Kicking Horse Energy Inc. acquired nine full working interest sections of Montney rights in the Kakwa area of Alberta in exchange for 27 sections of deep rights in the province’s Chime area, the company said July 6. Kicking Horse retained shallow rights in Chime, and the exchange was zero net cost to the company.

The new acreage offsets the West Kakwa acreage and is within three miles of the East Kakwa production block.

A vertical assessment well will be spudded on the new acreage late in 2015’s third quarter, the company said.

Separately, Kicking Horse sold 2.9 net sections of various shallow rights in the Wapiti area on acreage it previously farmed out for CA$3 million in cash. The sale was on an after-earnings basis.

The transactions have helped grow the company’s core Kakwa area, Steve Harding, president and CEO, said. He added that the new acreage is about 500 meters shallower than the disposed acreage.

The company also gave an operational update.

Drilling resumed at East Kakwa, and the 13-25-63-6 W6M well was spudded on July 5. It is on the same drilling pad as the 13-23-63-6 W6M well drilled in the first quarter. The rig will be moved to the newly acquired acreage to drill the vertical test well, Kicking Horse added. Later in the year, two additional test wells will be drilled in East Kakwa, and are scheduled to go on production late in 2015.

Net production has averaged about 4,000 barrels of oil equivalent per day (Mboe/d), 57% liquids and 43% gas. Second-quarter 2015 production is expected to average about 3Mboe/d.

In May, the two longest-reach wells, the 14-25 and 15-25-63-6 W6M, were brought on production using sliding sleeves. They produce at similar rates.

The 1-14-63-6 W6M well was started up after startup was delayed in June because of completions on the 1-11 and 8-11-63-6 W6M wells. These were completed using sliding sleeves, have been flow-tested and will go on production in August, Kicking Horse said.

Using a single rig drilling program should only result in modest 2015 annual production increases, because the additional wells are not scheduled to come onstream until late in this year, the company said. Production guidance remains at 3,200boe/d to 3,700boe/d. Total capex is expected to be about CA$65 million.

Calgary, Alberta-based Kicking Horse Energy Inc.operates in the liquids-rich tight gas Montney Formation.