Questerre Energy

Alberta

The Kakwa-Resthaven area is situated approximately 75 kilometres south of Grande Prairie in west central Alberta.

 

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. Questerre’s wells are currently targeting one of three prospective intervals in the Upper Montney formation.  Economics are enhanced by relatively high liquids content, particularly condensate, and Crown royalty incentives. Questerre currently holds 18,560 (10,880 net) acres in the area, including a 100% working interest in 4,480 acres (“Kakwa North”) and a 100% interest in 3,840 acres (“Kakwa South”).

 

Initial development of the Montney focused on areas of dry gas or relatively low liquids of approximately 25 bbls/MMcf in British Columbia. With changes in the natural gas market, activity shifted to target sweet spots where natural gas liquids rates are higher. With test rates from its wells as high as 200 bbls/MMcf, the Company’s acreage is in one of the sweet spots of this liquids-rich fairway. More importantly, liquids from these wells are mainly condensate which retains a premium to light oil and liquids prices because it is used as a diluent for bitumen and heavy oil production in Alberta.

 

Questerre invested $22.39 million at Kakwa (2016: $11.91 million) with daily production averaging 1,123 boe/d in 2017 (2016: 1,036 boe/d). Total proved and probable reserves at December 31, 2017 were estimated at 16.09 MMboe (2016: 14.21 MMboe) with a NPV-10% of $121.59 million (2016: $118.92 million).

 

During the year, activity focused on the drilling of 7 (1.60 net) wells and the expansion of field infrastructure on its joint venture acreage. The majority of the wells were completed and tied-in during the year. Questerre holds an average working interest of 23% in these wells.

 

The wells drilled during the year include the 100/09-29-63-5W6M (the “100/09-29 Well”), 102/09-29-63-5W6M (the “102/09-29 Well”), 100/01-20-63-6W6M Well (“01-20 Well”) and the 102/06-18-63-5W6M Well (“06-18 Well”). Production over the first thirty days from the Montney for the 100/09-29 Well, 102/09-29 Well and the 100/01-20 Well averaged 2.7 MMcf/d and 827 bbls/d of condensate and other liquids (1,277 boe/d). Although the initial results from these wells are encouraging, they are not necessarily indicative of long-term performance or ultimate recovery.

 

An investment of $7.74 million (2016: $3.26 million) was made in field infrastructure to support future growth. These included a regenerative amine sweetening system, central water processing facility and gas lift facilities. The amine system has largely eliminated the operating costs associated with chemical sweetening. The first phase of the central water facility was completed in the fourth quarter and will temporarily store produced water for future completion operations. The gas lift facilities have improved uptime and are assisting with the lifting of produced liquids.  Additional gas lift facilities are planned for 2018.

 

The Company is also participating in the planned expansion of the central processing facility from its current operating capacity of approximately 23 MMcf/d to 45 MMcf/d plus associated liquids. The plans contemplate a future expansion to 60 MMcf/d. Based on commodity prices and continued results Questerre plans to participate in the drilling of up to six (1.5 net) additional wells at its joint venture acreage during 2018. The majority of these wells should be drilled in the second half of the year to coincide with the scheduled in-service date for the facility expansion.

 

To evaluate its operated acreage in the area, the Company entered into a farm-out agreement with an experienced Montney operator in the first quarter of 2018. Pursuant to the agreement, the partner has the right to drill, complete, equip and tie-in two horizontal wells targeting the Montney formation to earn a 50% interest in certain acreage held by Questerre at Kakwa North. The partner has the option to drill, complete, equip and tie-in additional wells to earn a similar interest in other acreage held by Questerre at Kakwa North and Kakwa South. Questerre will hold a royalty interest in these initial wells and certain subsequent wells subject to standard payout provisions. The Company expects the first well to spud during the second quarter of 2018.

 

 

 

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