The Montney shale gas formation in B.C. and Alberta is seen as the crucial anchor of a future West Coast liquefied natural gas industry, but some companies are making money drilling there now, even as the price of the fuel languishes.

Painted Pony Petroleum Ltd. and ARC Resources Ltd. are among those that have had strong results in their acreage in the B.C. region, and their executives say they are generating returns with gas selling this winter below a bargain-basement $3 per 1,000 cubic feet.

Canadian gas recently sold for $2.65 per 1,000 cubic feet on the wholesale market, a far cry from the surging prices of about $5 a year ago.

With horizontal drilling and completion costs at $6.7-million a well – about six times that of a conventional vertical well – Painted Pony’s Montney operations north of Fort St. John, B.C., compete with any other in North America, chief executive officer Patrick Ward said.

They can do so because of how prolific the wells are and how comparatively low the day-to-day operating costs are, Mr. Ward said in an interview at First Energy Capital Corp.’s energy conference in New York.

“In the Montney, what we are competing with is the Marcellus in Eastern New York State and Pennsylvania,” he said.

The United States shale deposit has been cited as a major reason that the North American market has been transformed from shortage to abundance in recent years, providing new competition with Canadian gas. It offers a massive source of supplies adjacent to major population centres.

The Montney, with an estimated 271 trillion cubic feet of marketable gas on the B.C. side alone, represents the anchor supply for some of the multibillion-dollar liquefied natural gas plants proposed for Canada’s West Coast. Leading LNG proponent Petronas of Malaysia has been the most active driller there. The state-owned company is expected to make a final investment decision for a multibillion-dollar LNG complex later this year.

Painted Pony and ARC say LNG exports, should they come to fruition, would be a boon to Montney development, as gas prices are expected to rise – “the peanut butter on the cookie,” Mr. Ward called it. But delays in LNG are not preventing the producers from operating.

Low costs and royalty breaks from the B.C. government allow the Canadian producers to keep drilling while selling into the North American gas grid. The leftover cash flow still allows for reinvestment, even with gas markets in a trough, said Myron Stadnyk, ARC’s CEO.

“To continue to build this business, you’re adding value every time you add wells to that business,” he said, adding that the company is devising its plans as if gas prices will remain at $3.

ARC’s main Montney play is in the Dawson, B.C., area, where the company has employed new hydraulic fracturing technology to increase the long-term flow rates of wells, Mr. Stadnyk said.

Following major spikes last winter, North American gas markets have returned to low levels amid the relentless growth in U.S. shale supplies. which has calmed fears about draining inventories during cold snaps. Low gas prices only add to the pain across the industry caused by the collapse in crude markets.

Still, Montney players have managed to entice investors with equity issues in recent months.

Painted Pony, having signed a strategic alliance with AltaGas Ltd. to develop processing plant facilities, raised $55-million in a bought deal last August. In January, ARC completed a $402-million financing