Key Highlights

  • Stonehorse Energy (ASX:SHE) will participate in four additional development wells at Drumheller in Alberta.
  • The company plans to invest approximately C$8 million in the phase-two drilling program.
  • The new wells target the same Ellerslie Reservoir as the initial four-well campaign.
  • Stonehorse has divested a 26.25% working interest in a Natural Gas asset near Sundre for C$3.05 million.
  • The company expects its production profile to become increasingly weighted toward oil and liquids.

Stonehorse Energy (ASX:SHE) has announced its participation in a second four-well development program at the Drumheller project in Alberta, Canada, following the completion of an earlier drilling campaign that is currently producing as planned. The decision comes as the company continues to reshape its production portfolio, including the sale of a natural gas asset to increase its focus on oil and liquids production.

The latest development program reflects Stonehorse’s ongoing strategy of partnering with established operators in Western Canada while targeting projects that can be brought into production relatively quickly.

Four Additional Wells Approved

Stonehorse has agreed to participate in four new development wells at Drumheller alongside the same operating partner involved in the initial drilling campaign.

The company expects to invest approximately C$8 million in the phase-two program, which will target the Ellerslie Reservoir, a producing formation within the Drumheller area.

Management noted that the first four development wells are currently on production and performing in line with expectations. The positive outcome from the initial campaign contributed to the decision to proceed with further drilling in the area.

The new program is intended to build on the operational experience gained from the first phase while increasing production exposure within a known hydrocarbon system.

Focus Remains on the Ellerslie Reservoir

The upcoming wells will target the same reservoir interval that was tested in the first phase of development.

According to the company, the Ellerslie Reservoir is characterised by a high liquids content and has become a key focus of the development strategy. Stonehorse stated that the area has demonstrated production characteristics similar to those encountered in the initial Drumheller wells.

The first well in the second development phase is expected to commence drilling shortly. The location benefits from existing infrastructure, allowing production facilities to be connected soon after drilling and completion activities are finalised.

Access to established infrastructure can reduce development timelines and support earlier production commencement compared with greenfield developments.

Asset Sale Supports Portfolio Realignment

Alongside the drilling announcement, Stonehorse revealed the sale of a 26.25% working interest in land and production Assets near Sundre, Alberta.

The transaction generated proceeds of C$3.05 million in cash, which the company said will be used for general corporate purposes.

Management indicated that the divestment aligns with its broader objective of balancing and optimising the production portfolio. Following the sale, Stonehorse's production profile is expected to become more heavily weighted toward oil and liquids rather than natural gas.

The company believes the combination of the asset sale and expanded Drumheller activity supports this strategic transition.

Building an Oil-Weighted Production Base

The latest developments suggest a continued emphasis on projects with higher exposure to liquids production.

Oil and liquids-rich assets can offer different economic characteristics compared with natural gas assets, particularly when supported by established infrastructure and operational efficiencies.

Stonehorse's decision to deploy Capital into additional Drumheller wells while reducing exposure to a natural gas property reflects a deliberate allocation of resources toward projects it considers aligned with its production objectives.

The company noted that future growth opportunities in Western Canada will continue to be evaluated through this strategic lens.

Operational Momentum Continues

The Drumheller expansion demonstrates Stonehorse's intention to build on the momentum generated by its first development campaign.

Management highlighted the importance of working alongside experienced operators and targeting opportunities capable of delivering relatively short development timelines.

The second phase of drilling is expected to provide additional production exposure and operational data that could inform future development decisions in the region.

As drilling progresses, investors are likely to monitor well performance, production outcomes and any indications of further expansion opportunities.

About the Company

Stonehorse Energy (ASX:SHE) is an oil and gas company with operations focused on Western Canada. The company seeks to build production and Cash Flow through participation in development projects while maintaining a diversified energy portfolio and evaluating opportunities for growth.

Industry Trends and Market Context

The North American energy sector continues to see producers optimise asset portfolios by focusing capital on projects that align with production and return objectives. Many operators have prioritised liquids-rich reservoirs where existing infrastructure can support efficient development.

Across the sector, companies are increasingly evaluating asset sales and acquisitions as part of broader Portfolio Management strategies. Investment decisions continue to be influenced by Commodity prices, operating costs, infrastructure access and long-term production outlooks.

Bullish Perspective

Supporters may view the expansion of the Drumheller program as evidence of confidence in the performance of the initial wells. The additional drilling, combined with a greater focus on oil and liquids production, could provide opportunities for production growth and improved operational Leverage if drilling outcomes meet expectations.

Bearish Perspective

A more cautious perspective recognises that development drilling carries operational and commodity price risks. Future well performance may differ from earlier results, while a greater concentration in oil-focused assets could increase exposure to fluctuations in Crude Oil markets.

Investment Risks and Challenges

Stonehorse remains exposed to risks associated with hydrocarbon development, including drilling performance, production variability, operating costs and commodity price Volatility. Regulatory requirements, environmental obligations and infrastructure constraints may also influence project Economics. In addition, the success of the company's portfolio strategy depends on its ability to effectively allocate capital and generate returns from new development investments.