Spartan Delta → Logan Energy – BOE Intel

We’re visiting Spartan Delta’s 2023 repositioning once again. Having covered the company’s sale of its Karr and Gold Creek assets to Crescent Point in a previous article, in this article we will be focusing on Logan Energy. Formed as a spin-off company in the transaction, Logan Energy is a Montney pure-play producer with around 7,000 BOE/d in gas-weighted Q1 2024 corporate production. With a mix of producing and non-producing assets and significant growth potential in one of Canada’s premier producing regions, we wanted to highlight Logan Energy’s development since the close of the spin-off transaction in Q2 2023.

Corporate Overview

Logan started out with three primary assets at Flatrock, Pouce Coupe, and Simonette. Of the 3, Flatrock is the only significant BC asset and is also the only non-producing asset as of the publishing of this article. As of May 31, 2024, the company was the licensee for 150 active wells across its assets. The largest asset in terms of active licences, rights ownership, and production is Simonette, while Pouce Coupe is the smaller of the two producing assets. One of Logan’s main strengths is its significant land base, which is made up of over 330 Montney sections. This is a unique position, as the company has indicated it has a similar-sized land base to producers with 10x as much current production.

While Logan first reported full financial and production results in Q2 2023, the company has published data that covers back to Q2 2022. With an average quarterly production of just over 6,000 BOE/d through this period, the company reported its most significant quarter-over-quarter production ramp up in Q4 2023.

The production increase described above is undoubtedly linked to a multi-quarter ramp up in capital spending upon formation of the new company. Logan’s capital spending increased from $924,000 in Q1 2023 to a peak of $40.586 million in Q4 2023, before moderating slightly to $35.182 million in the first quarter of 2024. Looking ahead to the remainder of this year, Logan has budgeted for $120 million in capital spending in 2024. Given that the company spent just under $80 million in total across Q2-Q4 2023, its average quarterly spend is on the rise. As a reminder, the company is operating at a net cash surplus and has access to an undrawn $50 million credit facility.

Simonette Asset

The Simonette asset is the company’s largest and most productive asset, accounting for just under 4,000 BOE/d in corporate production in Q1 2024. With around 174 net Montney sections and 246 net Montney locations, the company has indicated that the company’s position at Simonette is mainly geared towards the Upper Middle Montney. Most of Logan’s production at Simonette is from “legacy” wells that were spud years prior to the founding of the company, and the company has just begun to expand its development program for this asset.

Interestingly, the company has no licences at Simonette that were obtained between 2018 and 2021, and only 2 licences were obtained in 2022. As such, a large share of the company’s current Simonette production is from 2023 licences, 2 of which have come on production (see the chart below for production data from these 2 spuds – note that NGL data is missing as these wells have confidential status). The company has not spud any of its 5 licences obtained in the current year, although it appears that 3 wells at Township 062-27W5 and 1 well at Township 062-02W6 are expected to come on production in August and July respectively.

Logan Energy Post-Transaction Simonette Spud Production

Pouce Coupe Asset

Pouce Coupe is a gas-weighted producing asset with light oil exposure. Per the company’s May 2024 corporate presentation, Pouce Coupe presents exploitation opportunities focused in the Upper Montney and the Lower Middle Montney. The smallest of the company’s three assets in terms of Montney locations (102 net locations) and land position (65 net sections), the project accounted for just under 40% of Logan’s Q1 2024 corporate production. Pouce Coupe is also the focal point of the company’s current drilling program, highlighted by 6 wells that have been spud at Township 079-10W6 since Logan was founded. To access a Petro Ninja list of the recently spud Pouce Coupe wells, click here. Production data for the area has been extremely volatile and with a number of the company’s new wells given confidential status, liquids production is hidden from the public domain. Recent gross licensed production in the area may be 2,500-4,000 BOE/d depending on the month and when taking into account potential liquids from the confidential wells. March production was unusually low on account of an unplanned outage related to a pipeline failure at the Company’s 6-18 pad.

Logan Pouce Coupe Asset Production

Looking ahead, the company has allocated noteworthy resources to Pouce Coupe for 2024. This planned development includes 3 net wells drilled, completed and brought onstream. Our data suggests that the company has drilled these 3 Pouce Coupe wells already; the wells are tagged with spud dates between mid-March and mid-April 2024, although none have come on production. In addition, the confidential status tags used by Logan at Pouce Coupe mean that limited completion data is available. With that said, the company’s licensing activity here may be hinting at larger ambitions. As shown in the map below, the company has obtained 8 licences in 2024 (11 if you include the spudded licences already discussed). It is unclear what the company intends to do with these licences, all 8 of which were obtained on April 25 2024, but it’s worth keeping an eye on them.

Flatrock Asset

Flatrock is classified by Logan as an “emerging undeveloped Montney property” with 244 net locations and development prospects for gas, condensate, and oil production. Like Flatrock, this asset’s productive potential is focused on the Upper Montney and the Lower Middle Montney. With respect to infrastructure, the Flatrock asset is close to Canlin’s Boundary Lake plant as well as the McMahon plant. While the asset is a key component of Logan’s long-term strategy, it doesn’t appear as if the company has any near-term plans for kickstarting production at Flatrock. Flatrock is situated near a number of established projects including Kelt’s Oak project, Coelacanth’s Two Rivers project, and Vermilion’s Mica project. Recall that Coelacanth itself was spun out following Vermilion’s acquisition of Leucrotta Exploration, a transaction we covered in a previous article. While geographic proximity isn’t sufficient to confirm comparable productive potential, Logan has previously specified the Oak and Mica developments as comparable (in some ways) to its own Flatrock positions. Specifically, Logan has compared its Upper Montney exposure to Kelt’s Oak asset and its Lower Middle Montney exposure to Vermilion’s Mica asset. As such, we’ve prepared charts of historical production for these assets in order to shed some light on the potential of Flatrock. One key point to remember about the Flatrock asset: it’s all 100% working interest.

Kelt Exploration Oak asset production

Vermilion Mica asset production

With an outsized land position and a deep roster of identified drilling locations (particularly when looking at the Flatrock asset), Logan has the inventory necessary for substantial production growth to occur over the longer term. It’s also important to remember that Logan’s management team, many members of which were involved in Spartan Delta and its predecessors, has a track record of attaining substantial production growth through both organic development and acquisitions. This is particularly true of CEO Rick McHardy, formerly CEO of Spartan Energy, Spartan Oil and Spartan Exploration, whose leadership of these companies illustrates that he is no stranger to acquiring and expanding land positions. Logan references section-by-section land position augmentation in its recent presentations, so we’ve prepared a map highlighting all crown mineral rights transfers to the company since it was founded (ignoring those clearly attributable to the spin-off transaction). This selection of transfers includes 17.88 sections of transfers from CNRL, Whitecap and Kiwetinohk.

To keep track of the latest Logan Energy news, look no further than BOE Intel and Petro Ninja.