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The Kakwa-Resthaven area is situated approximately 75 kilometres south of Grande Prairie in west central Alberta. The Company holds an average 71% working interest in 28,640 acres in this area. Among other zones of interest, the area is prospective for condensate-rich natural gas in the deep, over-pressured fairway of the Montney formation, at a depth of approximately 3,100 metres to 3,600 metres. Economics are enhanced by relatively high liquids content, particularly condensate, and Crown royalty incentives.
Consistent with 2015, the majority of activity in the year was on its joint venture acreage where it holds a 25% working interest. In 2016, to preserve financial liquidity, the Company selectively participated in the six (1.5 net) well drilling program and held an interest in two (0.50 net) wells drilled during the year. The Company can elect to earn an interest in the remaining four wells once the operator has received net revenue equivalent to four times the drilling and completion costs and two times the equipping and tie-in costs of each well. The Company also participated in an expansion of existing infrastructure on this acreage.
Production from this area averaged 1,037 boe/d in 2016 with liquids, primarily condensate, accounting for 50% of this amount.
In 2016, the average length of the horizontal section increased to 2,297 metres or 10% longer than the prior year. Leveraging the improvements in completion design from prior years, completions benefitted from increased sand tonnage and tighter inter-treatment spacing. Over the first thirty days, average production from the six wells drilled in 2016 was 4.2 MMcfe/d or 20% higher than the wells drilled in 2015. While the initial results are encouraging the results are not necessarily indicative of long term performance or ultimate recovery from these wells.
Questerre also participated in the expansion of field infrastructure on its joint venture acreage for future development. This included the acquisition of a regenerative amine sweetening system and construction of a water storage facility. The amine sweetening system, with a design capacity of 60 MMcf/d and up to 1 tonne of sulphur per day, will replace the non-regenerative chemical sweetening process and should lower operating costs. The water storage facility will temporarily store produced water and will be used for future completion operations. Investment in field infrastructure in 2016 was approximately $3.32 million.
In 2016, limited activity was conducted on the Company’s operated acreage in the area given the commodity price environment. Based on the results directly offsetting its operated acreage to the north, the Company is assessing possible development options in the second half of this year.
For 2017, subject to commodity prices and continued results, the Company plans to participate in the gross capital budget of $100 million ($25 million net) proposed by the operator. This will include the drilling of up to 8 (2.0 net) wells and additional infrastructure including gas lift facilities and pipelines.