Calgary鈥� Raging River Exploration Inc. has been one of the most active companies in Saskatchewan when it came to drilling over 2015-2016 winter season, typically with two rigs working hard in the Kindersley area.
Raging River is headed by president and CEO Neil Roszell, who was honoured last year with the 2015 Saskatchewan Oilman of the Year award at the Saskatchewan Oil and Gas Show in Weyburn. The company was Saskatchewan鈥檚 seventh highest oil producer in 2015, producing an average daily production of 12,188 barrels of oil per day within the province. The company鈥檚 production, totalling approximately 16,500 boepd now (90 per cent oil), was almost exclusively in Saskatchewan until a December 2015 acquisition of 2,500 bpd in the Alberta portion of the Viking.
Pipeline Newsspoke to Roszell on March 14 about Raging River鈥檚 operations and activity.
Roszell has a long history building junior oil producers in Saskatchewan. Raging River is the third company he has been CEO of, and it is the fifth startup company for the management team. Previous ventures include Wild River Resources Ltd. and Wild Stream Exploration, both focused in the Shaunavon area, but the latter had begun to work in the Viking play. Continuing with the river-theme based names, Raging River shifted focus to the Viking play in west central Saskatchewan, near Kindersley.
The Viking is a light oil play, and was developed extensively with vertical drilling after its discovery in the 1940s.
A typical Viking well for Raging River has a true vertical depth around 650 to 700 metres, and a measured depth of around 1,300 metres. That makes up for a roughly 600 metre horizontal lateral.
鈥淭ypical drill times are two-to-three days. Average initial production for the play is about 55 barrels of oil per day per well. Average spud to on-stream time, depending on the operator, varies from 20 to 30 days,鈥� Roszell said, adding any associated gas would be in addition to that 55 barrels of oil per day average.
with it, but some areas, like Hoosier in the western side and Lucky Hills in the middle, have a higher component of gas.
Roughly six years ago geologists from the Ministry of the Economy started discussing developments in the 鈥渉alo鈥� around the vertically-developed Viking play. This was the area surrounding the decades-old development that had not been pursued, as it was uneconomic at the time.
One of the first stories Pipeline News did back in the summer of 2008 was on Reece Energy, which at the time was pioneering horizontal drilling in the Viking play. Reece is a company Roszell said he was very familiar with.
Roszell said, 鈥淭he first drilling they did was non-halo drilling. They went in horizontally, drilling where it had already been developed. That was really the key to unlocking the play and letting the industry understand there was incremental oil not 小蓝视频 recovered with conventional technologies. That was step one.
鈥淪tep two in the play was moving the cost structure down. Reece鈥� initial foray was around $1.5 million, on stream, per well. The first steps working towards the halo of the play was getting the costs down. Step two got costs down to about a million dollars per well. We were able to toggle it down another 10 per cent to $900,000 per well. That was right up to Q1 in 2015.
鈥淚n that evolution we were also able to improve technology; better frac design, more sand, more fracs. That鈥檚 when the real halo development started happening.
鈥淭he first halo development we did, and we were one of the first halo drillers, was Q3 2012. It was really exciting for us. We stepped out about six or seven miles from existing vertical production and were able to successfully prove the productivity.
鈥淲hat we found was the net pay, which is a direct correlation to the original oil in place, was quite similar, a bit smaller, than the heart of the pool. The permeability, the ability of oil to flow, was materially different in the halo. The horizontal fracking is what unlocked that. If you go back to 1944 or 43, the companies never stopped drilling due to not finding oil, they stopped drilling because of not finding economic oil with the technology at the time. That鈥檚 really the change, and doubled up the hydrocarbons in the area from say what the Saskatchewan Crown carried a number of years ago to today,鈥� Roszell said.
Raging River has locked up a large portion of that halo. 鈥淚 think we鈥檙e the largest landholder on prospective Viking oil acreage. That鈥檚 really how we built this company. We certainly have had a portion of our lands in the heart of the play,鈥� he said, but it was a little hard to get land from some of the other oil companies.
鈥淲e鈥檝e been concentrating on the halo development and expanding the play boundaries,鈥� he said.
Province-wide, Crescent Point has been, by far, the leader in drilling. But Raging River, with a consistent two rigs working most of the winter season, has actually been one of the more active drillers.
鈥淚t鈥檚 the relative on-stream costs per well. We鈥檙e just slightly below $700,000 per well, so we can still make the economics come around, to a degree, at $35 or $40 WTI. So we鈥檙e still drilling, not to the same level as we did last year. We still have plans for 185 wells this year, of which we鈥檝e done about 60 in the first quarter. We would plan to be pretty steady, running two drilling rigs through the balance of the year once we get back to work in about the June timeframe,鈥� said Roszell.
Raging River is often producing to single well batteries. Approximately 65 to 70 per cent of their production is trucked. That means substantially reducing loads, but increasing the number of trucks, to maintain transportation during spring breakup. Roszell said they have a strong relationship with local rural municipalities in that regard.
They also add incremental storage to act as a buffer when roads are wet, allowing the company to truck it out quickly when the roads firm up.
鈥淭here will be a whole evolution in this play. It鈥檚 going to come from proving we can infill drill in the verticals to halo drilling. The next phase of activity is not only continuing development, but waterflood implementation on a large part of the resource.
With waterflood, you鈥檒l have the build out of infrastructure and the tying in of wells and all that comes with that,鈥� he said. 鈥淚n a 10-year vision, you would see most of the production tied in.鈥�
Indeed, Raging River has one long-term waterflood they bought from Enerplus, and six other waterfloods of various sizes, from half a section to a full section.
Raging River鈥檚 March 2016 corporate presentation shows their previous pattern of drilling, with 16 wells per section (eight vertical wellbores and two-leg horizontals).Approximately eight sections have been done by that. The new model shows 22 wells per section, all single legs. These would be drilled on four well pads (two going one direction, two going the other). Two wells would run perpendicular down the centre of the section, running just beyond the toes of the horizontals. This pattern is in pilot stage right now. Roszell things that is the correct well spacing to make the most of the play. 鈥淭hat鈥檚 a work in progress,鈥� he said.
The company is also looking at running longer laterals. Previous 1,300 metre wells hadn鈥檛 proved to be feasible, but with the improvements in drilling and fracturing, for a few extra hundred thousand dollars per well, they may work now. If that comes to pass, it would affect the 22-well per section model.
鈥淭his may open up further parts of the halo,鈥� he added.
Unlike most oil company presentations you might come across, Raging River lays out a ten-year plan and projections. That鈥檚 a switch even for Roszell, whose management team had subscribed to the build-and-sell model of development for junior oil companies.
For instance, he noted, 鈥淲e certainly have the intention of waterflooding a large portion of our acreage over the next 10, 15 years.鈥�
Regarding 10 year projections 小蓝视频 rare, he said, 鈥淵ou wouldn鈥檛 have seen anybody making that project. That鈥檚 why there鈥檚 a lot of investor confidence in our story. We鈥檝e made longer term projections. They understand where our story is going. It provides a lot of comfort in what they鈥檙e investing in.鈥�
So is the build-and sell model of junior companies by and large dead?
鈥淚 would say it鈥檚 stalled for now. I wouldn鈥檛 say dead. I never say anything鈥檚 dead in this industry, because things have a tendency to re-invent themselves.
鈥淚 would say the capital structure had moved such that companies with larger capital structures are easier to invest in for larger institutional investors. We obviously need capital to invent these smaller companies. But I think there will be a realm where we get strengthening commodity prices, where the junior cycle comes back. From a Raging River perspective, sure, we鈥檝e got a longer term vision. It鈥檚 a great company, and we need to have a plan in place to execute and create shareholder value for the long-term.
鈥淚t鈥檚 been a change in philosophy and I think it鈥檚 been pretty well-understood by the investment community that we have a long-term vision on this as opposed to the exploit-and-sell model that we used before,鈥� he said.
While the Kindersley region also has the heavy oil Birdbear formation, Raging River is not really interested in it in the near term, after having done some testing.
As for the oilman of the year award, he said it鈥檚 as much a reflection on the company as the individual. 鈥淚 don鈥檛 deem that as much as a personal award as a corporate award.鈥�
The company was the 2014 the Explorers and Producers Association of Canada Top Junior Producer. On March 11, it was received that honour again, as the 2016 Top Junior Producer.
Having grown up in Saskatchewan and graduated the University of Regina鈥檚 industrial systems engineering program, Roszell鈥檚 focus has primarily in this province in recent years. Asked why, he said, 鈥淚t鈥檚 been a favourable, stable political regime for a multiple years that has allowed us to build and execute our business without government interference. They鈥檙e kind of our partners. The landowners,聽 in general, have been a lot more favourable to oil and gas development. And the speed of execution in terms of well licensing has been quicker in Saskatchewan. I maintain that鈥檚 still the case today.
鈥淎s we evolve, whether we add piece in Alberta or additional pieces in Saskatchewan, it鈥檚 got to be in the context of where that next value creation can be for our stakeholders within this.
鈥淚f I was starting a brand new company again, I would certainly be more biased to starting a company in Saskatchewan, because it is more favourable environment to get rolling in, for sure,鈥� Roszell concluded.
