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Cardium Formation

Source; CAPP

The Cardium Basin runs from northeastern British Columbia to Western Alberta and is a major source of petroleum and natural gas. It is a sandstone and shale basin within the Western Canada Sedimentary Basin (WCSB) and its name originates from the abundant amount of fossilized cockle (Cardiidae) shells it contains.

The Pembina region of the Cardium has long been a petroleum producing hub in Alberta in terms of conventional oil. Given advances in oil extraction technology pertaining to shale and tight formations over the last decade, the Cardium has returned as a premier play within Western Canada – although ranking behind the extremely active Montney and Duvernay formations.

Source: NEB

Natural gas is produced in the Athabasca River area and the foothills in western Alberta and oil is produced in the Pembina oil field of central Alberta.

In the Cardium, premier drilling locations have  shallow depth, low well costs, and are more heavily weighted towards oil or liquids production. Shallow depths contribute to lower drilling costs.

Breakevens for most producers in the space are ~$50 USD for WTI, which means that they will be able to recover costs as well as an acceptable return on investment (~15%) at that oil price. Companies will make drilling decisions if they forecast a long-term oil price above that level.

Major subplots in the area are Pembina, Ferrier, and Willesden Green.

Major Producers in the Cardium

Whitecap Resources (TSX: WCP) is a Calgary based oil and gas company engaged in the business of acquiring, developing, and holding interests in petroleum and natural gas properties and assets. WCP’s Cardium producing areas are located in Pembina, Garrington, Ferrier, and Willesden Green. As of July 2018, 24 wells have been drilled in the region YTD. Operating costs are $11.64/boe with netbacks of $25.30/boe. Whitecap’s production splits are 85% crude oil and NGLs and 15% natural gas.

Bonterra Energy (TSX: BNE) is an intermediate-sized oil and gas company headquartered in Calgary. The company’s assets consist of concentrated, stable, and underdeveloped properties located across western Canada with large amounts of remaining oil still in place with long reserve life and low-risk drilling locations. BNE’s Cardium assets are largely concentrated in Pembina and Willesden Green. As of July 2018, 19 wells have been drilled in the region YTD. Operating costs are $14.49/boe with netbacks of $23.81/boe. Bonterra’s production splits are 91% crude oil and NGLs and 9% natural gas.

Yangarra Resources (TSX: YGR) is a junior oil and gas E&P company with operations in western Canada with main focus in the Cardium region. As of July 2018, 14 wells have been drilled YTD. Netbacks are $25.66/boe. Yangarra’s production splits are 59% crude oil and NGLs and 41% natural gas.

Obsidian (NYSE, TSX: OBE) (previously Penn West Petroleum) is an oil and gas producer headquartered in Calgary, formerly known as Penn West Petroleum. Most of OBE’s production comes from the Cardium. As of July 2018, 9 wells have been drilled YTD. Operating costs are $17.57/boe with netbacks of $17.57/boe. Obsidian’s production splits are 64% crude oil and NGLs and 36% natural gas.

Ridgeback Resources is a private oil and gas E&P company based in Calgary focused on light oil in the Bakken and Cardium regions. As of July 2018, 6 wells have been drilled YTD.

Vermillion Energy (NYSE, TSX: VET) is a Calgary-based international energy producer with operations in North American, Europe, and Australia. Vermillion targets production through exploitation of light oil and LNG plays in Canada and US, exploration and development of natural gas opportunities in Netherlands and Germany, and through oil drilling and workover programs in France and Australia. Operating costs in Canada are $8.43/boe with netbacks of $18.78/boe. Vermillion’s production split is 44% crude oil and NGLs and 56% natural gas.

ARC Resources (TSX: ARX) is a Calgary-based oil and gas company with operations in Montney in northeast British Columbia and Pembina Cardium in Alberta. Operating costs are $6.31/boe with netbacks of $17.48/boe. ARC’s production splits are 63% crude oil and NGLs and 37% natural gas.

NAL Resources is a Calgary-based private oil and gas company with operations in southeastern and southwestern Saskatchewan and central and northwestern Alberta. As of July 2018, 10 wells have been drilled YTD.

Energy Infrastructure in the Cardium

There is energy infrastructure that serves the production in the Cardium, although not nearly as developed as the Montney. Major players in the Cardium include Keyera and Pembina (of which its namesake is in the Cardium).

Like with the rest of the WCSB, there are severe egress issues for natural gas which is problematic as local Canadian demand (and Canadian demand in general) is far less than Canadian supply. This depresses natural gas prices relevant to Cardium producers (AECO) and pushes them to produce liquids-rich gas and oil.

Keyera in Cardium

Keyera Corporation (TSX: KEY) is a Calgary-based midstream company with two operating segments: gathering & processing and liquids infrastructure & marketing.

Natural gas is transported by the gathering & processing segments via pipelines which delivers raw natural gas from source to processing plants.

Keyera’s has several gas processing plants in the Cardium –  West Pembina, Brazeau River, and Brazeau North. The licensed throughput rates for the plants are 145 mmcf/d, 218 mmcf/d, and 50 mmcf/d respectively.

Pembina Pipeline in Cardium

Pembina Pipeline Corporation (TSX: PPL) is a Calgary-based midstream company that owns a system of pipelines that transport liquids and natural gas products produced in Western Canada. The company owns gathering and processing facilities and oil and natural gas infrastructure. In total, Pembina’s pipeline division has over 18,000 km of pipelines with a total capacity of 3 mboe/d.

Recent Mergers & Acquisitions in the Cardium Formation

April 17, 2018 – Clearview Resources  acquires Bashaw Oil Corporation for 1,560,046 voting common shares.

December 21, 2017 – Ikkuma Resources acquires assets in the Cardium and Montney regions for $34MM at roughly $85/acre, increasing production by 14,300 boe/d.

October 6, 2017 – Manitok Energy acquires Questfire for assets in the Cardium and Viking regions for $55MM, increasing production by 4,310 boe/d.

June 27, 2017 –Bellatrix Exploration divests assets in the Cardium region for $34MM, decreasing production by 1,750 boe/d.

April 28, 2017 – Journey Energy acquires assets in Cardium region for $35MM at roughly $425/acre, increasing production by 2,000 boe/d.

Appendix: Glossary of Shale Terms


A geological basin is a low-lying area, usually below sea-level. It’s one of two most common places where sediments are collected, the other being lakes.

Sedimentary Rock

The types of rocks that contain fossil fuels are all sedimentary rocks, rocks formed when sediments (gains and mineral particles) are broken down by weather, corrosion and subsequently moved by wind, water, and gravity. Because these rocks are formed from such small components, they are porous, full of spaces where energy-rich carbon compounds can settle and later be extracted in the form of oil and gas.


Shale is a sedimentary rock frequently mentioned as a natural fuel source because of its abundance and composition (42% of all sedimentary rock is estimated to be shale). Shale is produced when layers of carbon-rich mud is compressed until they harden into rock that retain those layers.


Sandstone is a type of rock that is often formed above shale beds, trapping low-density carbon compounds that rise through the mud. Within sandstone beds, carbon compounds generally exist in the form of crude oil.

Fossil Fuel

Fossil Fuels are formed when layers of decomposing plant and animal matter are exposed to intense heat and pressure under the surface of the earth over millions of years with energy obtained from ancient photosynthesis. The three most important fossil fuels are coal, petroleum, and natural gas.


Coal is a flammable black rock used a solid fossil fuel. It’s made up of mainly carbon and is a sedimentary rock formed from peat (decayed vegetation) by pressure of other layers of material on top. Therefore, coal is formed from the remains of plants which lived millions of years ago. Two-thirds of coal mined today is burned to make electricity. It’s becoming less and less popular because less expensive and pollutive sources of energy are beginning to take over such as natural gas.


Petroleum, also called crude oil, is a thick black liquid made up of mainly hydrocarbons. It’s the most important fuel source as it supplies 38% of the world’s energy. Petroleum is made up of many different chemicals, most of which burn well. It’s then separated into simpler mixtures through distillation where gasoline, kerosene, and bitumen (tar) is created. Bitumen gives crude oil its dark colour whereas other chemicals are slightly yellow or colourless.

Natural Gas

Natural gas is a mixture of gases consisting mostly of hydrocarbons with the main component being methane. It is the cleanest form of fossil fuels and is usually burned to boil water into steam that spins a turbine to generate electricity.

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BasinsCardium Formation · Major Oil And Gas Basins: Viking Formation · Major Oil and Gas Basins: Montney · Major Oil & Gas Basins: Alberta Deep Basin · Major Oil & Gas Basins: Duvernay Formation · Permian Basin Stocks ·
James is a third-year finance student at the UBC Sauder School of Business. He is currently a Director on the National Investment Banking Competition Organizing Team. Outside of school, he is studying for his CFA Level I and enjoys playing basketball, working out, and travelling in his spare time.

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