As recently announced, XTO Energy is putting their Kaybob, Smoky and Resthaven (Montney/Duvernay) assets up for sale. Within data rooms, one asset that is difficult to value is water management infrastructure (eg. water storage reservoirs, water wells, large water volume term licenses). Given oilfield cost inflation pressures and high completion costs within the Montney/Duvernay, the replacement value of constructing large 500,000+ m3 water storage pits to establish water security is very significant. While water supply was once viewed as a small portion of a completion AFE, getting a firm handle on your water management costs today can be a key component of play economics.
As we review XTO’s more developed Kaybob asset, we note that there are two strategically placed water storage pits within separate watershed basins (Athabasca River & Peace/Slave River Basins). Under the Water Act, transfer of water between major river basins in Alberta is not permitted and XTO’s strategically placed water storage/intakes has helped them gain a strategic advantage. As we see in Figure 1, XTO’s resource play water strategy includes an active 1.3 million m3 term license (October 2025 expiry) from the Athabasca River which could potentially supply a 25 – 30 well program. A second active multi-year term license (expires 2028) for 1,000,000 m3 within the Peace/Slave River basin could supply an additional 15 – 20 wells per year.
A similar situation should be applied to XTO’s more undeveloped Smoky asset which is also blessed with shallow groundwater resources. The inherent variability of aquifer yields within West Central Alberta are primarily governed by secondary porosity (natural bedrock fracturing) in conjunction with regional recharge. The groundwater supply potential has hardly been developed within XTO’s Smoky lands with similar water intensity demands of 40,000 – 60,000 m3 per Montney well.
Connate Water Solutions is a specialized hydrogeology company and we track water sourcing demand for drilling, completions and water management trends within Alberta and Texas. As consolidation of the industry continues, we believe the demand for customized water management solutions will continue to soar!
Contact us today to learn more and discuss the Smoky or Resthaven areas!
LINK TO CONNATE WATER SOLUTIONS INC. 2021 UPDATE VIDEO: https://www.youtube.com/watch?v=bJ3hXsUpmXI
Let’s start a conversation about your Water Strategy?
Geoff Kovacik M.Sc. P.Geo.
Connate Water Solutions Inc. | 204-1001 1st St SE | Calgary, AB T2G 5G3
Connate Water Solutions LLC. | 18911 Hardy Oak Blvd | San Antonio, TX USA 78258