Hype around oil and gas producers and explorers, such as Blackbird Energy, in the Montney shale or Montney formation has been diminished hugely amidst falling oil and gas prices.
The oil and gas sector is reeling as oil and gas prices fail to find a bottom. WTI crude prices traded near a 5-year low Tuesday down 0.5% to $55.63 in afternoon trading.
Few area plays have been hit harder than the Montney formation, which is a major shale gas and shale oil resource in Northeastern BC.
A federal-provincial study prepared jointly by Canada’s National Energy Board, the Alberta Energy Regulator and B.C.’s newly-created Ministry of Natural Gas Development, outlined in a blurb by Sven Milelli in November of 2013, revealed the potential reserves of the Montney Formation.
The unconventional petroleum resource had a reported shale gas and shale oil resource with reserves of 449 trillion cubic feet of marketable natural gas, 14,521 million barrels of marketable natural gas liquids (NGLs) and 1,125 million barrels of oil.
Montney Formation oil and gas Players feel the heat
Numerous Montney-based oil and gas companies, some of which that had traded up to new all-time highs just a few short months ago, are touching down to new 52-week lows.
The sell-off is coming at a time when infrastructure was set to expand rapidly in the Montney region.
In early November Pembina Pipeline Corp. (TSX:PPL) announced the decision to proceed with a $210-million expansion to its pipeline network that will transport condensates and natural gas liquids out of northeastern British Columbia.
Pembina has signed binding agreements with customers for the NEBC Expansion project, set to serve producers in the Montney formation.
Junior Explorers in Montney decline as oil and gas prices fall
In comparison to many senior producers in the Montney, few have fallen as hard and fast as junior explorer Blackbird Energy. While none rallied as hard as Blackbird earlier in the year, its volatility and early stage is now hampering its valuation.
The newcomer to the Montney gave some investors the opportunity to make many times their money in 2014. The stock rallied from a low of $0.055 to a 52-week high of $0.44 per share on October 22nd.
Blackbird traded as high as $0.405 per share on November 24th. Since then, its shares have lost more than 50% and fell to a low of $0.185 Tuesday.
Blackbird Energy – 3 Month Chart
On December 9th, Blackbird Energy provided an update at its Elmworth Operations and announced the closing of its final tranche of flow-through private placement.
Blackbird Energy announced that its first 100% working interest horizontal Middle Montney well at Elmworth, has been successfully drilled and cased with a cemented liner from surface location 14-14-70-07W6 to a total measured depth of 4,730 metres, including a 2,000 metre horizontal leg.
Below is an excerpt from the press release.
“Blackbird is also pleased to report that it has licensed and spudded its second 100% working interest horizontal well at Elmworth, located at 5-26-70-07W6 (“5-26”), targeting the Upper Montney. The 5-26 well was spudded from the same drilling pad located at 14-14-70-07W6 and will be drilled to a vertical depth of approximately 2,340 metres, a lateral length of approximately 2,000 metres and a total measured depth of approximately 4,740 metres.
As previously announced, completion operations for both wells are scheduled to occur in January 2015, subsequent to which Blackbird intends to flow-test both wells. Flow-testing results for both wells are expected by late February 2015.
Garth Braun, Blackbird’s Chairman, President, and Chief Executive Officer stated, “With the completion of the Private Placement, Blackbird has further strengthened its balance sheet and is well positioned in this challenging commodity price environment to continue its growth and aggregation strategy in the Elmworth corridor”.
Click here to read the entire press release.
Blackbird Energy’s management has to be feeling good about closing this latest flow through financing at $0.45 per shares and its previously announced bought deal financing for gross proceeds of approximately $30.4 million in October. North of $25 million was raised at a price of $0.29 per special warrant, while the remaining amount was done at $0.34 per flow-through share.
The financing was done at roughly 50% higher valuations than Blackbird’s current trading price.
While Blackbird’s treasury might have been strengthened recently and the company has no debt, it will need to deliver on its first few wells in the Montney Formation to keep confidence in the market. Blackbird Energy, like so many junior explorers and even senior producers, can only worry about factors it can control. The price of oil and gas in 2014 has reminded the retail investor that it is clearly not one of them.
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