Liquids-rich Ellerslie Hybrid Resource Play in Edson
Velvet entered into the Edson area through the acquisition of Vero’s deep basin gas assets in early 2012. Velvet has since amassed over 320,000 net acres in the Edson corridor through Crown land sales and several tuck-in acquisitions.
Over the past six years, Velvet has drilled 113 gross (82.8 net) horizontal Ellerslie wells, including the drilling of 9 gross (8.1 net) extended reach horizontal (ERH) wells in 2018. In 2018, Velvet shifted its strategy in Edson to optimize production through company-owned facilities and to generate free cash flow, resulting in Edson production level loading at approximately 14,000 boe/d. Today, over 95% of our production has been added via the drill bit. We have made consistent progress in reducing costs and optimizing recoveries to generate high rates of return in Edson, including ERH wells, and today, several third-party research studies have defined our liquids-rich Edson Ellerslie as the low cost play in the Deep Basin of Alberta.
Velvet plans to spend $43 million in the Edson area in 2019, with the program exclusively oriented to drilling extended reach horizontal wells. This pace of activity will hold area production flat and allow the Company to generate free field cash flow to reinvest in our Montney light oil growth project at Karr/Gold Creek.
Edson Area Land, Gathering & Processing Infrastructure
Liquids recoveries drive the economics of the Ellerslie, with a typical well yielding 80 barrels of liquids per million cubic feet of natural gas. Approximately 70% of our liquids recoveries consist of condensate and light oil, which yield premium pricing relative to benchmark light oil in western Canada. Through our development and delineation program, Velvet has built its deep basin inventory to over 1,000 gross (700 net) locations.