US-based Epsilon Energy has signed definitive agreements to form two JVs in the Garrington and Harmattan areas of Alberta, Canada.
This strategic move is part of Epsilon’s strategy to boost its presence in the Western Canadian Sedimentary Basin.
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The company partnered with an undisclosed “leading” Calgary-based private operator to acquire a 25% working interest in approximately 30,000 gross acres of undeveloped land.
The focus will be on horizontal development of the Glauconitic and Ellerslie formations within the Mannville, which are known for their liquids-rich potential.
Garrington covers 30,000 gross acres targeting the liquids-rich Glauconitic and Ellerslie formations, while Harmattan covers 130,000 acres targeting the Upper Viking formation.
Additionally, the JV encompasses around 130,000 gross acres in the Harmattan area, targeting the Upper Viking formation.
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By GlobalDataEpsilon CEO Jason Stabell said: “As previously communicated, we have been evaluating potential Canadian projects over the last year. We are excited to announce a new project area in Alberta that fits our strategic focus of drill bit weighted investments with attractive full cycle returns and meaningful follow-on investment runway (inventory).
“For a small amount of upfront capital, we will establish a third primary area to deploy capital in a proven hydrocarbon system and more than double our company leasehold (after the carry is satisfied), while also increasing our liquids exposure.
“With the deal signed this week, we are partnered with a well-capitalised leading private player in the basin. Importantly, this acreage is largely held by production, affording the ability to opportunistically develop these resources as market conditions warrant.”
Epsilon estimates that the JV areas contain more than 252 miles of lateral development potential in the Mannville formation.
Offset wells in the region have demonstrated strong economic potential, with mid-teens effective royalty rates and estimated drilling and completion costs of C$600-C$700 ($433–$505) per completed lateral foot, the company said.
The agreement includes a development carry up to C$12m, with C$10m allocated for drilling and completing at least four horizontal wells within a 12-month period, starting 1 December 2024.
The operator has the option to drill two additional horizontal wells within the subsequent 12 months, maintaining a minimum 20% working interest during the carry period.
In April this year, Epsilon entered a separate JV in Alberta’s Killam area, acquiring a 50% working interest in 14,000 gross acres to develop the Mannville formation, with a C$1.4m investment and commitment to drill two wells in 2024.
The first two wells, drilled in August and September, yielded one commercial discovery now in production, while the second faced mechanical challenges preventing full evaluation.
Each well’s gross drilling and completion cost is around C$2m, with Epsilon’s net cost at C$1m per well.
