Oct. 2--Stone Mountain Resources is just a 3-year-old, 12-employee company based in the Canadian oil capital of Calgary, but it's taking on an ambitious project as one of the pioneers drilling for natural gas in Canada's Horn River Basin, a remote, bitterly cold corner of far northeast British Columbia.

The lure of Horn River is obvious. The Canadian Society for Unconventional Gas estimates that there is an enormous volume of natural gas in place -- as much as 500 trillion cubic feet -- according to a Sept. 22 report by the commodities research unit of Barclays Capital.

If only 20 percent of the gas proved recoverable, that could total up to 100 trillion cubic feet of production, more than quadruple annual U.S. natural gas consumption.

This gives Horn River "the distinction of being among the top natural gas accumulations on the planet if considered a single field," Barclays said, even though it technically is "a conglomerate of fields...collectively known as the Horn River Formation."

Stone Mountain Resources CEO Harvey Klingensmith, a 34-year veteran of the oil and gas industry, had the rapt attention of his audience when describing the company's Horn River prospects in a presentation Thursday at the final day of the Unconventional Gas International Conference and Exhibition at the Fort Worth Convention Center.

"We believe that this play is going to be very successful," Klingensmith said. "It's going to put out a lot of gas for a long time."

In terms of gas reserves, "the basin stands out with more potential than the Barnett Shale" of North Texas, the Barclays report said.

Texas players

Horn River has attracted significant Barnett Shale producers such as Fort Worth-based Quicksilver Resources, Oklahoma City-based Devon Energy, Houston-based EOG Resources and Calgary-based EnCana Corp. The Canadian shale-gas play has even been enticing enough to lure Irving-based behemoth Exxon Mobil to drill there.

Quicksilver's stock jumped 10 percent on Sept. 22 after its announcement that its first completed Horn River well tested at a strong initial production rate of 13 million cubic feet of gas per day and averaged about 10 million cubic feet per day during its first month of production. Quicksilver has a substantial lease holding of about 127,000 net contiguous acres at Horn River.

Klingensmith said he could foresee Stone Mountain drilling perhaps 360 Horn River wells over 30 to 40 years, potentially recovering as much as 40 percent of the gas in place as more knowledge is gained about how to best drill and complete wells there.

The company has five producing horizontal wells. Each cost about $10 million to drill and complete, including hydraulic fracturing to stimulate greatly increased gas flow to the wellbore.

Initial production rates per well were about 6 million to 10 million cubic feet a day and currently range from about 4.5 million to 6 million cubic feet daily, with one well already in production more than 100 days, Klingensmith said in an interview with the Star-Telegram.

Stone Mountain's investors include First Reserve Corp., a firm specializing in energy investments, and Quintana Energy Partners L.P., formed by Corbin "Corby" Robertson Jr., an heir of the late Hugh Roy Cullen of Houston, one of Texas' legendary oilmen.

While the Horn River's potential drew raves from several energy experts at the Fort Worth gas conference, it's a much more expensive place to drill than the Barnett Shale, will require constructing considerably more supporting infrastructure such as pipelines, and is far removed from major gas markets.

But Barclays said one option is to transport Horn River gas via a planned $1.2 billion pipeline to the coast of British Columbia, where it would be exported on tankers as liquefied natural gas to growing Asian markets. In addition, Horn River gas is expected to replace dwindling production from conventional Canadian gas fields.

JACK Z. SMITH, 817-390-7724

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