Horn River Shale

Nexen Enters Joint Venture In Horn River Shale

Nexen (NXY) announced that the company has entered into a joint venture to help develop shale assets in the Horn River Basin and other areas in Western Canada.

Nexen will sell a 40% working interest in properties in the Horn River, Cordova and Liard basins to Inpex Corporation for $700 million.  The company will received 50% up front and the balance as a drilling carry.

Inpex is a Japanese company and will own its 40% interest through INPEX Gas British Columbia Ltd.  This entity is jointly owned by Inpex and JGC Corporation.

Nexen is currently drilling an eighteen well pad in the Horn River Shale and expects these wells to be completed by the fourth quarter of 2012. Gross production is expected to peak at 155 million cubic feet of natural gas per day in early 2013.

Nexen estimates that the Horn River and Cordova basins contain from 4 to 15 Tcf of recoverable contingent resources, while the Liard basin contains from 5 to 23 Tcf of recoverable contingent resources. The company expects to invest $400 million in the Horn River Basin in 2012, or $60 million net to the company after the drilling carry.

Quicksilver Resources - Horn River Shale Conference Call Commentary - Q3 2011

Quicksilver Resources (KWK) disclosed additional information during a recent conference call on its third quarter of 2011 activity in the Horn River Shale:

“In Canada, most of our efforts and budget have been directed to the Horn River Basin project, where we now have drilled a total of 8 horizontal wells into the Muskwa and Klua formations. We have 4 wells online, which are exceeding our early projections, with the best well projected to have an EUR of close to 20 BCF. Quicksilver will be drilling an additional 4 wells this year before the year end and will plan to complete these by the end of the first quarter of 2012.”

“These 4 wells will be drilled on 1 central pad and connected to sales. At this point, it looks like we have a high BTU gas well in the 1 Exshaw well we have completed. But we have only completed approximately 30% of the lateral. The well is shut in currently and we intend to complete the remaining lateral section after winter operation. We have recovered just 20% of the frac load, thus far, so we don't yet have a clear picture of what this well can do.”

“We continue to make progress on the infrastructure side of the Horn River, and recently, we executed a memorandum of understanding with KKR, to team up on a joint venture to develop and build a Midstream business in the basin. The proposed deal structure, which is scheduled to close in the next several weeks, provides for a $125 million upfront payment to Quicksilver and financing for buildout of processing and gathering assets in the initial stages of the business.”

“Quicksilver will contribute its midstream assets that are already in place, which comprised a 20-mile, 20-inch pipeline and compression. The JV expects to complete the first train of processing facilities in 2014, which will require approximately $120 million of capital. Each party will own a 50% interest in the entity and Quicksilver will operate.”

Source

Quicksilver Resources - Horn River Shale Update - Third Quarter of 2011

Quicksilver Resources (KWK) progressed on the development of the company’s properties in the Horn River Shale Basin during the third quarter of 2011. 

Quicksilver Resources drilled eight horizontal wells into the Muskwa and Klua Shale formations and has put four wells onto production.  These four wells have produced an average of 18.4 million cubic feet of natural gas per day through the end of October 2011.  This was 14% above the 16.4 million cubic feet of natural gas per day that was estimated in the company’s reserve report released at the end of 2010.

Quicksilver Resources reported that it needs to drill two more wells to convert almost all of its 130,000 net acres into ten year exploratory licenses.  The company plans to drill four more horizontal wells into the Horn River Shale during the fourth quarter of 2011, and will complete these wells in early 2012.

Quicksilver Resources is also currently testing its first horizontal well into the Exshaw oil formation.  The company did not specify when it expects to release results from this well.

Nexen Reports On Horn River Shale Production And Costs

Nexen (NXY) has successfully reduced its cost to drill and complete Horn River Shale wells since the company first started in 2008.  The company has reduced its capital used per fracturing stage by 46% from 2008 to 2009, and 65% from 2009 to 2010.

Nexen is producing from an eight well pad in the Horn River Basin and reported that the average well produced 11 million cubic feet of natural gas per day during the first thirty days of production.

Canadian Government Releases Horn River Shale Assessment

The National Energy Board of Canada and British Columbia Ministry of Energy and Mines released an updated assessment of the potential natural gas resources located in the Horn River Basin.

The report is entitled “Ultimate Potential for Unconventional Natural Gas in Northeastern British Columbia’s Horn River Basin” and estimates that there is 78 trillion cubic feet (Tcf) of marketable natural gas resources located in the Horn River Shale.  The report gave a low estimate for the Horn River Shale of 61 Tcf and a high estimate of 96 Tcf.

The full report is located here.

Nexen - Horn River Shale - Q1 2011 Update

Nexen (NXY) issued an update on its first quarter of 2011 operational activity in the Horn River Basin, where the company has 300,000 net acres under lease here and in two other nearby basins.

Nexen recently finished drilling and completing eight horizontal wells from a single pad and reported that the production was meeting expectations. 

Nexen is currently drilling a nine well pad and hopes to have the wells on line in the fourth quarter of 2011.  The company drilled one of the wells in 14 days, a record for the Horn River Basin.  

Nexen plans to drill an 18 well pad in the summer of 2011 and estimates that these wells will come on line in the fourth quarter of 2012. The company estimates that its Horn River Shale production will increase by 60 million to 120 million cubic feet per day of natural gas equivalents per day over the next two years.