CORE AREA REVIEW

NORTH EAST BRITISH COLUMBIA

Umbach/Nig Creek/Fireweed 120,000 net acres (189 gross sections, 170 net sections) / approximately 26,862 Boe/d*

Horn River Basin 68,000 net acres / Boe/d not material

*Average daily production Q2 2021

Storm’s land position is prospective for liquids-rich natural gas from the Montney formation and totals approximately 120,000 net acres (189 gross sections, 170 net sections) with 90 horizontal wells (83.4 net) drilled to the end of the second quarter.

Field activity in the second quarter was minimal and included completing construction of gathering and sales pipelines at Fireweed plus work to upgrade leases and roads in preparation for a busy third quarter.  Wet weather in June and early July delayed some activity including the movement of a drilling rig to Nig Creek by approximately three weeks.

Expected field activity in the third quarter will include drilling and starting completions on four lower Montney wells (4.0 net) at Nig Creek, drilling three wells (3.0 net) at Umbach, drilling one well (0.5 net) and completing three wells (1.5 net) at Fireweed, installing inlet compression at the Nig Creek Gas Plant in early July, and starting construction of the field compression facility at Fireweed.

At the end of the second quarter, there were seven Montney horizontal wells (4.0 net) that had not started producing which included one well (1.0 net) at Umbach and six wells (3.0 net) at Fireweed.

At Umbach, produced raw natural gas contains 1.2% H2S, field compression capacity totals 150 Mmcf raw per day, and firm processing commitments total 80 Mmcf raw per day.  Second quarter gross raw gas averaged 96 Mmcf per day (Storm working interest approximately 98%) while net sales were 16,450 Boe per day (80.8 Mmcf per day, 1,515 barrels per day condensate, 1,470 barrels per day NGL).  Activity in the remainder of 2021 is expected to include drilling and completing four wells (4.0 net).

At Nig Creek (100% working interest), produced raw natural gas contains up to 0.5% H2S and is directed to Storm’s 100% working interest sour gas plant.  Gas plant inlet volumes in the second quarter averaged 52 Mmcf per day raw, sales were 10,065 Boe per day (47.4 Mmcf per day, 910 barrels per day condensate, 1,255 barrels per day NGL), and the production cost was $1.25 per Boe.  Capacity of the gas plant is estimated to be 70 Mmcf per day at current average H2S of 0.3%.  Activity in the remainder of 2021 is expected to fill the gas plant and will include adding inlet compression in July plus drilling and completing four wells (4.0 net) this summer in the lower Montney.

At Fireweed (50% working interest), activity in the remainder of 2021 is expected to include construction of a 50 Mmcf raw per day field compression facility, drilling five wells (2.5 net) and completing six wells (3.0 net).  First production of approximately 2,500 Boe per day net is expected in the fourth quarter of 2021 from five wells (2.5 net).

Recent wells at Nig Creek and Umbach continue to meet or exceed expectations:

  • The four wells completed at Nig Creek in 2020 started producing in late October, have an average calendar day IP270 of 9.5 Mmcf per day raw or approximately 1,900 Boe per day sales (8.8 Mmcf per day, 200 barrels per day condensate, 235 barrels per day NGL), and cumulative operating income from all four wells was $41 million to the end of June. Payout of the $17 million cost to drill, complete and equip was achieved in five months.

The three wells completed at Umbach in 2021 started producing in late March and early June, have an average calendar day IP90 of 5.7 Mmcf per day raw or approximately 1,080 Boe per day sales (5.1 Mmcf per day, 155 barrels per day condensate, 80 barrels per day NGL), and cumulative operating income from all three wells was $5 million to the end of June.  The cost was $15 million to drill, complete and equip.

Through a predecessor company Storm began acquiring undeveloped land in the Horn River Basin of northeast British Columbia in 2008. As at December 2020, Storm had 100% working interest in 101 sections (68,000 net acres) which are prospective for natural gas from the Muskwa, Otter Park and Evie/Klua shales. Storm has one producing horizontal well in this area with cumulative production of 6 Bcf raw which was shut in for the majority of 2019 and produced intermittently in 2020 in response to improved commodity prices in the second half of the year. A core area totaling 30 sections has been proven to be productive through drilling of this well plus two vertical wells that were completed with final test rates of 900 Mcf per day over the final 24 hours of each flow test. Lands within the 30 section area have been continued through drilling and are not subject to expiry. The remaining 71 sections may be subject to expiry over a period of several years beginning in 2021.

ALBERTA

The majority of the properties in this area were sold on July 15, 2015 and there remains only one property with no associated production or reserves.  No capital was invested on this property by Storm from 2017 to 2020 and no activity is planned for 2021.

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