Stonehorse’s Alberta Drilling Push Raises Execution and Capital Questions
Stonehorse Energy has secured a farm-in agreement to drill a well in Alberta’s prolific Ellerslie reservoir, with plans to participate in up to three additional wells, marking a significant step in its Canadian growth strategy.
- Farm-in agreement for first well in Drumheller area near Calgary
- Investment of approximately C$1.15 million for 20% working interest
- Plans to participate in up to three more wells at 35% working interest each
- Targeting the high-growth Ellerslie reservoir with strong liquids content
- Drilling to commence imminently on an existing well pad with quick production ramp-up
Stonehorse’s Strategic Move into Alberta’s Oil Patch
Stonehorse Energy Limited (ASX, SHE) has announced a definitive farm-in agreement to drill a new well targeting the Ellerslie reservoir in the Drumheller area near Calgary, Alberta. This move marks a notable expansion for the Australian-based oil and gas explorer into one of Canada’s most promising light oil plays.
The initial well will see Stonehorse invest approximately C$1.15 million for a 20% working interest. Drilling is set to commence imminently on an existing well pad, with infrastructure already in place to facilitate a swift transition from drilling to production and sales. This operational readiness could translate into quicker cash flow and reduced upfront development risks.
Targeting a High-Quality Reservoir with Strong Growth
The Ellerslie reservoir is a prolific formation within the Western Canada Sedimentary Basin, known for its light oil production with a high liquids ratio, currently around 77%. The reservoir has demonstrated robust growth, expanding at a compounded annual growth rate of 18% since 2017 and producing over 40,000 barrels of oil equivalent per day.
Stonehorse’s entry into this play aligns with its strategy to build a portfolio of high-quality well bore assets with working interests that balance risk and capital availability. The Ellerslie reservoir’s economic competitiveness rivals other major Canadian plays such as the Montney and Clearwater formations, making it an attractive target for growth-focused explorers.
Expanding Footprint with Additional Wells
Beyond the initial well, Stonehorse is finalizing agreements to participate in up to three additional wells in the same area. Each of these wells would require an investment of approximately $1.82 million to earn a 35% working interest. While documentation for these wells is still being finalized, this planned expansion signals Stonehorse’s confidence in the operator and the play’s potential.
Executive Chairman Robert Gardner expressed optimism about the partnership, highlighting the opportunity to leverage the operator’s local expertise and success to grow Stonehorse’s position in Western Canada’s light oil sector.
Looking Ahead
As drilling commences, investors will be watching closely for initial results and production ramp-up. The company’s ability to convert these new wells into steady cash flow will be critical in validating its growth strategy and capital deployment in the region.
Bottom Line?
Stonehorse’s Alberta expansion could reshape its production profile, but execution and well performance remain key to unlocking value.
Questions in the middle?
- What are the expected production volumes and timelines for the new wells?
- How will Stonehorse finance the additional capital commitments for the three planned wells?
- What operational risks or challenges could impact drilling and production in the Drumheller area?
