CDL Blog

Mergers and acquisitions in the Nipisi-Marten Hills-Jarvie Clearwater heavy oil plays shifted into overdrive during the last two months of 2020. In November, newcomer Headwater Exploration (dark blue on the map) (figure 1) acquired Cenovus’ Marten Hills assets (approximately 3,000 bopd and 270 net sections), and in December, Tamarack Valley acquired Woodcote Oil’s Nipisi assets (light green) and Highwood Oil’s Nipisi and Jarvie assets (dark green) (combined, 2,000 bopd and 167 net sections). In all, about $189MM of value changed hands—$99MM in the Headwater-Cenovus transaction; $41MM in the Tamarack-Highwood deal; and $49MM in the Tamarack-Woodcote deal (BMO, 2021). Tamarack Valley and Headwater join Spur (purple), Deltastream (cyan) and Crestwynd (light blue) as the major operators in the play.

These deals are looking pretty shiny as oil prices have strengthened from the pits of the earth in April 2020 to WTI hovering in the mid $50s in early February 2021. CDL’s analysis shows robust economics for the play when WTI is above $40 (figure 2).

The Clearwater play grew from just a few hundred barrels per day in January 2017 before peaking around 34,000 bopd in February 2020 while WTI oil prices ranged from $45 to $71 over the same time period (figure 3). The second quarter of 2020 was rough as operators shut in production (down to 2,900 bopd) and curtailed drilling activity as oil prices plummeted. As prices rose, operators turned the taps back on, and the play exited 2020 producing about 33,000 bopd.

CDL’s 2020 Clearwater study found that oil quality varies across the play; the observed variation is complex and likely related to formation temperature, biodegradation and the initial source of the oil (CDL, 2020). Costs are kept down in the Clearwater play because operators can access large reservoir volumes using multi-leg horizontals produced through one production string without using costly hydraulic fracturing or thermal technologies such as SAGD or CSS. The Clearwater reservoir is permeable enough (often over 100 mD) to allow the 10°–20° API oil to flow unstimulated. The wells are shallow with TVDs ranging from 600 to 850m (Fockler, 2021).