Montney

The Deep Basin portion of the Western Canada Sedimentary Basin contains significant resource potential. Seven Generations is focused on producing low-cost, liquids-rich natural gas from the Montney geological formation, which covers about 130,000 square kilometres and spans 700 kilometres north to south, traversing the provincial boundary between northwest Alberta and northeast British Columbia. This elongated oval-shaped, Lower-Triassic formation is estimated by Canada’s National Energy Board to contain more than 90 billion barrels of oil equivalent of marketable natural gas, oil and natural gas liquids. The Montney is a world-class resource that stands as an energy peer to Canada’s oil sands.

Source: National Energy Board7G’s Discovery Well – 2009

Conventional oil and natural gas reservoirs in the Kakwa River area have been produced for more than 50 years. Only recently, due to the application of new technology, have some of the unconventional tight-gas resources such as the Montney become commercially viable. Prior to drilling our vertical Montney discovery well in 2009, we evaluated the play’s potential by utilizing historical vertical well bore penetrations in the area, which had largely targeted conventional plays. Petrophysical log evaluations from these vertical well bores indicated both the presence of favorable reservoir properties and allowed us to formulate a positive view on its aerial extent. During our exploration phase, we drilled through more than 200 metres (650 feet) of the Montney geological core to verify these reservoir properties. Unconventional evaluation and technological improvements, including horizontal drilling, multi-stage hydraulic fracture stimulation and drawdown induced fracturing, have allowed us and industry competitors an opportunity to economically develop the hydrocarbon potential contained within the Alberta unconventional Montney.

The Alberta deep basin Montney formation was deposited approximately 240 million years ago, during the Triassic period. Exploration and production of the Montney reservoir is at such an early stage that we are continually growing our understanding of its characteristics, productive capacity and geological properties. We believe the prolific rates of natural gas, condensate and natural gas liquids from our lands are partially the result of unique geological and reservoir properties including: a predominantly brittle, dolomitic siltstone created in a high energy depositional environment, a low clay content, and a reservoir interval that averages approximately 200 metres (650 feet) in vertical thickness. We believe our Montney lands are ideally located within an area of both lower geomechanical stress and lower geothermal gradients, and we have observed that our Montney reservoir is over-pressured.

Production Attracts Premium Pricing

Our scientific, geological and engineering understanding of the Montney grows every day. Based on our work to date, we believe the lower geothermal gradient has preserved the liquids originally contained within the Montney, leading to high ratios of condensate and light oil to natural gas, and creating a rich gas stream with light ends (ethane, propane and butane) dissolved into the gas and resulting in premium pricing due to the high natural gas liquids (NGL) content. We also believe that the lower geothermal gradient has played a role in lack of hydrogen sulfide formation on our Montney lands; whereas nearby plays such as Elmworth, Wapiti and Resthaven have shown hydrogen sulfide percentages high enough to require specialised sour gas processing. Over most of our lands, we have only identified hydrogen sulfide in low enough quantities to be treated with chemicals at the well site and processed through sweet infrastructure. Other unconventional over-pressured, mixed-hydrocarbon reservoirs may exhibit some of these characteristics. However, we believe the combination of all the above makes this a unique asset, differentiated by excellent well economics at existing capital costs and holding significant potential for further economic optimization on a dollar per recoverable unit of production-cost basis.

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