en.Wedoany.com Reported - Obsidian Energy Ltd. and Yangarra Resources Corp. are drilling for oil on the edge of the Canadian Rockies, targeting a long-dormant natural gas reservoir—the Basel Belly River formation.
The two companies are hydraulically fracturing sandstone that makes up the Basel Belly River formation in Willesden Green, southwest of Edmonton, Alberta. According to data from the Alberta Energy Regulator, 15 drilling licenses targeting or terminating in this formation were issued in the first half of this year, the highest for the same period in 14 years.
This oil drilling boom gained attention in early June when Obsidian agreed to acquire 35 parcels of land in the field from Highwood Asset Management Ltd. for C$105 million (approximately US$75 million) in cash. The transaction covers oil and gas production of about 2,500 barrels of oil equivalent per day, representing roughly 9% of the company's total output, of which approximately 75% is light crude oil.
"You're starting to see some good early success from wells drilled in the Basel Belly River, thanks to the wells we permitted," Obsidian CEO Steve Loukas said in a recent interview with Bloomberg. "The first well we spudded in the fall of 2024 yielded constructive results, which carried into 2025 and will ultimately impact 2026."
The push to drill for oil is part of a broader trend in Western Canada. After years of low natural gas prices, companies are targeting liquid-rich zones in shale formations including the Montney and Duvernay. Over the past five years, the average trading price of natural gas in Western Canada has been about US$1.70 per million British thermal units (MMBtu) lower than U.S. gas, a discount that has persisted since the start of liquefied natural gas exports from British Columbia last year. Meanwhile, Middle East wars and new export pipelines, such as the expanded Trans Mountain pipeline system, have supported local oil prices.
Loukas said Obsidian plans to implement a six-well development program next year, boosting production from the acquired assets to 3,000 barrels per day equivalent, with each well costing about C$5 million to develop.
The increased interest in the Basel Belly River marks a revival for the formation. Two decades ago, when natural gas prices surged to near historic highs of US$16 per MMBtu, companies including Ember Resources Inc. and Ovintiv Inc. (then known as Encana) tapped into its gas. According to the Alberta Energy Regulator, over 1,000 wells were drilled in 2005 targeting or terminating in this formation, 95% of which were for natural gas extraction.
After the U.S. shale revolution erupted in 2009, supply released from Pennsylvania to Oklahoma caused natural gas prices to plummet. By 2014, drilling in the Basel Belly River formation had fallen to single digits and remained there until two years ago.
Combined with Obsidian's existing production in the Basel Belly River, the company could boost output to 7,000 barrels per day, accounting for the majority of production from the formation in the Willesden Green area. Obsidian estimates total production in the area is equivalent to about 10,000 to 13,000 barrels per day.
