between rock and a hard place In case anyone has missed it, the burning issue in Montney these days is not light oil v NGL or production costs or land values - it is the ability to process and ship the product - south, west or east. The problem right now is, and will be for the next two years, that all the outbound pipelines serving Montney are at full capacity. Some companies are cutting back on production - Toumaline and Peyto for starters - others have farsightedly secured firm commitments for pipeline capacity. Here are three examples taken from 2017 reports:
Storm - Firm transportation commitments are used to diversify sales points and mitigate pricing risk. Firm transportation totals 72 Mmcf per day in 2017 and increases to 102 Mmcf per day in 2018. In addition, preferential interruptible capacity on the Alliance Pipeline adds up to 14 Mmcf per day in 2017 and up to 15 Mmcf per day in 2018. Natural gas production exceeding firm commitments is directed to Chicago and/or Station 2 using interruptible pipeline capacity (sales point depends on price).
Black Swan - Including the new contracts, in 2019 Black Swan will hold over 395 MMcf/d of long term egress, which provides capacity for ongoing development of the company’s Northeast British Columbia (NEBC) Montney asset and enhances visibility of its long-term growth profile.
Painted Pony - Painted Pony has secured firm transportation for all expected natural gas production volumes through the end of 2019 with exposure to several markets, including an incremental 130 MMcf/d of firm transportation into AECO by April 2018.
And CKE? - here is all that their latest quarterly has to say on this issue.
Additionally, we have been experiencing some Enbridge downstream line issues and TCPL maintenance issues upstream of James River that may negatively impact our Birley/Umbach production volumes and/or field prices during the latter part of August. We are evaluating the impact of these unbudgeted proposed production outages and their impact on field prices.
One hopes in a worst case scenario, CKE would be able to ship sufficient gas to fund their ongoing operations. However that might not be sufficient to fund the projected new wells in 2018. Even worse if CKE goes into debt to do this - as they currently propose - we could be totally up the creek. Wally and Co would have succeeded in snatching defeat from the jaws of victory and our most dreaded fear would be realized - Kurt Molner of Raymond James would be right!
Doing a share swap with a diversified entity like Peyto would solve the problem - but that would probably run contrary to our management’s share option ambitions.
Time for someone to phone Calgary to find out what gives on this score. Canadianfemme you would be ideal for this chore - if they tell you that this information is proprietary - just tell them JDavis17 sent you!