Oil – Breakthrough: upside to many/most conventional Cdn heaThis is exactly the drilling teechnique that Baytex management stated, they have started implementing
Oil – Breakthrough: upside to many/most conventional Cdn heavy oil plays
Oil – Breakthrough: upside to many/most conventional Cdn heavy oil plays We were surprised that Canadian Natural Resources Nov 30 institutional open house comments on conventional heavy oil plays didn’t get more attention and excitement from investors. It certainly got our attention. CNQ openly discussed a breakthrough that many oil industry players knew and it is a breakthrough that has big implications to the western Cdn conventional heavy oil potential for big to small companies. Drilling tightly spaced, multilateral wells (no fracking) is opening up many/most conventional heavy oil plays. (i) We see it as a breakthrough much like horizontal drilling was in the late 80s. Ask any old-time oil and gas person what they saw when horizontal drilling first came to western Canada in the late 80’s what happened after they had or saw success. Remember this doesn’t require any special technical skill to execute. We were fortunate to be in industry with an intermediate producer who drilled one of the first horizontal wells in the late 80s in a Mississippian oil play in SE Sask (Souris/Workman) and as we and others saw industry successes, we tried them in other oil plays. And then no surprise, horizontal wells took off. (ii) The key for that play and Peak SPR Stocks: 726.62 mmb Commercial Stocks: 413.9 mmb SPR Stocks: 387.0 mmb 0 100 200 300 400 500 600 700 800 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Inventory Stocks (mmb) Commercial Stocks Strategic Reserve Stocks SPR reserves remain lower Upside to Cdn conventional heavy oil The Disclaimer: Energy Tidbits is intended to provide general information only and is written for an institutional or sophisticated investor audience. It is not a recommendation of, or solicitation for the purchase of securities, an offer of securities, or intended as investment research or advice. The information presented, while obtained from sources we believe reliable as of the publishing date, is not guaranteed against errors or omissions and no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. This publication is proprietary and intended for the sole use of direct recipients from Dan Tsubouchi and SAF Group. Energy Tidbits are not to be copied, transmitted, or forwarded without the prior written permission Dan Tsubouchi and SAF Group. Please advise if you have received Energy Tidbits from a source other than Dan Tsubouchi and SAF Group. 24 Energy Tidbits the plays being drilled today in the Clearwater, Sparky, SE Sask Bakken, Se Mississippian, SW Sask Shaunavon etc is that these are all conventional oil plays. And to the great degree what we used to call crappy conventional oil plays. The economics didn’t work great with vertical wells and then horizontal wells made the math work. Some of these crappy conventional wells have been drilled with horizontal wells with fracks and that has made them work very well. But these aren’t like a true shale well that is so tight, it needs the frac to split the rock. Rather industry is drilling these no-frack horizontal wells close to each and there is enough perm to make the math work. There is no special technical knowledge gap stopping anyone from trying this in a crappy conventional play. This is why we said before it is applicable to any sized company. (iii) This week CNQ noted their strong success in their conventional heavy oil plays. They updated the continued strengthening conventional heavy oil wells in the Clearwater oil play. But then, they highlighted the conventional heavy oil success leveraging improved multilateral technology in the Bonnyville and Lloydminster regions. They noted the 2022 wells, vs the pre-2018 wells had 50% higher production at 230 b/d and 42% lower capital efficiency at $9,450 per flowing b/d. As a result, their 2023 Bonnyville & Lloydminster oil production is forecast to almost double in 2023. (iv) The key though is their comment that the new multilateral technology is “applicable across our large heavy oil land base”. (v). It’s why we tweeted [LINK] “It's Working! tightly spaced multi-leg horizontal wells without fracking in Cdn conventional #oil plays 11/30. $CNQ "applicable across our large heavy oil land base"
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