The Horseshoe Canyon in Alberta – a coal trend offering rich, long-term CBM production
A leading producer in unconventional gas resources, Ember Resources has an operational base that is concentrated in three core areas within the Horseshoe Canyon coal trend located in Alberta. This land base covers more than 171,000 acres. With 550+ wells in its inventory, Ember can continue CBM drilling for a minimum of four more years.
In addition to the predictable, long-term CBM production of Horseshoe Canyon, Ember is targeting this rich Alberta play for many other distinct advantages:
- Natural gas starts to flow immediately after drilling, and wells can produce for 25 years or more.
- Using the same wellbore, CBM production can be commingled with conventional gas found in different geological horizons, thus adding production at little additional cost.
- Horseshoe Canyon geology is relatively simple, which translates to low-risk, low-cost CBM drilling.
- The coal seams extend across large areas and there is virtually no risk of drilling a dry hole.
- Some wells will have better CBM production rates or recoveries but, overall, Ember drills with 100 per cent success.
- With the Horseshoe Canyon found at a shallow depth of 150 - 700 metres, CBM drilling costs are low.
- The long production life of the Horseshoe Canyon means that the economics of wells are not materially impacted by short-term weakness in gas prices.
One of the lowest-cost plays for CBM production in North America
The Horseshoe Canyon found in Alberta is one of the lowest-cost plays in North America. Ember, along with other operators in the play, has a break-even cost of $3-4 per Mcf for a typical well, which includes both capital and operating costs. In addition to a low-cost structure, Ember’s royalty burden is estimated at 7 per cent, which is one of the lowest in the industry. This enviable cost structure helps insulate against low gas prices and provides significant upside to higher gas prices.
CBM drilling inventory
In 2009, Ember expects to drill 35-45 wells. That is only a small portion of its potential. At the end of 2008, independent reserve evaluators estimated that only half of the total proved + probable + possible reserves were producing. With the land and unconventional resources, Ember has an estimated 89 Bcf of reserves waiting to be developed.
Strong reserve base
Ember’s three Horseshoe Canyon properties in Alberta provide a sound reserve and operational base to continue to grow CBM production.
- Reserve life index of 16.5 years (proved + probable + possible)
- Reserves of 180 Bcfe of gas (proved + probable + possible) established in the year-end independent report
- Net asset value estimated at $402.3 million, discounted at 10 per cent, using our independent reserve report as at December 31, 2008
- Low-cost CBM drilling, completion and tie in costs of approximately $300-400 thousand per well due to shallow depth and existing infrastructure
Three core areas along Horseshoe Canyon in Alberta
Fenn-Big Valley
Fenn-Big Valley has nearly 150 wells for CBM production with another nine wells (9.0 net) planned for 2009. Ember owns 10 MMcf/d of processing capacity in two natural gas plants and interests in a gathering system covering four townships.
Production (net 2008 average) – 4.8 MMcf/d
Land – 49,581 acres (45,737 net)
Average working interest – 92%
Acme
The Acme area was acquired as a non-producing property in 2007 and has undergone extensive CBM development. Almost 90 wells were producing at the end of 2008 and up to 36 wells (15 net) are expected to be drilled in 2009. Ember has a long-term agreement to process volumes from the Acme area through processing and pipeline infrastructure constructed by its partner, AltaGas.
Production (net 2008 average) – 5.7 MMcf/d
Land – 18,185 gross (11,991 net) acres
Average working interest – 66%
Bashaw
The Bashaw area includes properties at Buffalo Lake and Malmo, and was acquired in September 2008 through the acquisition of Cordero Energy Inc. Up to 23 CBM drilling wells (19.0 net) are planned for the Bashaw area in 2009.
Buffalo Lake had 125 CBM drilling wells (100 net) producing at the end of 2008. Ember also owns and operates an 8 MMcf/d gas plant and two compressor stations.
Production (net 2008 raw gas average) – 8.6 MMcf/d
Land – 69,250 gross acres (57,902 net acres)
Average working interest – 84%
The Malmo properties are predominately Horseshoe Canyon CBM properties. At the end of 2008, 122 CBM drilling wells (108 net) were active. Ember owns and operates infrastructure; main compressor stations, booster compressors and associated gathering systems, which generate revenue from the processing of third party gas.
Production (net 2008 raw gas average) – 8.8 MMcf/d
Land – 28,277 gross acres (24,923 net acres)
Average working interest – 88%
Investigating new areas for CBM production
Ember owns interests in two other properties that are prospective for CBM production – Bittern Lake and Donalda. Initial development of these areas is planned in 2009/2010.
Ember Resources has quickly and aggressively developed large Horseshoe Canyon projects in Alberta to create escalating growth for shareholders. And there is more to come. For more information, please contact Ember Resources today.
