A new study from the DOB and CanOils shows that Marcellus producers currently enjoy lower full supply costs¹ than Montney producers.

Production in the Montney, however, is far more liquids-rich and this resulted in higher operating netbacks than the Marcellus.

The study, which can be downloaded in full here, focuses on 16 pure-play producers in the two formations, which are the fastest growing gas plays in their respective countries.

The seven Marcellus producers included in the study operated with average full supply costs of around C$16.37 in Q2 2017, which is a seven per cent year-over-year decline. In contrast, the nine Montney producers operated at slightly higher average full supply costs of C$18.79.

Source: Montney vs. Marcellus Cost Benchmarking Study, Q2 2017 – download here

These findings are at least in part due to the production mix in the two formations. The Montney is far more liquids-rich and liquids cost more to produce. These higher costs are of course offset by the higher realized prices involved in selling the eventual product, and Montney producers enjoyed netbacks of C$18.30 compared to C$15.07 in the Marcellus. Both sets of companies saw average netbacks increase, year-over-year, due to average commodity prices increasing.

Source: Montney vs. Marcellus Cost Benchmarking Study, Q2 2017 – download here

The full study is available here and breaks down how each set of producers compared in each component of the full supply cost measure.

Notes: 1)  Throughout the study, “full supply costs” are the sum of: Operating expenses per boe; Transportation expenses per boe; 3 Year Average F&D expenses per boe; Interest expenses per boe; General and administration expenses per boe; 2) Full supply costs would usually include royalty expenses per boe, but as the key premise of the study is to benchmark costs between U.S. and Canadian producers, royalty expenses had to be excluded; the figure is not reported by U.S. companies, who instead include the figure within their revenue totals