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Kaybob Montney Oil Pool Development

Through 2013 Trilogy built on the success it achieved in the previous two years with the continued development drilling of the Kaybob Montney oil pool. In 2010 through 2012, Trilogy drilled a total of 47 wells into the pool, followed by an additional 31 wells in 2013, with plans to drill and complete an additional 30 wells within the existing pool boundary in 2014. The success of the pool development is based on the application of horizontal drilling and multi-stage fracture completion techniques in a pool that had been partially delineated over the previous 10 to 15 years using vertical drilling and completion technology.

In 2013, Trilogy spent approximately $141.5 million to drill, complete and tie-in 31 wells to find 8.1 MMBoe of proved reserves and 10.0 MMBoe of proved plus probable reserves. On average, the year’s drilling and completion program added 269 MBoe of proved reserves per well (68 percent oil reserves) and 334 MBoe per well of proved plus probable reserves (67 percent oil reserves). This represents a finding and development cost of $17.47/Boe for proved reserves and $14.15/Boe for proved plus probable reserves. Over the past three years, Trilogy has only booked reserves to the 77 wells that have been drilled and competed within the Kaybob Montney oil pool, with average proved reserves per well of 310 MBoe (66 percent oil reserves) and average proved plus probable reserves per well of 388 MBoe (65 percent oil reserves).

In 2013, production from the pool averaged 11,653 Boe/d (69 percent oil and natural gas liquids production), with operating costs of $7.12/Boe and operating netback of $46.86/Boe. As of year end 2013, the pool has produced approximately 6.3 MMBbls of oil from the horizontal oil wells drilled into the pool. Under the current royalty regime, each well qualifies for royalty relief, where Crown royalties are reduced to 5 percent on the initial 80 to 90 MBoe of production. Historically, the costs of approximately $4 million to drill, complete and tie-in are usually paid out in less than one year
of production.

Production in 2013 was less than expected due to infrastructure issues at the Kaybob North Gas Plant and some issues related to the completion technique used in the wells drilled in the first half of the year. As the pool gets further developed, Trilogy anticipates that wells towards the pool boundary will have lower productivity and reserves than the initial wells drilled in the center of the pool; however such wells are expected to have rates of return in excess of 100 percent.

Trilogy has endeavoured to remove operating bottle necks and reduce downtime in the pool to ensure that production flows more consistently for 2014 and beyond. Trilogy is becoming increasingly more confident in its ability to forecast production and reduce operational issues as the base pool production grows and stabilizes with time. Trilogy has budgeted $135 million to be spent on the pool in 2014 to drill 30 additional wells and grow production to an estimated 12,000 Boe/d for the year.