Looking good for Angle. GLTA

Condensate “liquid gold” for gas producers, thanks to booming oilsands

In the non-oilsands sectors of the western Canadian oilpatch, various commodities or strategies have fallen in and out of favour over the years, depending on the economics. Coalbed methane, tight gas and natural gas in general have each been in vogue at certain points in the past dozen years. Light tight oil, conventional heavy oil and liquids-rich gas have all been in fashion since natural gas prices tanked.

Today, condensate is king—and with good reason.

At last week’s Peters & Co. Limited investor conference in Toronto, Peyto Exploration & Development Corp. president Darren Gee exhibited a slide showing the prices of key natural gas liquids (NGLs) based on Peyto’s monthly average realized prices in the second quarter, after pipeline/fractionation/transportation costs.

Topping the list was condensate at $90 per barrel. At the other end of the NGL price spectrum was ethane at $6 per barrel, or $2.10 per gigajoule in gas equivalency, which wasn’t much better than an average Alberta dry-gas price of $1.74 per gigajoule during the quarter.

“So it doesn’t make a lot of sense to convert ethane into liquid form,” Gee said. “We weren’t really benefiting when you look at the price we realized for it. In June and July, the liquids price for ethane was lower than the price for natural gas, so you were better leaving it in the gas.”

The opposite is true for condensate, which is mainly a mixture of pentanes (C5) and pentanes plus (C5+). Alberta’s booming oilsands sector—with capital spending forecast to exceed $20 billion a year in each of the next five years—is driving the demand for condensate. In Alberta, the light hydrocarbon is mainly used to dilute bitumen for pipelining. And diluent demand in Alberta could outstrip domestic supply far into the future.

“Condensate here is liquid gold. It is better than oil,” Heather Christie-Burns, president and chief operating officer of Angle Energy Inc., said during a question-and-answer session at the Peters conference.

Stressing the importance of viewing each NGL as a different product, Christie-Burns displayed a slide showing the average price differentials of individual NGLs to West Texas Intermediate (WTI) oil. So far this year, the condensate price has been 103 per cent of WTI, followed by butane at 67 per cent, propane at 30 per cent and ethane at a paltry six per cent.

Angle’s key area is Harmattan in west-central Alberta where it is focused on liquids-rich gas in the Mannville formation and light oil in the Cardium. The company has grown by the drill bit to about 15,000 barrels of oil equivalent a day.

Light oil and condensate make up 48 per cent of Angle’s liquids output, and liquids account for 45 per cent of the company’s total output. Angle says its yield of total liquids from the Mannville at Harmattan is more than 200 barrels per million cubic feet.

The Mannville at Harmattan is “an incredibly high-liquids-cut condensate pool,” says Christie-Burns. “Condensate is very, very robust. It is always a premium on WTI—anywhere from 105 up to 115 per cent premium.”

Butane is also strong, but propane needs more infrastructure to raise Canadian prices to levels enjoyed by producers in the more robust U.S. propane market.

According to a recent Canadian Energy Research Institute report on NGLs, butane is used by refineries as a blend for gasoline. It is also used as a petrochemical feedstock and, increasingly, as a diluent for pipelining bitumen.