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. Subject to the drilling of additional wells under its farm-out agreement at Kakwa North, Questerre holds 40,320 (17,600 net) acres in the area, including a 50% working interest in 13,120 acres at Kakwa North.
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).
Two significant projects were completed on the Company’s Kakwa acreage during the third quarter of 2018. They are designed to accommodate the future growth in production volumes.
These expansions included an increase in the capacity of the central processing facility from 23 MMcf/d to 43 MMcf/d with associated liquids and the central water storage facility from 30,000 m3 to 60,000 m3. Questerre holds a 25% working interest in these facilities. The local gathering system was also expanded and 5 (1.17 net) wells were equipped with gas lift. For the quarter and year to date, Questerre invested $1.65 million and $11.23 million respectively in facilities, representing more than half of its total investment in Kakwa during these periods.
On its Kakwa acreage, two wells targeting the Montney formation were drilled during the third quarter. Drilling operations were concluded on the 102/04-09-63-6W6M Well (the “04-09 Well”) and the 102/11-18-63-5W6M Well (the “11-18 Well”) with laterals of approximately 2300m. The 04-09 Well was completed and placed on production early in the fourth quarter. The 11-18 Well was completed early in the fourth quarter and will be tied in prior to year-end. Questerre holds a 25% working interest in both wells.
Further drilling is expected to resume on this acreage late in the fourth quarter. Subject to the operator’s plans, the Company expects to participate in the drilling of up to one (0.21 net) additional well in 2018 and six (1.29 net) wells in 2019.
As part of its commitments on the Kakwa North acreage, the operator has drilled and completed two wells which tested at an average rate of 2,800 boe/d. For more information, please refer to the Company’s press releases dated November 11, 2018 and November 22, 2018.