Investor Relations Contact Information
Questerre Energy Corporation
St. Lawrence Lowlands, Quebec
The Lowlands are situated in Quebec south of the St. Lawrence River between Montreal and Quebec City. The exploration potential of the Lowlands is complemented by proximity to one of the largest natural gas markets in North America, a well-established distribution network and favorable fiscal terms.
The area is prospective for natural gas in several horizons with primary targets in the Utica, Lorraine shales and the Ordovician Trenton Black-River ("TBR") carbonates at approximately 2000m.
The majority of Questerre’s landholdings of over one million gross acres lie in the heart of the fairway between two major geological features – a subsurface thrust fault known as Logan’s Line to the west and the Yamaska growth fault to the east. This acreage is comprised of three separate blocks.
The largest block of 719,788 acres is subject to a joint venture agreement with Talisman Energy. Questerre holds approximately 25% working interest and 4.5% royalty on the production from Talisman. Talisman holds the remaining 75% interest.
The 113,453-acre Yamaska acreage is governed by a royalty and joint venture agreement with Gastem Inc. and Forest Oil and lies adjacent to the Talisman farm-in lands. Questerre currently holds a 20% working interest on this block.
Questerre’s third exploration block, St. Jean, covers 181,255 acres close to the US border where the company is testing an extension to the main play fairway. Questerre holds an approximate 59% working interest in this block with Gastem.
Quebec offers one of the most competitive royalty schemes in Canada with 10% to 12.5% dependent on production volumes. Volumes under 3 mmcf/d are subject to a 10% royalty rate. Natural gas produced in Quebec further enjoys a US$0.50-1.00/mcf premium to NYMEX due to its proximity to consuming markets. In sum natural gas production in Quebec is highly economically competitive to other areas in Canada and the US.
While interest in the Utica and Lorraine shales has increased dramatically in the last two years, exploration has been ongoing since the late 1950's.
There have been over 275 well penetrations in the shales with approximately 30 recorded production tests throughout the St. Lawrence Lowlands. Early indications of potential included gas shows and kicks while drilling for deeper targets. A key well was the St. Francois Romaine that was tested by Shell in the 1970's. An interval within the Lorraine flowed natural gas at an initial rate of over 4 mmcf/d with a stabilized flow rate of 200-300 mcf/d. This confirmed the presence of naturally fractured intervals that were able to flow gas at sustained rates.
The potential of the Utica was further quantified by an Encana study in 2007 that identified it as a viable resource play target covering over 1 million acres with 163 Tcf of discovered gas in place or approximately 88 Bcf per square mile.
In the summer of 2007, Questerre's partner Gastem Inc., spud two vertical wells to evaluate the Utica shale potential. These wells, St. Francois du Lac and St. Louis de Richelieu, were successfully fracture stimulated by Forest Oil with initial flow rates of up to 1mmcf/d. Announced in early 2008, these results sparked substantial market interest in the Utica and the Lowlands.
The results from the Forest wells were further validated by the extensive appraisal program completed by Questerre and Talisman on their joint acreage. Four wells- Gentilly, La Visitation, St. David and St. Edouard- were drilled and fracture stimulated in the Utica and Lorraine. Over a distance of one hundred kilometres between the farthest wells, the program yielded consistent stabilized flow rates of between 300-900 mcf/d from the middle Utica interval.
The results confirmed the middle utica can be fracture stimulated and has the important rock properties necessary for a shale play. Based on these test results over a large area, Questerre and Talisman committed to a pilot program of multi-stage fractured horizontal wells to assess the commercial parameters of the Utica.
An independent resource assessment commissioned by Questerre further corroborated the scale of this resource. Utilizing the data gathered from these appraisal programs, including core, frac results, temperature and pressure gradients, resulted in an updated estimate of original gas in place to 150 Bcf per square mile. This compares favorably to early industry estimates of 88-93 Bcf per square mile. Technically recoverable resources for the deep fairway acreage are estimated to 4.2 Tcf net to Questerre interest.
The first horizontal well St. Edouard #1A was drilled to target depth in late December and is currently being fracture stimulated. Drilling operations on the second horizontal well, Gentilly #2HZ are underway and the well will be frac'd later this year. Preliminary test data from the first well is expected late in the first quarter with more results later this spring. Subject to the results, the partners plan to proceed with further horizontal test wells that could include pilot pads with multiple wells.
Initial test results from the shallower Lorraine formation confirm that the interval can be successfully frac'd with sustained gas flows. Additional work, particularily with fluid sensitivity, is necessary to improve cleanup times and improve frac effectiveness. With an estimated 120 Bcf of gas in place per section in this interval, it remains an exciting and significant resource play to be evaluated.
Video: Learn About Horizontal Drilling
The success of the Trenton Black-River (TBR) play in the analogous Appalachian Basin to the south led Questerre to initially secure its land position in the Lowlands in 2001.
Questerre completed an extensive regional geological and geophysical study of the Lowlands to support this exploration model. This included reprocessing and reinterpretation of a database of over 3,000 km of 2-D seismic and a detailed review of the wells that have been drilled in the area. The work is supported by the documented occurrence of dolomitized TBR in outcrop and well bores in Quebec. With mapping of the wrench fault systems key to this play and seismic modelling, Questerre identified numerous leads for the TBR.
Results from the TBR have been mixed with the most recent well St. Edouard testing over 2 mmcf/d from this zone. However on futher testing, estimated reserves were insufficient to justify the tie-in costs.