4 100/13-06-059-21W5/00 ConocoPhillips 285,549 4/1/2011 Pine Creek
5 100/09-14-040-05W5/00 Penn West 277,071 4/1/2011 Willesden Green
6 100/12-13-043-09W5/00 Penn West 255,785 7/1/2010 Willesden Green
7 100/08-22-057-20W5/00 Pengrowth 224,047 4/1/2009 Pine Creek
8 100/01-06-060-23W5/00 Canadian Oil & Gas 220,692 2/1/2010 Pine Creek
9 100/04-01-045-11W5/00 Bellatrix 218,358 3/1/2012 Brazeau
10 100/04-02-064-05W6/02 ConocoPhillips 214,286 4/1/2012 Wapiti
11 100/14-34-038-08W5/00 Canadian Natural 213,789 1/1/2011 Willesden Green
12 100/13-32-059-23W5/00 ConocoPhillips 212,423 4/1/2011 Pine Creek
13 100/04-01-044-10W5/00 Bellatrix 200,698 8/1/2012 Willesden Green
14 100/08-06-044-09W5/00 Bellatrix 199,809 9/1/2012 Willesden Green
15 100/15-25-054-18W5/00 TORC 197,163 12/1/2011 Pine Creek
16 100/13-30-042-08W5/00 Bellatrix 195,186 11/1/2010 Willesden Green
17 100/15-34-038-08W5/00 Canadian Natural 194,199 2/1/2011 Willesden Green
18 100/05-10-049-07W5/00 ARC Resources 192,290 11/1/2009 Central Pembina
19 100/14-32-059-23W5/00 ConocoPhillips 187,344 4/1/2011 Pine Creek20 100/04-02-045-11W5/00 Bellatrix 183,592 3/1/2012 Brazeau
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 16
Have aggregate type curves improved?
We also thought it would be interesting to provide an aggregate type curve along the Cardium
trend to determine whether productivity has improved since the introduction of multi-stage
fracture stimulation in the play. As shown in Figs 1920, overall productivity has indeed shown a
steepening upward trend, with nearly all years highlighting YoY improvements. Interestingly, the
Cardium type well for 2013 has improved by nearly 1015% versus the 2012 vintage and nearly
5060% since the 2009 vintage. We attribute the productivity increases to improved completion
and fracture stimulation technology as well as longer lateral wells. For 2014, we believe the
aggregate type well will follow closely to the 2013 vintage curve. Going forward, we are of the
view that economics will improve via lower service costs, especially in the current low commodity
cycle, rather than productivity gains.
Fig 19 Aggregate type curve by year
Source: geoSCOUT, Macquarie Research, January 2015
Fig 20 Aggregate cumulative production by year
Source: geoSCOUT, Macquarie Research, January 2015
-
50
100
150
200
250
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
All avg
2009
2010
2011
2012
2013
2014
-
20
40
60
80
100
120
140
160
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47
Cu
mu
lati
ve
Pro
du
cti
on
(m
bo
e)
Productive Month(s)
P90
P50 (Median)
P10
2009
2010
2011
2012
2013
2014
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 17
Economics What makes sense at todays prices?
We have updated our type curves for the ten different Cardium regions. Obviously, we recognize
that some plays are more mature than others, and our degree of confidence in the type curves
from the more mature plays is greater. Currently, we believe the revised type curves outlined
below are an accurate representation of current well rates and recoveries in the Cardium.
Figs 2128 outline the various inputs for our type curves, in addition to profitability metrics
(NPV10, P/I ratio, IRR and payback period) on an after-tax basis. In addition, we show the
breakeven price for oil (Edmonton Light) on an after-tax basis. Our breakeven calculations assume
a 10% after-tax IRR, and are based on a C$3.50/mcf flat AECO price. Our P/I ratio is calculated as
a wells NPV divided by its all-in cost (drill, complete, and tie-in). A P/I of 0.0x assumes that a well
only recovers its 10% required rate of return, while any output greater than 0.0x assumes higher
profitability. Note that only half-cycle economics are illustrated in the type curves and, as such,
they do not include land purchases and/or necessary infrastructure builds.
As can be seen, based on flat pricing of C$70/bbl Edm Par and C$3.50/mcf AECO, a large chunk
of the Cardium is economic (except for Wapiti). The highest return areas are found in Lochend,
Willesden Green, and Brazeau. At todays pricing environment, however, we can safely say that
the average Cardium well is simply uneconomic.
Fig 21 Macquarie type well assumptions: Alberta Cardium Oil
*Economics based on flat C$70/bbl Edmonton Par and C$3.50/mcf AECO
Source: Company reports, Macquarie Research, January 2015
Well properties
Central
PembinaBrazeau East Pembina
West
PembinaPine Creek Wapiti Lochend
Willesden
GreenGarrington Alder Flats
IP Rate (gas) mcf/d 400 960 209 252 680 425 280 840 286 264
IP Rate (liquids) boe/d 200 240 190 210 170 170 280 240 220 240
IP Rate (total) boe/d 267 400 225 252 283 241 327 380 268 284
EUR/well (gas) bcf 0.2 0.9 0.1 0.1 0.4 0.2 0.2 0.5 0.2 0.1
EUR/well (liquids) mbbl 110 140 105 117 112 93 154 154 86 104
EUR/well (total) mboe 147 283 124 140 186 132 179 243 112 123
% Liquids % 75% 49% 85% 83% 60% 71% 86% 63% 69% 85%
Liquids Yield (C5+); GOR bbl/mmcf; scf/bbl 2,000 4,000 1,100 1,200 4,000 2,500 1,000 3,500 1,300 1,100
Liquids Yield (NGLs) bbl/mmcf 0 0 0 0 0 0 0 0 0 0
Well economics
Total Costs $m 3.0 4.0 3.0 3.5 3.5 4.2 3.7 4.0 3.0 3.0
F&D Costs ($/boe) $/boe 20.39 14.12 24.25 24.93 18.80 31.80 20.65 16.44 26.77 24.42
Recycle Ratio x 1.5x 1.9x 1.2x 1.3x 1.5x 0.6x 1.5x 1.7x 1.2x 1.3x
Average royalty rate % 13% 15% 14% 13% 13% 14% 16% 16% 10% 13%
Before Tax
NPV10 $m 0.8 1.5 0.3 0.6 0.5 -0.5 1.6 1.4 0.5 0.6
P/I Ratio x 0.3x 0.4x 0.1x 0.2x 0.2x -0.1x 0.4x 0.4x 0.2x 0.2x
IRR % 25% 32% 17% 20% 18% 2% 43% 30% 23% 27%
Payback period years 2.8 2.5 3.7 3.2 3.8 6.7 1.8 2.8 2.5 2.4
After Tax
NPV10 $m 0.4 0.9 0.1 0.2 0.2 -0.7 1.0 0.9 0.1 0.3
P/I Ratio x 0.1x 0.2x 0.0x 0.1x 0.1x -0.2x 0.3x 0.2x 0.0x 0.1x
IRR % 17% 22% 11% 14% 13% 0% 27% 21% 13% 16%
Payback period years 3.7 3.3 4.7 4.0 4.6 10.0 2.6 3.5 3.4 3.6
Breakeven price (Edm. Light) $/bbl 60.99 52.10 68.35 65.33 64.92 87.00 53.42 53.51 66.91 63.97
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 18
Fig 22 Macquarie Cardium oil type curves
The highest IP rates are from the Brazeau and Willesden Green regions; however, both areas tend to produce at a higher GOR relative to the other Cardium regions.
East Pembina exhibits the lowest IP30 rate, which we model at ~225boe/d.
Lochend, greater Pembina, Garrington, and Alder Flats generally have the highest initial oil weighting relative to the other Cardium regions at >75%.
Our breakeven calculations assume a 10% after-tax IRR, and are based on a C$3.50/mcf flat AECO price. All our economics assume Crown royalties.
At C$70/bbl Edm Par and C$3.50/mcf AECO, before-tax payback periods range from 1.83.8 years.
Source: Macquarie Research, January 2015
0
50
100
150
200
250
300
350
400
450
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Pro
du
cti
on
Ra
te (
bo
e/d
)
Months on production
Lochend
Pine Creek
West Pembina
East Pembina
Willesden Green
Garrington
Wapiti
Brazeau
Central Pembina
Alder Flats
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 19
Fig 23 Ranking after tax IRR Fig 24 Ranking after tax NPV
Fig 25 Ranking after tax P/I ratio Fig 26 Ranking after tax payback period
Fig 27 Ranking oil breakeven supply cost Fig 28 Ranking after tax breakeven price: Oil Plays
Source: Macquarie Research, January 2015
-5%
0%
5%
10%
15%
20%
25%
30%
Lo
ch
end
Bra
zeau
Wille
sden G
reen
Cen
tral P
em
bin
a
Ald
er F
lats
West P
em
bin
a
Garr
ingto
n
Pin
e C
reek
East P
em
bin
a
Wap
iti
AT
IRR
(%
)
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Lo
ch
end
Bra
zeau
Wille
sden G
reen
Cen
tral P
em
bin
a
Ald
er F
lats
West P
em
bin
a
Pin
e C
reek
Garr
ingto
n
East P
em
bin
a
Wap
iti
AT
NP
V ($m
)
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Lo
ch
end
Bra
zeau
Wille
sden G
reen
Cen
tral P
em
bin
a
Ald
er F
lats
West P
em
bin
a
Pin
e C
reek
Garr
ingto
n
East P
em
bin
a
Wap
iti
AT
P/I R
ati
o
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Lo
ch
end
Bra
zeau
Garr
ingto
n
Wille
sden G
reen
Ald
er F
lats
Cen
tral P
em
bin
a
West P
em
bin
a
Pin
e C
reek
East P
em
bin
a
Wap
iti
AT
payb
ack p
eri
od
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Bra
zeau
Lo
ch
end
Wille
sden G
reen
Cen
tral P
em
bin
a
Ald
er F
lats
Pin
e C
reek
West P
em
bin
a
Garr
ingto
n
East P
em
bin
a
Wap
iti
Oil b
reakeven
pri
ce
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
Ba
kke
n-S
K-S
ing
le
Mo
ntn
ey-K
ayb
ob
oil
Mo
ntn
ey-P
ou
ce
Co
up
e
Be
lly R
ive
r-B
raze
au
Ba
kke
n-F
erg
uso
n
Mo
ntn
ey-G
iro
uxville
Vik
ing
-Pro
vo
st
Torq
ua
y-H
off
er
Vik
ing
Do
dsla
nd
AB
Ba
kke
n-B
ig V
alle
y/B
an
ff
Sp
ea
rfis
h-W
aska
da
Ca
rdiu
m-B
raze
au
Mo
ntn
ey-A
nte
Cre
ek
Mo
ntn
ey-T
ow
er
Ca
rdiu
m-L
och
en
d
Ca
rdiu
m-W
ille
sd
en
Gre
en
Lo
we
r S
ha
un
avo
n
Mo
ntn
ey-W
aska
hig
an
Ca
rdiu
m-C
en
tra
l Pe
mb
ina
Ca
rdiu
m-A
lde
r F
lats
Ca
rdiu
m-P
ine
Cre
ek
Ca
rdiu
m-W
est P
em
bin
a
Vik
ing
-Re
dw
ate
r
Ca
rdiu
m-G
arr
ing
ton
Ca
rdiu
m-E
ast P
em
bin
a
Du
ve
rna
y-K
ayb
ob
Be
ave
rhill L
ake
Ca
rdiu
m-W
ap
iti
Sla
ve
Po
int-R
ed
Ea
rth
AT
Bre
ak
ev
en
Pri
ce
(C
$/b
bl)
Lochend and Brazeau have the highest IRRs at C$70/bbl Edm Par among the Cardium plays in Alberta.
The lowest NPVs are in the East Pembina and Wapiti region.
Again, Brazeau and Lochend show the highest P/I ratios due to the high peak rates and EURs in both regions of the Cardium.
Not surprisingly, Brazeau has the lowest breakeven price at C$52.10/bbl followed by Lochend at C$53.42/bbl.
On average, Cardium break-even costs are at the higher end of the basin cost curve.
The average after-tax payback period is around 3.6 years.
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 20
Sensitivities
In Figs 2932, we outline the NPV and IRR sensitivities of each of our Cardium type curves to a
+/- C$10/bbl change in oil prices and +/- C$0.50/mcf change in gas prices.
East Pembina and Wapiti have the highest NPV and IRR sensitivities to a change in the oil price.
On an IRR basis, East Pembina and Garrington round out the top three most sensitive plays to
changes in oil prices.
Pine Creek and Wapiti have the highest NPV and IRR sensitivity to a change in the gas price,
given their higher gas weightings. On an IRR basis, Pine Creek and Brazeau round out the top
three most sensitive plays to changes in gas prices.
Fig 29 NPV AT sensitivity to oil prices (+/- C$10/bbl) Fig 30 IRR AT sensitivity to oil prices (+/- C$10/bbl)
Fig 31 NPV AT sensitivity to gas prices (+/- C$0.50/mcf) Fig 32 IRR AT sensitivity to gas prices (+/- C$0.50/mcf)
Source: Macquarie Research, January 2015
-800% -600% -400% -200% 0% 200% 400% 600% 800%
Brazeau
Lochend
Willesden Green
Wapiti
Central Pembina
Alder Flats
Pine Creek
West Pembina
Garrington
East Pembina
-150% -100% -50% 0% 50% 100% 150%
Brazeau
Willesden Green
Lochend
Pine Creek
Central Pembina
West Pembina
Alder Flats
East Pembina
Garrington
Wapiti
-60% -40% -20% 0% 20% 40% 60%
Lochend
Wapiti
Alder Flats
Central Pembina
Willesden Green
West Pembina
Brazeau
Garrington
East Pembina
Pine Creek
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25%
Lochend
West Pembina
Alder Flats
East Pembina
Central Pembina
Willesden Green
Garrington
Brazeau
Pine Creek
Wapiti
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 21
In Figs 3334, we provide the IRR and P/I sensitivities of each of our Cardium type curves at Edm
Par pricing between C$4080/bbl and assuming a flat C$3.50/mcf AECO price. As can been seen,
most of the wells are simply uneconomic around C$4060/bbl Edm Par.
In Figs 3536, we have shown the same sensitivity assuming that total well costs decrease by
30%, which we believe is a likely scenario under this low commodity price environment. As shown,
the economics greatly improve; however, the break-even costs are still in the low C$4050/bbl
range, suggesting a higher price of around C$60/bbl Edm Par would be required to justify
incremental drilling in the Cardium.
Fig 33 IRR AT sensitivity to oil prices Fig 34 P/I AT sensitivity to oil prices
Fig 35 IRR AT sensitivity to oil prices at 70% of cost Fig 36 P/I AT sensitivity to oil prices at 70% of cost
Source: Macquarie Research, January 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
$80 $70 $60 $50 $40
IRR
%
Edmonton Par (C$/bbl)
Central Pembina
Brazeau
East Pembina
West Pembina
Pine Creek
Wapiti
Lochend
Willesden Green
Garrington
Alder Flats
-0.6x
-0.5x
-0.4x
-0.3x
-0.2x
-0.1x
0.0x
0.1x
0.2x
0.3x
0.4x
0.5x
0.6x
0.7x
0.8x
0.9x
1.0x
1.1x
1.2x
$80 $70 $60 $50 $40
P/I R
ati
o
Edmonton Par (C$/bbl)
Central Pembina
Brazeau
East Pembina
West Pembina
Pine Creek
Wapiti
Lochend
Willesden Green
Garrington
Alder Flats
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
$80 $70 $60 $50 $40
IRR
%
Edmonton Par (C$/bbl)
Central Pembina
Brazeau
East Pembina
West Pembina
Pine Creek
Wapiti
Lochend
Willesden Green
Garrington
Alder Flats
-0.6x
-0.5x
-0.4x
-0.3x
-0.2x
-0.1x
0.0x
0.1x
0.2x
0.3x
0.4x
0.5x
0.6x
0.7x
0.8x
0.9x
1.0x
1.1x
1.2x
$80 $70 $60 $50 $40
P/I R
ati
o
Edmonton Par (C$/bbl)
Central Pembina
Brazeau
East Pembina
West Pembina
Pine Creek
Wapiti
Lochend
Willesden Green
Garrington
Alder Flats
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 22
Appendix Area breakdowns
Breaking down the Cardium
Lochend .............................................................................................................................. 23
Garrington ........................................................................................................................... 30
Willesden Green Ferrier .................................................................................................. 37
Alder Flats .......................................................................................................................... 44
East Pembina ..................................................................................................................... 51
Central Pembina ................................................................................................................. 58
Brazeau .............................................................................................................................. 65
West Pembina .................................................................................................................... 72
Pine Creek Kaybob .......................................................................................................... 79
Wapiti .................................................................................................................................. 86
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 23
Lochend
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 24
Fig 37 Cardium Lochend map
Source: geoSCOUT, Macquarie Research, January 2015
Fig 38 Gross Lochend Cardium production (September 2014)
Source: geoSCOUT, Macquarie Research, January 2015
4,576boe/d
2,719boe/d
1,273boe/d
607boe/d 197boe/d 34boe/d
Pengrowth
Lightstream
Bonavista
TriOil
Tamarack
Others
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 25
Fig 39 Vintage production by year Lochend
Cardium production from horizontal wells at Lochend has increased from 0 in 2010, peaking at >10.0mboe/d in early 2014 according to geoSCOUT data.
The largest wedge of production came from 2013 with Pengrowth leading the way in terms of wells drilled at Lochend. Since that time, activity appears to have tapered in the area.
As of September 2014, Cardium horizontal production from the area was ~9.7mboe/d.
Fig 40 Type curve vs results Lochend
Over 120 horizontal Cardium wells have been put on production at Lochend.
Our type curve has an IP30 of 327boe/d and a first-year decline of ~74% and generates an EUR of 179mboe.
This compares to Pengrowths internal type curve at Lochend with an IP30 of 285boe/d and EUR of 239mboe.
Fig 41 Activity by producer Lochend
Pengrowth and Lightstream are among the most active producers in the Cardium play at Lochend with 55 and 31 wells producing respectively.
TriOil has the most horizontal Cardium licences in the area at 14.
Source: geoSCOUT, Macquarie Research, January 2015
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Pro
du
cti
on
(m
bo
e/d
)
2014
2013
2012
2011
2010
-
20
40
60
80
100
120
140
-
50
100
150
200
250
300
350
400
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
# P
rod
uc
ing
We
lls
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Count
P90
Swanson Mean
P50 (Median)
P10
Macq Cardium Type
0
10
20
30
40
50
60
70
Peng
row
th
TriO
il
Lig
hts
tream
Bo
navis
ta
Tam
ara
ck
Bern
um
# W
ells
Drilled & Cased
Location
Producing
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 26
Fig 42 Type curve by year Lochend
There has been a marked improvement in the type curve since the initial horizontal wells came on production during the 20092010 time period.
Improvements in fracking technology and completion optimizations have improved the deliverability of individual wells in the play.
Our type curve for Lochend assumes slightly better rates than the group average due to the improving well performance with time. The 2014 data is currently exceeding our Lochend type curve.
Fig 43 Type curve by operator Lochend
Bonavista, Lightstream, and Tamarack have all exceeded our type curve, particularly in the first year of production.
Pengrowth and TriOil have both underperformed the group average and type curve in terms of average well productivity.
Fig 44 Type curve by operator, 20132014 wells Lochend
As previously mentioned, well productivity has improved with time as completion techniques have been optimized.
Looking at the most recent Cardium wells, which were drilled in 20132014, Lightstream, Bonavista, and Tamarack have performed better than our type curve while Pengrowth has been in line, and TriOil is underperforming.
Source: geoSCOUT, Macquarie Research, January 2015
-
50
100
150
200
250
300
350
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
2009
2010
2011
2012
2013
2014
All avg
Macq Cardium Type
-
50
100
150
200
250
300
350
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
TriOil
Lightstream
Pengrowth
Tamarack
Bonavista
All avg
Macq Cardium Type
-
50
100
150
200
250
300
350
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
TriOil
Lightstream
Pengrowth
Tamarack
Bonavista
Macq Cardium Type
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 27
Fig 45 Average peak month rate by operator Lochend
Since 2013, Bonavista and Lightstream have shown the highest peak rates.
Peak rates have shown improvement post 2013 for Lightstream, Bonavista, and Pengrowth.
Fig 46 12-month average rate and decline by operator Lochend
The data shows first-year declines ranging from 5570%, which compares to 74% for our type curve. The reason why the data is understating the actual decline is that first-month IPs are underestimated using calendar day rates. Declines in the Cardium are comparable to other tight oil plays in Canada (6080%).
Fig 47 Variability by operator (P90/P10) Lochend
Variability is a measure of the consistency in well performance. We calculate the P90 (only 10% of wells above this rate) and P10 (90% of wells above this rate) curves, then took the ratio of P90/P10 over a 90-day period. The higher this number, the greater the variability in initial production rates on the play. Wells with lower variability can facilitate capital budgeting and provide for greater certainty for meeting production targets.
TriOils well results have among the highest variability within the peer group. Tamarack and Bonavista have the lowest P90/P10 (IP90 avg) ratios.
Source: geoSCOUT, Macquarie Research, January 2015
0
20
40
60
80
100
120
140
0
50
100
150
200
250
300
350
400
Lig
hts
tream
Bo
navis
ta
Peng
row
th
Tam
ara
ck
TriO
il
Bern
um
Nu
mb
er
of
We
lls
Av
era
ge
Pe
ak
CD
R (b
oe
/d)
2013+ peak rate
pre 2013 peak rate
2013+ well count
pre 2013 well count
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
50
100
150
200
250
Bo
navis
ta
Tam
ara
ck
Lig
hts
tream
Peng
row
th
TriO
il
Bern
um
Fir
st
Ye
ar
De
clin
e R
ate
Av
era
ge
Fir
st
Ye
ar
Ra
te (
bo
e/d
)
1 Year Avg
Decline Rate
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
Tam
ara
ck
Bo
navis
ta
Peng
row
th
Lig
hts
tream
TriO
il
P9
0/P
10
(IP
90
av
g)
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 28
Fig 48 Average well depth by operator Lochend
Average True Vertical Depth of the Cardium at Lochend is between 2,2002,300m.
Average lateral length is longest for wells drilled by Lightstream and Tamarack.
Fig 49 Cumulative production vs time Lochend
We highlight cumulative production by year. Wells drilled during 20122014 have shown the highest cumulative production over a comparable time frame.
The two years that fall below the median are 2009 and 2010, which represent the initial horizontal wells in the play.
Fig 50 Cumulative production vs time by operator Lochend
Lightstream, Bonavista, and Tamarack are all on par with or slightly outperforming our type curve on a cumulative production basis.
Pengrowth and TriOil have wells that on average have produced a lower volume than our Lochend type curve over a comparable time period.
Source: geoSCOUT, Macquarie Research, January 2015
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Bern
um
Peng
row
th
TriO
il
Bo
navis
ta
Lig
hts
tream
Tam
ara
ck
Av
era
ge
De
pth
/Le
ng
th (
m)
Lateral Length Avg
TVD Avg
-
20
40
60
80
100
120
140
160
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Cu
mu
lati
ve
Pro
du
cti
on
(m
bo
e)
Productive Month(s)
P90
P50 (Median)
P10
2009
2010
2011
2012
2013
2014
-
20
40
60
80
100
120
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Cu
mu
lati
ve
Pro
du
cti
on
(m
bo
e)
Productive Month(s)
TriOil
Lightstream
Pengrowth
Tamarack
Bonavista
Macq Cardium Type
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 29
Fig 51 Log rate vs cumulative production Lochend
By plotting the logarithmic average production rate against the cumulative production, we are able to forecast the potential EUR that a well may produce over its life.
By approximating a line of best fit for 20122014 wells, we forecast new wells at Lochend will recover ~170mboe before reaching an estimated economic limit of 5boe/d. This compares to the EUR of 179mboe that we estimate from our Lochend type curve.
Fig 52 Top 20 wells by peak monthly rate Lochend
Eleven of the top 20 wells measured by peak monthly rate were brought on production by Lightstream and six by Pengrowth.
Eleven of the top 20 wells measured by peak monthly rate were brought on production in 20132014.
Bonavista and TriOil also have among the top 20 Cardium wells drilled at Lochend.
Fig 53 Top 20 wells by cumulative production Lochend
Twelve of the top 20 wells by cumulative production at Lochend were by Lightstream.
Pengrowth, TriOil, Bonavista, and Tamarack each had wells in the top 20.
Source: geoSCOUT, Macquarie Research, January 2015
1
10
100
1,000
0 50 100 150 200 250
Lo
g R
ate
Cumulative Production (mboe)
P90
P50 (Median)
P10
2009
2010
2011
2012
2013
2014
Well ID Operator Peak Rate (boe/d) On Production Date
1 100/14-20-027-03W5/00 Pengrowth Enrg Corp 757 2011-09
2 100/03-31-027-03W5/00 Pengrowth Enrg Corp 734 2013-06
3 100/02-31-027-03W5/00 Pengrowth Enrg Corp 639 2013-07
4 100/04-08-027-03W5/00 Lightstream Rsrcs Ltd 548 2011-10
5 100/15-01-028-04W5/00 Bonavista Enrg Corp 542 2013-09
6 100/04-11-026-04W5/00 Lightstream Rsrcs Ltd 522 2013-10
7 100/01-18-027-03W5/00 Pengrowth Enrg Corp 516 2011-11
8 100/14-01-028-04W5/00 Bonavista Enrg Corp 510 2013-09
9 100/01-17-026-03W5/00 Pengrowth Enrg Corp 494 2013-12
10 100/04-05-027-03W5/00 Lightstream Rsrcs Ltd 493 2011-12
11 100/14-19-027-03W5/00 Lightstream Rsrcs Ltd 493 2011-11
12 100/01-08-027-03W5/00 Lightstream Rsrcs Ltd 472 2011-09
13 100/16-30-027-03W5/00 Lightstream Rsrcs Ltd 471 2012-11
14 100/01-31-026-03W5/00 TriOil Rsrcs Ltd 436 2012-04
15 100/04-08-026-02W5/00 Lightstream Rsrcs Ltd 433 2013-09
16 100/15-12-028-04W5/00 Lightstream Rsrcs Ltd 422 2013-12
17 100/02-05-027-03W5/00 Lightstream Rsrcs Ltd 401 2011-08
18 100/15-30-027-03W5/00 Lightstream Rsrcs Ltd 401 2014-02
19 100/02-11-026-04W5/00 Lightstream Rsrcs Ltd 401 2013-11
20 100/04-16-026-03W5/00 Pengrowth Enrg Corp 399 2014-03
Well ID Operator Cumulative Production On Production Date
1 100/01-08-027-03W5/00 Lightstream Rsrcs Ltd 146,009 2011-09
2 100/14-20-027-03W5/00 Pengrowth Enrg Corp 139,576 2011-09
3 100/04-08-027-03W5/00 Lightstream Rsrcs Ltd 136,196 2011-10
4 100/02-05-027-03W5/00 Lightstream Rsrcs Ltd 129,994 2011-08
5 100/14-19-027-03W5/00 Lightstream Rsrcs Ltd 127,703 2011-11
6 100/04-05-027-03W5/00 Lightstream Rsrcs Ltd 125,869 2011-12
7 100/15-36-027-04W5/00 Lightstream Rsrcs Ltd 119,817 2012-09
8 100/01-05-027-03W5/00 Lightstream Rsrcs Ltd 113,551 2012-05
9 100/01-18-027-03W5/00 Pengrowth Enrg Corp 111,093 2011-11
10 100/01-31-026-03W5/00 TriOil Rsrcs Ltd 109,152 2012-04
11 100/13-06-028-03W5/00 Lightstream Rsrcs Ltd 107,436 2012-12
12 100/14-01-028-04W5/00 Bonavista Enrg Corp 107,367 2013-09
13 100/15-01-028-04W5/00 Bonavista Enrg Corp 107,133 2013-09
14 100/16-30-027-03W5/00 Lightstream Rsrcs Ltd 104,355 2012-11
15 100/02-12-026-04W5/00 Lightstream Rsrcs Ltd 104,217 2012-08
16 100/03-08-027-03W5/00 Lightstream Rsrcs Ltd 99,213 2012-11
17 100/13-36-027-04W5/00 Lightstream Rsrcs Ltd 97,274 2012-09
18 100/02-29-026-03W5/00 Tamarack Valley Enrg Ltd 97,218 2012-05
19 100/03-31-027-03W5/00 Pengrowth Enrg Corp 96,694 2013-06
20 100/01-17-026-03W5/00 Pengrowth Enrg Corp 95,930 2013-12
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 30
Garrington
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 31
Fig 54 Cardium Garrington map
Source: geoSCOUT, Macquarie Research, January 2015
Fig 55 Gross Garrington Cardium production (September 2014)
Source: geoSCOUT, Macquarie Research, January 2015
7,992boe/d
4,975boe/d
4,007boe/d
1,108boe/d
685boe/d497boe/d 1,088boe/d
Pengrowth
Whitecap
Exxonmobil
Bellatrix
Lightstream
Baccalieu
Others
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 32
Fig 56 Vintage production by year Garrington
Cardium production from horizontal wells at Garrington has increased from 0 in 2009, peaking at >23.0mboe/d in late 2013 according to geoSCOUT data.
Production growth in the Garrington area has shown to be consistent between 2010 and 2013. Since that time, activity appears to have tapered slightly in the area.
As of September 2014, Cardium horizontal production from the area was ~20.0mboe/d.
Fig 57 Vintage production by area Garrington
~450 horizontal Cardium wells have been put on production at Garrington.
Our type curve has an IP30 of 268boe/d and a first-year decline of ~79% and generates an EUR of 112mboe.
This compares to Whitecaps internal Garrington type curve with an IP30 of 320boe/d and an EUR of 227mboe. Pengrowth uses an IP30 of 170boe/d and EUR of 137mboe at Garrington.
Fig 58 Type curve vs results Garrington
Whitecap and Pengrowth are among the most active producers in the Cardium play at Garrington with 151 and 136 wells producing, respectively.
Lightstream has the most horizontal Cardium licences in the area at 7.
Source: geoSCOUT, Macquarie Research, January 2015
0.0
5.0
10.0
15.0
20.0
25.0
Pro
du
cti
on
(m
bo
e/d
)
2014
2013
2012
2011
2010
2009
-
100
200
300
400
500
600
-
50
100
150
200
250
300
350
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
# P
rod
uc
ing
We
lls
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Count
P90
Swanson Mean
P50 (Median)
P10
Macq Cardium Type
0
20
40
60
80
100
120
140
160
180
Whitecap
Peng
row
th
Exxo
n
Bella
trix
Lig
hts
tream
Baccalie
u
Bo
navis
ta
Co
no
co
Tam
ara
ck
Hyp
erio
n
Cre
scent
Pt
Husky
# W
ells
Drilled & Cased
Location
Producing
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 33
Fig 59 Type curve by year Garrington
There has been a noticeable improvement in the type curve since the initial horizontal wells came on production during the 2009 time period.
Improvements in fracking technology and completion optimizations have improved the deliverability of individual wells in the play.
Our type curve for Garrington assumes slightly better rates than the group average due to the improving well performance with time. The 2013 and 2014 data is currently exceeding the early months of our Garrington type curve.
Fig 60 Type curve by operator Garrington
Pengrowth and Baccalieu have both exceeded our type curve in the first year of production.
Conoco and Bonavista have both underperformed the group average and our type curve in terms of average well productivity at Garrington.
Fig 61 Type curve by operator, 20132014 wells Garrington
Type curves have improved substantially in recent years, with Baccalieu, Whitecap, Pengrowth, and Bellatrix all outperforming our type curve in 20132014.
Source: geoSCOUT, Macquarie Research, January 2015
-
50
100
150
200
250
300
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
2009
2010
2011
2012
2013
2014
All avg
Macq Cardium Type
-
50
100
150
200
250
300
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Baccalieu Bellatrix Bonavista
Conoco Exxon Hyperion
Lightream Pengrowth Tamarack
Whitecap All avg Macq Cardium Type
-
50
100
150
200
250
300
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Baccalieu Bellatrix
Bonavista Exxon
Lightream Pengrowth
Tamarack Whitecap
Macq Cardium Type
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 34
Fig 62 Average peak month rate by operator Garrington
Since 2013, Baccalieu and Whitecap have shown the highest peak rates.
The majority of operators have shown an improvement in peak rates post 2013 including Baccalieu, Whitecap, Pengrowth, Lightstream, and Bonavista.
Fig 63 12-month average rate and decline by operator Garrington
The data shows first-year declines ranging from 4581%, which compares to 79% for our type curve. The data is understating the actual decline because first-month IPs are underestimated using calendar day rates. Declines in the Cardium are comparable to other tight oil plays in Canada (6080%).
Fig 64 Variability by operator (P90/P10) Garrington
Lightstreams well results have among the highest variability within the peer group. Tamarack, Baccalieu, and Exxon have the lowest P90/P10 (IP90 avg) ratios at Garrington.
Source: geoSCOUT, Macquarie Research, January 2015
0
20
40
60
80
100
120
140
0
50
100
150
200
250
300
350
Baccalie
u
Whitecap
Peng
row
th
Exxo
n
Lig
hts
tream
Bo
navis
ta
Tam
ara
ck
Bella
trix
Hyp
erio
n
Co
no
co
Husky
Cre
scent
Pt
Nu
mb
er
of
We
lls
Av
era
ge
Pe
ak
CD
R (b
oe
/d)
2013+ peak rate
pre 2013 peak rate
2013+ well count
pre 2013 well count
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
20
40
60
80
100
120
140
Baccalie
u
Exxo
n
Lig
hts
tream
Peng
row
th
Hyp
erio
n
Tam
ara
ck
Bella
trix
Whitecap
Bo
navis
ta
Co
no
co
Husky
Cre
scent
Pt
Fir
st
Ye
ar
De
clin
e R
ate
Av
era
ge
Fir
st
Ye
ar
Ra
te (
bo
e/d
)
1 Year Avg
Decline Rate
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
Tam
ara
ck
Baccalie
u
Exxo
n
Bella
trix
Peng
row
th
Bo
navis
ta
Whitecap
Lig
hts
tream
P9
0/P
10
(IP
90
av
g)
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 35
Fig 65 Average well depth by operator Garrington
Average True Vertical Depth of the Cardium at Garrington is ~2,000m.
Fig 66 Cumulative production vs time Garrington
We highlight cumulative production by year. Wells drilled during 20132014 have shown the highest cumulative production over a comparative time frame.
The two years that fall below the median are 2009, 2010 and 2011, which represent the initial horizontal wells in the play.
Fig 67 Cumulative production vs time by operator Garrington
Baccalieu is the only company on par with our type curve on a cumulative production basis.
Conoco, Crescent Point, and Husky have wells that have underperformed versus its peers.
Source: geoSCOUT, Macquarie Research, January 2015
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Husky
Cre
scent
Pt
Co
no
co
Whitecap
Hyp
erio
n
Bella
trix
Peng
row
th
Bo
navis
ta
Baccalie
u
Tam
ara
ck
Lig
hts
tream
Exxo
n
Av
era
ge
De
pth
/Le
ng
th (
m)
Lateral Length Avg
TVD Avg
-
10
20
30
40
50
60
70
80
90
100
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Cu
mu
lati
ve
Pro
du
cti
on
(m
bo
e)
Productive Month(s)
P90
P50 (Median)
P10
2009
2010
2011
2012
2013
2014
-
10
20
30
40
50
60
70
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Cu
mu
lati
ve
Pro
du
cti
on
(m
bo
e)
Productive Month(s)
Baccalieu Bellatrix
Bonavista Conoco
Crescent Pt Exxon
Husky Hyperion
Lightream Pengrowth
Tamarack Whitecap
Macq Cardium Type
-
Macquarie Research Dude, Wheres My Cardium?
29 January 2015 36
Fig 68 Log rate vs cumulative production Garrington
By plotting the logarithmic average production rate against the cumulative production, we are able to forecast the potential EUR that a well may produce over its life.
By approximating a line of best fit for 2013 and 2014 wells, it is estimated that new wells at Garrington will recover ~125mboe before reaching an estimated economic limit of 5boe/d. This compares to the EUR of 112mboe that we estimate from our Garrington type curve.
Fig 69 Top 20 wells by peak monthly rate Garrington
Ten of the top 20 wells measured by peak monthly rate were brought on production by Whitecap.
12 of the top 20 wells measured by peak monthly rate were brought on production in 20132014.
Exxon, Tamarack, Baccalieu, Pengrowth, and Bellatrix also have wells in the top 20.
Fig 70 Top 20 wells by cumulative production Garrington
Eight of the top 20 wells by cumulative production at Garrington have been by Whitecap.
Bellatrix, Lightstream, Pengrowth, Tamarack, and Baccalieu also have wells in the top 20.
Source: geoSCOUT, Macquarie Research, January 2015
1
10
100
1,000
0 20 40 60 80 100 120 140 160 180 200
Lo
g R
ate
Cumulative Production (mboe)
P90
P50 (Median)
P10
2009
2010
2011
2012
2013
2014
Well ID Operator Peak Rate (boe/d) On Production Date
1 100/02-12-035-04W5/00 Whitecap Rsrcs Inc 531 2010-04
2 100/03-28-031-03W5/00 Exxonmobil Cda Ltd 510 2012-06
3 100/02-20-032-03W5/00 Tamarack Acqstn Corp 496 2012-07
4 100/04-21-033-03W5/00 Whitecap Rsrcs Inc 491 2013-05
5 100/14-29-034-04W5/00 Whitecap Rsrcs Inc 474 2012-09
6 100/16-18-035-04W5/00 Pengrowth Enrg Corp 469 2010-08
7 100/04-06-035-04W5/00 Whitecap Rsrcs Inc 467 2014-03
8 100/13-33-033-03W5/00 Whitecap Rsrcs Inc 464 2013-05
9 100/02-31-033-03W5/00 Whitecap Rsrcs Inc 461 2011-07
10 100/02-30-032-03W5/00 Baccalieu Enrg Inc 451 2013-01
11 102/03-21-033-03W5/00 Whitecap Rsrcs Inc 446 2013-09
12 100/14-09-032-03W5/00 Exxonmobil Cda Ltd 444 2013-07
13 100/13-18-035-03W5/00 Whitecap Rsrcs Inc 441 2010-08
14 100/03-06-035-04W5/00 Whitecap Rsrcs Inc 439 2014-03
15 100/14-33-033-03W5/00 Whitecap Rsrcs Inc 437 2014-02
16 100/02-27-034-04W5/00 Pengrowth Enrg Corp 436 2014-02
17 100/14-34-034-04W5/00 Pengrowth Enrg Corp 413 2014-02
18 100/16-19-032-03W5/00 Exxonmobil Cda Ltd 413 2013-09
19 100/14-17-032-03W5/00 Pengrowth Enrg Corp 399 2013-04
20 100/03-03-032-03W5/00 Bellatrix Expl Ltd 398 2012-02
Well ID Operator Cumulative Production On Production Date
1 100/16-31-034-07W5/00 Pengrowth Enrg Corp 134,684 2010-06
2 100/04-21-033-03W5/00 Whitecap Rsrcs Inc 127,821 2013-05
3 100/03-03-032-03W5/00 Bellatrix Expl Ltd 120,472 2012-02
4 100/01-21-032-03W5/00 Lightstream Rsrcs Ltd 119,484 2011-11
5 100/13-02-035-04W5/00 Pengrowth Enrg Corp 119,417 2009-09
6 102/01-07-035-04W5/00 Pengrowth Enrg Corp 119,241 2010-08
7 100/02-31-033-03W5/00 Whitecap Rsrcs Inc 109,450 2011-07
8 100/02-21-034-04W5/00 Pengrowth Enrg Corp 109,165 2011-04
9 100/15-29-034-04W5/00 Whitecap Rsrcs Inc 105,700 2010-10
10 100/14-33-032-03W5/00 Lightstream Rsrcs Ltd 104,862 2010-07
11 100/02-30-032-03W5/00 Baccalieu Enrg Inc 97,207 2013-01
12 100/04-28-032-03W5/00 Lightstream Rsrcs Ltd 96,884 2011-11
13 100/02-05-035-04W5/00 Pengrowth Enrg Corp 96,739 2013-03
14 100/01-21-034-04W5/00 Pengrowth Enrg Corp 96,514 2010-04
15 100/13-33-033-03W5/00 Whitecap Rsrcs Inc 96,506 2013-05
16 100/02-20-032-03W5/00 Tamarack Acqstn Corp 95,960 2012-07
17 100/04-14-034-04W5/00 Whitecap Rsrcs Inc 95,644 2010-03
18 102/13-29-034-04W5/00 Whitecap Rsrcs Inc 93,727 2011-02
19 100/14-29-034-04W5/00 Whitecap Rsrcs Inc 91,421 2012-09
20 100/13-23-034-04W5/00 Whitecap Rsrcs Inc 91,240 2010-10
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 37
Willesden Green Ferrier
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 38
Fig 71 Cardium Willesden Green/ Ferrier map
Source: geoSCOUT, Macquarie Research, January 2015
Fig 72 Gross Willesden Green-Ferrier Cardium production (September 2014)
Source: geoSCOUT, Macquarie Research, January 2015
10,916boe/d
2,682boe/d2,618boe/d
2,317boe/d
1,866boe/d
1,808boe/d
1,586boe/d
1,538boe/d
1,325boe/d
2,402boe/d
Bellatrix
Penn West
Bonavista
Tournament
Yangarra
CNRL
Anderson
Bonavista
Baccalieu
Others
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 39
Fig 73 Vintage production by year Willesden Green/Ferrier
Cardium production from horizontal wells at Willesden Green-Ferrier has increased from 0 in early 2010, peaking at >30.0mboe/d in early 2014 according to geoSCOUT data.
Production growth has been steady on an annual basis at Willesden Green-Ferrier and this trend has continued into 2014.
As of September 2014, Cardium horizontal production from the area was >29.0mboe/d.
Fig 74 Type curve vs results Willesden Green/Ferrier
Over 350 horizontal Cardium wells have been put on production at Willesden Green.
Our type curve has an IP30 of 380boe/d and a first-year decline of ~75% and generates an EUR of 243mboe.
This compares to Bellatrixs internal Willesden Green type curve with an IP30 of 582boe/d and EUR of 341mboe. Penn West uses an IP30 of 370boe/d and EUR of 334mboe.
Fig 75 Activity by producer Willesden Green/Ferrier
Bellatrix leads the pack in terms of Cardium horizontal wells producing, drilled, and cased; while Penn West has the greatest number of licences for the group.
Source: geoSCOUT, Macquarie Research, January 2015
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Pro
du
cti
on
(m
bo
e/d
)
2014
2013
2012
2011
2010
-
50
100
150
200
250
300
350
400
-
100
200
300
400
500
600
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
# P
rod
uc
ing
We
lls
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Count
P90
Swanson Mean
P50 (Median)
P10
Macq Cardium Type
0
20
40
60
80
100
120
Bella
trix
Penn W
est
Yang
arr
a
And
ers
on
CN
RL
To
urn
am
.
Bo
navis
ta
Whitecap
Baccalie
u
Co
no
co
TriO
il
Bo
nte
rra
Direct E
nrg
Bayte
x
Tim
berr
ock
# W
ells
Drilled & Cased
Location
Producing
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 40
Fig 76 Type curve by year Willesden Green/Ferrier
The following display shows an improving type curve with time.
Improvements in fracking technology and completion optimizations have improved the deliverability of individual wells in the play.
Our type curve for Willesden Green assumes better rates than the group average due to the improving well performance with time, specifically in 2013 and 2014.
Fig 77 Type curve by operator Willesden Green/Ferrier
The best results from the Willesden Green-Ferrier Cardium have come from Bellatrix, whose wells have on average outperformed our type curve in the first 24 months of production.
Also of note, Penn West and Bonavista have significant production in the area and are both underperforming our type curve
Fig 78 Type curve by operator, 20132014 wells Willesden Green/Ferrier
Looking at the most recent Cardium wells, which were drilled in 20132014, Whitecap, Tournament, and Bellatrix have performed better than our type curve while Bonavista and Penn West have underperformed.
Source: geoSCOUT, Macquarie Research, January 2015
-
50
100
150
200
250
300
350
400
450
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
All avg
Macq Cardium Type
2010
2011
2012
2013
2014
-
50
100
150
200
250
300
350
400
450
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Anderson Baccalieu Bellatrix
Bonavista Bonterra CNRL
Conoco Exoro Penn West
Baytex Tournam. TriOil
Whitecap Yangarra Macq Cardium Type
All avg
-
50
100
150
200
250
300
350
400
450
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Ca
len
da
r D
ay
Ra
te (
bo
e/d
)
Productive Month(s)
Anderson Baccalieu
Bellatrix Bonavista
CNRL Penn West
Tournam. TriOil
Whitecap Yangarra
Macq Cardium Type
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Macquarie Research Dude, Wheres My Cardium?
29 January 2015 41
Fig 79 Average peak month rate by operator Willesden Green/Ferrier
Since 2013, Bellatrix, Tournament, Whitecap, and Anderson have had the highest average peak