Both CNRL and Whitecap have continued to license new pads in the South Kaybob rich gas window. Wells here are more sensitive to gas realizations, though we estimate will still produce >285,000Bbls of condensate due to reasonable liquids yields combined with higher OGIP and extreme deliverability due to overpressuring. There is some risk of souring due to proximity to the reefs, though the zone shows >30m of bituminous shale. Whitecap recently TIL’d a 5-well pad in the area, and has spud another 5-well pad. CNRL has licensed a 9-well pad that we’d expect them to complete into the end of the year. 

For both CNRL and Whitecap, this south rich gas window represents 15MBOE/d and 30MBOE/d of incremental production potential respectively, with strong economics driven by condensate and NGL yields (~50Bbls/MMcf total NGLs at shallow cut recoveries). We expect raw gas EURs moving south will exceed 12Bcf at 3-miles in length.

Continuing their strong success in the Charlie Lake, Archer is pushing their play south, into the Wapiti area, where there is a large, untapped play with the potential to be produced unconventionally. This non-Montney Triassic and Cretaceous area has seen strong interest recently, especially the Dunvegan through Karr and Wapiti. This iteration of Archer has seen some extremely strong well results, with payouts averaging <6 months in the Charlie Lake. We estimate they will sell for >$1Bn give their growth trajectory.

There are multiple vertical wells that intersect or target the Charlie Lake throughout Wapiti (i.e. 08-07-069-06W6) that delineate a very promising fairway to be produced horizontally, moving further downdip. Archer has also recently spud a Doe Creek multilateral at Wapiti, continuing to add upside horizons in their new area.

At EnerCom, Baytex confirmed they would be open to transactions that would monetize the Eagle Ford. If you ignore the >$2Bn of open market equity value incinerated over the past 3-years, this has the potential to be a very accretive deal. 

The full Eagle Ford asset should transact in the ~3.4-3.6x field cashflow range. This maps to ~US$2.6Bn which is approximately what Baytex paid for Ranger in 2023 and equal to Atax PDP PV_10%. This sale would include their non-operated position in Karnes County, which is higher quality rock than their operated assets (ConocoPhillips operator). While this is below-market compared to recent transactions a disposition, we think this is fair considering the challenged inventory footprint across the assets. A disposition in-line with our reasonable estimate would cover ~85% of their enterprise value after closing adjustments.

The $0.6Bn pro forma E&P would have ~60MBbls/d of liquids production in Canada, which, valued in-line with Saturn, would be worth ~$1.5Bn.  We would expect that Baytex would announce a Duvernay acquisition concurrent with an Eagle Ford disposition, which continues to reinforce our positive outlook on Spartan Delta.