Canada's Permian of the North Roused by Cheap Gas Drilling

‘Costs Lower’

“The Montney has evolved into a world-class condensate play, and with a relentless focus on innovation and efficiency, we have driven costs lower and increased well productivity,” Averill said.

Even with those gains, Encana probably will lose the top spot to bigger increases by Seven Generations, according to Wood MacKenzie. ARC Resources will be No. 3, followed by Royal Dutch Shell Plc.

While the Montney is a long way from the energy-hungry U.S., it is close to Canada’s biggest consumer of gas and condensate -- Alberta’s oil sands mines and wells. The industry uses gas to loosen the hard bitumen rock, as well as to heat water used in the process. Condensate is blended with viscous, raw bitumen so it can flow freely through pipelines. Oil sands production by 2020 could reach 3.4 million barrels a day, up 34 percent from 2015, according to Canadian Energy Research Institute projections.

Montney producer Kelt Exploration Ltd., which planned at least three new wells, is the best-performer this year among 27 companies tracked by the S&P/TSX Composite Oil & Gas Exploration & Production Index. Its shares are up 6.5 percent, while the index is down 14 percent.

The drilling revival in the Montney has been a lifesaver for Grimes Well Servicing, which increased its winter workforce to 80 from 50 a year earlier. While demand isn’t strong enough yet to raise service rates that were cut 20 percent during the slump, executives at the company are glad for the business.

“Its an improvement over the last couple of years, no doubt about it,” said Mackey, the company’s accountant.

To contact the reporters on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net; Kevin Orland in Calgary at korland@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Steve Stroth, Lynn Doan.