Elmworth producer profiles..RMP's neighboursBackground. Hammerhead, formerly known as Canadian International Oil Corp, holds a substantial position in the Montney light oil and Duvernay liquids-rich plays of Alberta and expects average production of 20,000-22,000boe/d in 2017. The company recently secured a C$150 million equity commitment at C$3.65 per share from its largest shareholder, Riverstone, which will be used to further develop the company's large high-quality Montney resource base.
Land and Locations. The company's land base now totals over 200,000 net acres of contiguous Montney rights, including ~59,000 acres at Gold Creek and ~76,000 acres adjacent to the south at Karr. It has identified 1,150-1,400 locations within the Upper/Middle Montney (including 330-450 at Gold Creek), with an additional 400-550 upside locations in the Lower Montney.
Recent Activity. We estimate the company has drilled 18 Montney wells at Gold Creek year to date in 2017, with an additional 9 further to the south at Karr. The majority of the drilling activity at Gold Creek has been in close proximity to the prolific Montney JJJ pool. Production data from the 2017 wells is currently limited in the public domain; however, we believe the company is testing lower intensity completions, as a means to reduce well costs, and improve economics. At Gold Creek, Hammerhead estimates a typical well to have an IP30 rate of between 750-1,600boe/d (EURs of between 685- 1,360mboe) and well costs of between $4.1-4.6 million DC&T.
Infrastructure. A third-party midstream plant (Meritage), through which Hammerhead processes the majority of its gas, is currently undergoing an expansion to 180mmcf/d (from 75mmcf/d) of processing capacity by 2Q/18.
Background. Velvet is a private company backed by Warburg Pincus, Trilantic Capital, and 1901 Partners.The company is focused on development of the liquids-rich Ellerslie play in west central Alberta and light oil in the Montney at Gold Creek.
Land. Velvet Energy holds >245 net sections of Montney rights in Alberta including ~210 in the greater Gold Creek area.
Recent Activity. The company has drilled a total of 10 delineation wells across its Gold Creek land base, including six since December 2016 that have been 2-mile laterals. Two of these wells were placed on production in mid-June (12-10, 1-10), while the other four are currently being completed at the 11-02 pad. The 12-10 well has cumulatively produced 25.7mbbl oil and 169mmcf gas in less than two months, while 1-10 has produced 34.1mbbl oil and 88.2mmcf gas over the same time period. We believe that the company is pursuing a higher intensity completion strategy with its most recent wells, in an effort to maximize rate and recovery, and enhance economics in the play. We anticipate Velvet to drill additional wells from its 04-01 pad as part of its winter 2017/18 program. Infrastructure. We understand Velvet is pursuing a long-term infrastructure solution to handle its Montney development plans in the area. The company has a central oil battery, compressor station, and water disposal at its 11-02 pad site.