Ember CEO Doug Dafoe says his firm recently completed a 120-well drilling program.Todd Korol/The Globe and Mail
Ember Resources Inc. has quietly climbed into the top 15 ranking of Canadian natural gas producers, concentrating on a part of the business many thought the shale revolution had killed off.
The private company, which is backed by Brookfield Asset Management Inc., has become a consolidator of Alberta properties producing coal-bed methane: natural gas trapped in coal seams. It is prospering, even with gas prices well below last year's levels, chief executive Doug Dafoe says.
Most of its lands in what is known as the Horseshoe Canyon coal trend were acquired in the past year and a half. The company bought assets from Apache Corp. in August, 2013, for $220-million, and this month closed the $605-million purchase of Encana Corp.'s Clearwater lands, making it the country's largest producer of coal-bed methane.
In the past decade, numerous companies formulated grand plans to drill up reserves of coal-bed methane, but scrapped the idea as the industry increasingly tapped massive shale gas deposits in the U.S. northeast and Texas, driving gas prices down.
Ember's business has been structured to operate with long-term prices for natural gas in the range of $3-$4 per thousand cubic feet. It does that through low-cost, shallow drilling, and the ability of its wells to produce at rates that show minimal natural decline over time, Mr. Dafoe said. The current Alberta price is just below $3 per thousand cubic feet.
"If you're going to be in this business, you have to be able to live in a business than can operate in that environment," Mr. Dafoe said in an interview this week at the company's Calgary office.
Energy producers that focus on natural gas have had a tough run for several years. Last winter, when the polar vortex triggered a spike in heating demand and gas prices across the continent, was a rare exception.
Encana and Apache, previously the No. 1 and No. 2 Horseshoe Canyon operators, both shifted their focus away from shallow-depth drilling, which the coal trend demands, to the much more expensive horizontal and multistage hydraulic rock fracturing suited to shale-resource plays. The payoff for those operations are much higher production rates per well.
Ember pumps much less gas from each well, but drilling costs at $160,000-$190,000 a pop makes them little more than one tenth of the price.
"Their surface preparation probably equals our total cost," the 60-year-old energy executive said. "In fact, we've just finished drilling a 120-well program that we started in late August and we were finished drilling by Christmas, so it's very quick, very efficient and has minimal disturbance."
In the latest coal-bed methane drive, many of the companies targeted the more expansive Mannville formation, and those operations required a higher natural gas price because of the need for more exploration and often deeper wells.
Ember's current output is about 300 million cubic feet a day from the acreage, which covers a large swath of central Alberta, up from about 20 million when Brookfield anchored the initiative to take the company private in 2011. The company, one of a growing number in the Canadian oil patch backed by private equity, now employs about 250 people
With much of the oil industry under severe financial pressure due to the collapse in crude oil prices, Ember can keep operating, adjusting its drilling plans as the gas market and oil-field service costs dictate, Mr. Dafoe says.
Jeffrey Jones