Pipeline Online: Royal Helium completes well

Saskatchewan’s Energy News

Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca. Articles are used with permission.

Royal Helium completes Climax-4 well, intends future multi-leg well, multi-branch horizontal wells.

By Brian Zinchuk
www.pipelineonlince.ca

SASKATOON –Royal Helium Ltd. announced on Feb. 16 that the hydraulic fracture program at the Climax-4 vertical well was successful in opening the Nazare formation and tested 0.57 per cent helium over the 100-meter interval. The helium grade is consistent with initial (DST) tests and commercial grades in the region.

The company has recently focused on completing its current wells as opposed to new drilling.

Royal will now advance Nazare to the next stage to maximize the development of what it calls “this particularly thick and large pay zone.” Royal will begin conducting simulation modelling and evaluate development scenarios based on multi-stage, multi-leg horizontal frac completions programs. Follow-on development of the Climax Nazare reservoir will depend on the results of these simulations but will likely include drilling and hydraulically fracturing multi-leg/multi-branch horizontal wells.

John Styles, chair of Edge Engineering, and completions and production consultant to Royal said in a release, “The open hole, hydraulic fracture treatment on a 100-meter interval (vertical well) at Climax-4 in December 2021 performed better than projected. Royal’s next step in evaluating the potential of the unconventional Nazare play is to use the permeability, fracture conductivity and flow information gathered to use as inputs to into a three-dimensional finite element simulator to evaluate development scenarios based on horizontal drilling used in combination with multi-stage hydraulic fracture technology. The analogies for this unconventional play type include the low permeability Montney horizontal multi-stage frac gas plays in Northeast British Columbia/Western Alberta, now one of the largest developed natural gas fields in the world. The scenarios Royal plans to simulate will include variations on number of horizontal legs, leg length and number of stages for the hydraulic fracture treatment.”

Royal Helium president and CEO Andrew Davidson said, “Sampling grades of helium consistent with the current commercial production grades in Saskatchewan is a great development at Nazare where the pay zone is 10-20 times thicker than conventional helium reservoirs found to date. With these results in hand, we are excited to proceed to reservoir and production simulation modelling and look forward to the remarkable potential of drilling and developing the largest helium reservoir ever found in Saskatchewan. Along with the ongoing development of the Nazare, our crews and technical teams are also advancing the conventional helium reservoirs at Climax and Ogema and preparing for our spring drill program.”

Despite US$90 oil, Saskatchewan’s two largest oil producers have dramatically reduced drilling activity during what’s usually the busiest time of the year.

ESTEVAN – February is typically the busiest month of the year for oilwell drilling in Saskatchewan, but the largest players have dramatically reduced their programs compared to previous years, even though oil prices are now in the US$90/bbl. range for benchmark West Texas Intermediate oil. According to Bloomberg, Western Canadian Select (WCS) was US$76.45/bbl. and WTI was US$89.50. Both benchmarks were very close to its highest points in at least 7.5 years.

Drilling rig counts are a key leading indicator of activity in the industry. You don’t frac a well, complete it, produce it, truck or flowline its product, or perform maintenance on it unless that well is drilled first.

According to RiggerTalk.com, publisher of the Canadian Association of Energy Contractors (CAOEC) rig data, as of Feb. 9, there were 31 drilling rigs working in Saskatchewan, either active or moving. The CAOEC website noted there were 226 active rigs in Canada. Alberta had 174, British Columbia had eight, Manitoba had six, and there were seven listed as “other.” There were 463 land-based drilling rigs registered across the country, a little over half of what it was a decade ago. Two offshore rigs were also listed.

Notably, Saskatchewan’s two largest oil producers, Cenovus Energy and Crescent Point Energy, have substantially diminished drilling programs compared to what they ran even during the darkest days of the oil downturn, prior to the COVID-19 pandemic.

During the period of January 2015 to March, 2020, Crescent Point would frequently employ over 20 rigs in Saskatchewan around this time of year. Currently, they only have five, three in southeast Saskatchewan, and two in southwest Saskatchewan.

Last year Cenovus bought Husky Energy. Husky had historically been Saskatchewan’s largest oil producer for decades, used to run 10 or more rigs in northwest Saskatchewan prior to their shift away from cold heavy oil production with sand (CHOPS) and towards thermal development. However, prior to COVID, they would still typically run around six rigs in this time of year, drilling for their numerous thermal projects. Each of those cookie-cutter SAGD projects, all-in, cost between $250 and $350 million. With just one rig going, Cenovus has effectively paused most of its drilling development for much of the area, compared to Husky’s previous activity levels.

Rundown

In southeast Saskatchewan, 13 rigs were working. Adonai was working south of Carnduff. Spectrum was south of Oxbow. Tundra had one rig at Roche Percee. A cluster of rigs were working 10 kilometres east of Benson, at Woodley. They included Midale Petroleums, Surge, Aldon Oils and Whitecap Resources. Whitecap Resources also had rigs at Lampman and in the Weyburn Unit.

Allied Energy Corporation had a rig just west of the Weyburn Unit.

Crescent Point Energy Corp. had rigs at Forget, Viewfield and southeast of Ratcliffe.

Moving over to southwest Saskatchewan, Crescent Point also had two rigs in the region, with one north of Shaunavon and a second between Eastend and Frontier.

North American Helium showed a rig working southwest of Mankota. Weil Helium has an idle helium processing facility southeast of Mankota.

Whitecap also had a rig working due north of Gull Lake.

West Central Saskatchewan had 11 rigs going. Baytex had rigs at Elrose, south of Superb,

Teine Energy had rigs at Plato, north of Kindersley, and Hoosier.

Whitecap had rigs working at Plenty, south of Dodsland,

Strathcona Resources had one rig northwest of Kelfield.

Ish Energy had a rig working within spitting distance of the Kindersley weigh scales, west of Kindersley.

Longshore Resources LTd. had a rig just south of Evesham.

Northwest Saskatchewan had just three rigs working. Baytex had one rig south of Maidstone, while Canadian Natural Resources had one rig northeast of Maidstone.

Cenovus, which bought Husky last year, had just one rig working south of Edam. During most of the oil downturn until 2020, Husky used to operate around six rigs in this region prior to the COVID-19 pandemic.