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Saskatchewan a deal-making hot spot
Gary Park For Petroleum News
Outside of British Columbia’s sizzling tight and shale gas prospects, the hottest piece of oil patch real estate in Canada these days is southern Saskatchewan, led by the Bakken oil field.
It’s the scene of a heavyweight contest between PetroBakken (formed from a C$2.4 billion merger of Petrobank Energy and Resources and TriStar Oil & Gas) and Crescent Point Energy, which has pushed its 2009 deal making to almost C$1.25 billion.
Trying to move up the rankings is Glamis Resources, which has made five investments totaling C$535 million this year.
The attraction is simple: Powered by new technology, the industry has drilled more than 1,000 wells in the last five years, raising oil-in-place by about tenfold to almost 5 billion barrels and current output to 65,000 barrels per day.
Crescent Point has locked up about two-thirds of the Bakken land and has a similar share of the Lower Shaunavon, which contains heavier crude.
TriAxon latest deal Its latest deal on Nov. 9 is an agreement to take over privately owned TriAxon Resources for C$249 million, adding 1,400 barrels of oil equivalent per day to its third-quarter output of about 41,000 boe per day.
It has also corralled 12.4 million boe of proved and probable reserves (in Saskatchewan and Alberta); 91,000 net acres of undeveloped land, 40,00 acres of which are in the Bakken and Viking plays of Saskatchewan; 199 net drilling locations; and C$99 million in tax credits.
The transaction works out to C$142,643 per flowing boe and C$16.10 a boe for the proved and probable reserves.
Crescent Point Chief Executive Officer Scott Saxberg said TriAxon has aggressively pursued high quality plays over recent years with a significant recovery factor and established leading positions in Bakken and Viking, establishing a base for “significant production and reserves growth.”
And Crescent Point is making no secret of the fact that its buying binge is not over.
Chief Financial Officer Greg Tisdale said the company sees “some consolidation opportunities available” in the Saskatchewan plays, suggesting the list of potential takeover targets is lengthy.
“We do have a critical mass in all our core areas,” he said.
Tisdale credited new horizontal drilling and fracture technology with making rocks previously seen as uneconomic candidates for production.
Unlocking the potential TriAxon Chief Executive Officer Jeff Saponja said the basin is now less about exploration and more about returning to areas where there are known hydrocarbon accumulations and using science to unlock the potential.
He said that is the “essence about what we believe the new junior (companies) are all about now.”
TriAxon did not even require Crescent Point to dip into the proceeds from a C$575 million share offering which it completed Nov. 3.
Scotia Capital analyst Jeremy Kaliel said in a research note that “numerous opportunities are currently emerging across the (Saskatchewan) basin.”
He said Crescent Point is ideally positioned to make acquisitions, “given the rapid emergence of new resource plays and the company’s cost of capital advantage over most of its peers.”
Jeff Martin, a Peters & Co. analyst, estimated Crescent Point’s Viking wells would break even at an oil price of C$64 per barrel.
On a more cautionary note, Dean Orrico, chief investment officer at Middlefield Capital, warned about the per-flowing-boe acquisition cost being paid by Crescent Point.
He said it is now up to management to focus on what it has, drill the properties and prove that what they are paying is justified.
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