Shallow Gas

The Plains Belly River and overlying Edmonton Horseshoe Canyon shallow gas zones cover more than 1,200 sections of Compton held land in southern Alberta.  The entire 900 metre gas-charged section is comprised of multiple Belly River sands, silts, shales, and coals, overlain by the Edmonton/Horseshoe Canyon Coals that similarly include sands, silts, and shales.  In 2007 we drilled a total of 226 wells through the Edmonton Horseshoe Canyon Group targeting the Belly River section.  Going forward, we will focus on downspacing, development drilling, and recompletions in order to establish a resource manufacturing and processing model designed to maximize production.  

 

Plains Belly River and Edmonton Coal Bed Methane

At December 31, 2007, we were producing approximately 55 mmcf/d from 630 Belly River and Edmonton coal bed methane wells.  With 1,200 sections of land, at four wells per section automatic downspacing, this translates to a significant multi-year, low risk drilling inventory on which to grow our company.

 

During 2007, we took full advantage of the four well per section reduced spacing initiative for our Belly River drilling program.  Wherever possible, our shallow gas wells were drilled in batches in areas close to existing infrastructure.  This initiative enabled us to significantly reduce our 2007 spud to rig release and rig release to on-stream times to 2.8 days and 99 days, respectively.  Drilling results at our southern Alberta Belly River play were 100% successful in 2007, and we made particularly notable advances in the Brant, south Hooker, Ghost Pine, and Vulcan areas.  Using our 1,200 km2 of proprietary 3D seismic, coupled with detailed geological mapping, has allowed us to model the Belly River sands for consistent, repeatable success.

 

At Brant, our 3-5-17-27W4M compressor station became fully operational in November 2007, providing us the requisite horsepower needed to bring on eight new 100% owned Belly River wells.  These wells were producing a combined four mmcf/d at year end.  The average production rate of these wells is approximately double the 30 day initial production rate of a typical Belly River well.  Our 2007 drilling targeted longer term producing wells such as Compton Brant 00/07-05-017-27W4M/0 and Compton Silver 00/13-32-016-28W4M/2.  These two wells are producing 570 and 860 mcf/d, respectively.  In 2008, we will aggressively follow up similar trends into south Hooker and south Brant. 

 

In the Ghost Pine area, we expanded our 15-11-30-23W4M compressor station from eight to 12 mmcf/d in 2007.  A total of 62 Belly River and Horseshoe Canyon coal wells are currently producing 12 mmcf/d at Ghost Pine.  We have 14 standing gas wells that are scheduled to be tied-in in the first quarter 2008.  We have recently reprocessed our 3D seismic in this area, and in 2008 we plan to use this seismic to replicate the Ghost Pine Belly River gas well 02/07-10-030-23W4M, which had an initial production rate of 1,300 mcf/d, and the 00/05-01-030-23W4/4 Coal Bed Methane gas well, which had an initial production rate of 74 mcf/d.

 

Finally, further south in the Vulcan area, we placed five Belly River gas wells drilled by Stylus Energy on production in late 2007.  In aggregate, these wells were placed on production at 2.2 mmcf/d.  These wells are the southernmost Belly River gas wells producing in Alberta.

Our total compression capacity for southern Alberta low pressure gas is 95 mmcf/d.  Compton had 27,000 horsepower of installed compression dedicated to the play installed and running at year end 2007.

 

In 2008, we plan to drill 275 Belly River wells, focusing specifically on the top tier prospects identified by our technical teams.  We have allocated approximately $180 million in our budget to this area, with $5 million ear-marked specifically to continue with identification of well locations and licensing such that as industry conditions improve, we can readily ramp-up activity.  We estimate that roughly 40% of our 2008 Belly River wells drilled in the latter part of the year will not come on production until early 2009 and will, as a result, take full advantage of the lower shallow gas royalty rates effective for 2009.

 

Our 2008 southern Alberta plans also include an eight well per section pilot project.  Additionally and following on our Deep Basin deeper target success, we will use extended reach drilling with multi-stage fracturing techniques.