CNRL Karr Asset Review – BOE Intel

For our next asset review article, we’re focused on an asset operated by Canada’s largest E&P: Canadian Natural Resources Limited. We were spoiled for choice when narrowing in on a productive CNRL asset for this post; from the Montney to the oil sands and lots in between, CNRL has a cornucopia of high quality oil & gas projects. With the Deep Basin and the Alberta Montney being the talk of the industry lately, however, we wanted to focus in on the company’s position in this area. CNRL considers the Deep Basin to be among its top conventional plays, and the company’s assets at Karr are an important piece of the puzzle. With Karr having been a focal point in numerous high profile M&A transactions from the past year (recall Paramount’s recent asset sale as well as Crescent’s Point’s acquisition of Hammerhead and Spartan Delta’s Alberta Montney assets), we thought it was worthwhile to examine CNRL’s footprint in this major producing region.

Karr Overview

The Karr field is right at the intersection of the Deep Basin and the Alberta Montney, and it has been a target of some major Canadian E&Ps. Mineral rights ownership in the region is highly complex, and as such it is difficult to illustrate with a two-dimensional map on account of split ownership of producing formations at the same geographic point. In fact, most of the major recent rights transfers at Karr involved agreements that overlap geographically with rights held by CNRL. With that said, examining a map of the active wells at Karr gives an idea of the current situation. CNRL is a good sized producer in the area, but Karr is also home to major developments from ARC Resources, Crescent Point and Paramount Resources among others. The company’s Karr area mineral rights often extend from the surface to the base of the Bluesky formation, which results in the company drilling wells with different characteristics (usually Dunvegan wells) compared to other companies in the area that often focus on the Montney. CNRL’s Karr assets also boast a robust pipeline network and an operated sweet gas plant with a capacity of 120,000 mcf/d.

Production Profile

CNRL’s Karr assets accounted for just under 11,700 BOE/d in January 2024 gross licensed production. Notably, the Karr asset’s production was roughly 58% liquids with a sizeable oil portion. CNRL’s production at Karr has trended up in the longer run, although its gas output seems to be much more predictable than its oil production (which has seen several protracted troughs). Interestingly, CNRL’s oil production at Karr hit yearly floors in February for 3 of the past 5 years. Whether this pattern is coincidental or the result of turnaround activity, it’s worth keeping in mind with full February 2024 production data set to release any day now.

Drilling & Licensing Activity

CNRL has drilled 29 wells at Karr since 2020, and virtually all of the wells target the Dunvegan producing formation. The company’s most active drilling year in the area was 2022, which saw the company spud 11 wells at Townships 066-04W6 and 065-03W6. The company has been focused on the northwest corner of its Karr land position for the past few years, although the company has historically licensed a large number of wells in the southeast portion as well. The map below, which showcases the company’s Karr licences and spuds since 2018, illustrates CNRL’s track record of productive horizontal well pads. We’ve also prepared a chart showing the asset’s production by spud year since 2018. With 10 spuds in 2022 and 11 spuds in 2023 compared to 5 in 2021, 3 in 2020, 2 in 2019 and 9 in 2018, the company appears to be demonstrating renewed interest in its Karr assets.

While the company has not drilled any wells at Karr in 2024, the company has been licensing at Township 065-03W6. It appears likely that CNRL’s 5 licences at Karr in 2024, all of which were obtained in March, are part of the same pad. The company’s closest pad is a 4-well location just to the north that came on production in early 2019. This pad produces around 200 BOE/d now, but its production peaks back in 2020 exceeded 2,000 BOE/d. It will be interesting to see whether the five 2024 licences result in any drilling activity this year.

Top Wells by February 2024 Production

In examining CNRL’s top 10 wells at Karr, we notice that they have a lot in common. All 10 target the Dunvegan producing formation, and in fact this is true of the top 20 as well. This stands out compared to other major producers in the region, who typically target the Montney which is at a much deeper vertical depth. The oil-weighting of production from these wells is between 60% and 80%. For a Petro Ninja list with these ten wells, click here.

*Raw gas volumes used as marketable gas volumes are not yet available for February

CNRL’s Karr assets have received consistent attention from the company, and industry consolidation in the area proves that Karr is worth keeping an eye on. To keep tabs on the latest developments at Karr, check out BOE Intel.