Operations

While others have focused their attention on the Montney, Cardium, and Wilrich formations,
the Deep Basin & Foothills hold vast reserves of gas and oil, waiting to be exploited.

Tuku’s recent Deep Basin & Foothills Consolidation in Southwestern Alberta

  • Most recent operations by many other public and private companies are focusing to the north of Calgary, predominantly in the Deep Basin. To the south, despite the same petroleum migration and charge system, few companies are active, lowering competition for land and for the purchasing of producing assets.
  • In most of the Foothills, competition for assets and undeveloped land is very low, despite yielding some of the largest single well reserves in the basin.
  • The company has developed a business plan targeting such assets that allows for significant free cash flow generation combined with high impact drilling opportunities on low-risk drilling locations.

Attractive light oil-prone land in the Deep Basin

  • Light oil production from several Mississippian reservoirs
  • Cumulative oil production influenced primarily by regional, basement involved fault sets. Several of these wells may produce more than 500 Mbbls.
  • Producing reservoirs and nearby fractures are very similar to the foothills fracture plays drilled many times by the Tuktu Team.

The Deep Basin in the past has been a focus of large conventional reservoirs, such as the Cardium and deeper Devonian reefs, which provided Alberta with some of the largest onshore oil and gas pools in North America (e.g., Turner Valley in 1914, Leduc #1 in 1947, Pembina in 1953).

Since these early days, operators have uncovered many other conventional reservoirs; however, pool size has decreased through time. With the onset of multistage fracture stimulation in western Canada in about 2011, operators were able to exploit very low permeability reservoirs, thus extending the production capability of the basin which has more than offset the declining conventional reservoir production. As the technology progressed, operators have become very efficient at such drilling and completion strategies; however, now, the technology is widespread, and it seems that one operator cannot be held above another by their knowledge and unique skill set. Success in a particular play is measured by the underlying geology, appropriate mix of producing liquids yield and gas volumes, and project scalability such that initial high production declines can be offset with continued drilling. Moreover, all of this must come with the lowest possible production costs.

The Tuktu team’s approach is unique amongst the many current producers that focus on unconventional operators. Tuktu has the experience and skill necessary to exploit complex, highly fractured foothills reservoirs that have, in the past, yielded some of the most prolific wells in the basin. Examples of this exist in the Waterton gas field where individual wells have yielded near ½ Tcf, and the foothills Stolberg field will likely produce over 5.5 million barrels of light oil (both fields were owned and operated by current Tuktu team members in the past; the Stolberg field was also discovered by current team members, (Figures 1,2,3).

Figure 1. Stolberg Foothills light oil pool, location cumulative oil production

Figure 2. Cross section through the Stolberg pool

Figure 4. Pincher Creek structure. Light sweet crude is currently free flowing from a single vertical well. This reservoir is very similar to the Cardium at Stolberg, though deeper and significantly higher initial reservoir pressure.

The team believes that the Pincher Creek Structure (Figure 4) is analogous to the Stolberg fractured Cardium discovery.

In this area, deformed, porous Jurassic and Cretaceous reservoirs are light oil-charged that free-flow from a single deviated well. As at Stolberg, the discovery deviated well was fracture-stimulated and had an initial production rate under pump of only about 30 bbls/d, while cumulative production from offset HZ wells yielded, in some cases, more than 300,000 bbls. The single producing well at Pincher Creek seems comparable in terms of initial production and in a similar structural position, thus HZ drilling at Puncher could yield comparable results.

Farther west, Cretaceous reservoirs are generally more gas charged, and Tuktu Resources plays in contrast to the foothills type producers focus on low permeability reservoirs that requires costly slickwater fracture stimulation to liberate gas and liquids. Due to this consistent development approach, these plays are highly competitive, resulting in increased land prices, gas processing costs, and associated field services. The Foothills require a particular technical skillset to exploit, one that has not been readily developed by industry, due to a focus on resource plays and to gradual workforce attrition of those that have worked the foothills fields in the past. Despite better average foothills single-well reserves (Exhibit 1) than in the deep basin resource plays, the resource play “manufactured approach” has been adopted by many producers.

This basin-wide shift into resource plays has also created a technical worker exodus from certain plays, including the foothills, leaving numerous, large, conventional gas and oil reservoirs for future exploitation. The Tuktu team believes that they have assembled 4 such opportunities across its current land base.

Figure X

Foothills

The foothills require a particular technical skillset to exploit, one that has not been readily developed by industry, due to a focus on resource plays and to gradual workforce attrition of those that have worked the foothills fields in the past. Despite better average foothills single-well reserves than in the deep basin resource plays, the resource play “manufactured approach” has been adopted by many producers.

Foothills oil and gas fields have been developed and held for decades by major oil and gas companies due to the low production decline and to the long reserve life of Mississippian and older reservoirs. While deeper reservoirs continue to produce significant gas volumes, shallower Cretaceous oil and gas zones have only recently been exploited significantly. To this end, the Tuktu team has made numerous discoveries within these shallower Cretaceous reservoirs, supporting the notion that these shallower conventional reservoirs yield as good, or better, economic returns than resource plays.

Large untapped Foothills gas and oil reservoirs have been vastly overlooked by resource-play dependent Canadian Companies in recent decades (e.g., companies with focus on the Montney, Cardium and Wilrich formations).

These resource plays focus on low permeability reservoirs with hydrocarbon charge that requires costly slickwater fracture stimulation to liberate gas and liquids. Due to this basic development approach, these plays are highly competitive, resulting in increased land prices, gas processing costs, and associated field services. This basin-wide shift into resource plays has also created a technical worker exodus from the foothills, leaving numerous, large, conventional gas and oil reservoirs for future exploitation. Most remaining foothills reservoirs remain undeveloped for the following reasons:

  1. The foothills require a particular technical skillset to exploit, one that has not been readily developed by industry, due to a focus on resource plays and to gradual workforce attrition of those that have worked the foothills fields in the past. Despite better average foothills single-well reserves than in the deep basin resource plays, the resource play “manufactured approach” has been adopted by many producers.
  2. Foothills oil and gas fields have been developed and held for decades by major oil and gas companies due to the low production decline and to the long reserve life of Mississippian and older reservoirs. While deeper reservoirs continue to produce significant gas volumes, shallower Cretaceous oil and gas zones have only recently been exploited significantly. To this end, the Tuktu team has made numerous discoveries within these shallower Cretaceous reservoirs, supporting the notion that these shallower conventional reservoirs yield as good, or better, economic returns than resource plays.

A note about resource plays:

Resource plays tend to have a per-well reserve statistical variance that is much lower than wells in the foothills, though the foothills average well reserves are significantly greater (Exhibit 1), thus creating better full-cycle economics. Another challenge with resource plays is that the per-well decline is significantly greater than in conventional foothills plays, thus production maintenance on a corporate level is much more capital intensive. These steep declines require “treadmill drilling capital” to ensure production replacement. Steep decline is a distinguishing characteristic of resource plays: multi-stage slickwater fracture stimulation is required to create permeability, but reservoir drainage is still limited. In contrast, foothills structures are typically pervasively fractured, promoting high initial production rates, lower decline, and better aerial resource drainage.

Most remaining foothills reservoirs remain undeveloped for the following reasons (Continued):

  1. Major oil and gas companies built gas processing infrastructure and production access roads in order to exploit large conventional reservoirs. Some of these gas fields contain wells that have produced in excess of 500 Bcf/each, which would support capital intensive infrastructure buildout (Exhibit 2). However, foothills drilling has been subdued for at least 2 decades, and gas egress and processing infrastructure is considerably underfilled with respect to other parts of the basin. Land costs are also significantly less, due to lack of competition, thus reducing full-cycle foothills project economics significantly.
  2. The regional tectonic shortening observed in the foothills results in structural repetition of rocks and favors intense fracture development, thus increasing natural reservoir permeability of otherwise fairly low-permeable rock. Due to tectonic shortening, reservoir rocks can be structurally repeated on top of one another (stacked vertically), allowing for reservoirs to be exploited through pad drilling which reduces industrial footprint and drill costs (Exhibit 3).
  3. Successful foothills exploitation strategy is exemplified in the Stolberg Field, central Alberta, where Cardium wells yielded exceptional economic returns. The Stolberg field is only a few sections in size, but due to the Cardium structural relief and associated intense fracture development, the field has produced more than 5 million barrels of oil to date (Exhibits 4-5). According to a TD Bank report in 2016, the Stolberg oil pool featured best-in-class economics for the Cardium of all contemporary oil and gas operators.

Exhibit 1. Cross plot if IP (initial average production rates in the first 30 days of production history) versus Total Production/well for Wilrich Formation wells in the foothills versus deep basin areas.    Geoscout data.

Exhibit 2. Cross plot if IP (initial average production rates in the first 30 days of production history) versus EUR (estimate production per well). Graph is based on a well count of 1043 wells.  Geoscout data.

Exhibits 3A-3B. Regional cross section through the foothills belts in Alberta (3A) and British Columbia (3B) showing contrasting structural style, but the result is that many reservoirs contain ubiquitous natural fractures that increase permeability, and in some cases, by several order of magnitude. 

Exhibit 4. Cross-section: Stolberg area. Only the blue horizon above has been fully developed. Red and Green stars indicate remaining un-drilled targets (green-oil; red-gas). Folding and faulting creates structural repetition and natural fracture networks superior to hydraulically stimulated networks allowing for greater production and improved aerial drainage of reservoirs.

Exhibit 5. Stolberg Field historic production and forecast: 5.6 MMbbl light oil produced to April 2023.