Vertical wells drilled around the Gentilly well are economical if
Gaz Metro builds the pipeline connection and signs a gas
contract which locks in $4.20 + 0.60 -> $6.00 CDN pricing. The
economics would greatly improve if more than one interval
is fracture stimulated. The $750,000 capital cost of a vertical
well was copied from an analyst report on Junex which
talks about the North Shore of the St. Lawrence where the wells
are shallower and cheaper.
For the Gentilly well:
| First Production (year) |
|
2010 |
|
|
|
|
| First year average rate (cf/d) |
|
548,000 |
|
Initial 30 Day Rate |
800,000 |
| Reserves (cf) |
|
|
n/a |
|
First year decline |
0.63 |
| Operating costs (mcf) |
|
1.50 |
|
|
|
|
| Royalty Rate |
0.13 |
|
0.00 |
0.13 |
|
|
|
| Tax Rate |
|
|
|
0.35 |
|
|
|
|
| Price per mcf |
(4.20 + .6) |
6.00 |
|
|
|
|
| Capital Cost of one well |
|
750,000 |
|
|
|
|
| NPV(10) after tax |
|
833,749 |
|
|
|
|
|
|
|
|
|
|
| IRR after tax |
|
67% |
|
|
|
|
|
|
|
|
|
|
| NPV(10) is the net value of the gas flows after Income Tax (minus the cost of the well) |
