Highpine, Vaquero, Kick, West and Lightning — not exactly household names in Alberta’s energy world, but they’re seizing investor attention.
What they have in common is an overriding interest in the Pembina Nisku region of west-central Alberta, rated as the hottest oil play of this century in Western Canada.
The already simmering activity in Pembina boiled over April 6 when Highpine Oil & Gas launched a C$386 million takeover bid for Vaquero Energy, its 40 percent partner in a string of recent discoveries in Canada’s largest oil pool, 60 miles southwest of Edmonton.
That was just a day after Highpine came blazing out of the gates, raising C$72 million in an initial public offering on the Toronto Stock Exchange and closing on April 6 at C$19.69 per share, compared with the C$9 a share it fetched on a private offering of C$30 million last October. Fueling interest in Highpine and its peers is what Tristone Capital described as the “source of the most significant series of light oil discoveries” in the past five years. First Energy Capital said the area is “emerging as one of the hottest plays in Canada.”
Pembina Nisku, which lies about 60 miles southwest of Edmonton, has attracted an eye-catching land rush in recent times, peaking in late March when an Alberta government sale generated an average C$20,600 per hectare (one hectare equals 2.471 acres) for 64 hectares, four times what was paid in December for 256 hectares in the same area.
Pembina Canada’s biggest oil pool
Nisku is a geological formation in the Pembina field that became Canada’s biggest oil pool after the Cardium layer was opened up.
Nisku has needed advances in seismic technology over the last 30 years to fire up renewed interest in Pembina, although the experts have issued some cautionary observations. They say the geology isn’t fully understood; the timing of government approvals and the provision of infrastructure is uncertain; and there are worries that operators may recover what they can without determining the scope of the reserve base.
Meantime, these are some of the developments:
• Highpine has been involved in 14 of 18 Pembina discoveries and was expecting to produce 5,500 barrels per day by the end of 2005. If the Vaquero deal is approved, it is expecting to reach 13,500 barrels of oil equivalent per day, three quarters coming from Pembina, and will spend C$120 million to drill 40-50 wells. The Vaquero bid represents a purchase price about C$100,000 per flowing barrel, which Highpine Chief Executive Officer Gordon Stollery said is high based only on what exists today. But he described a Pembina discovery in March as one of the “most dramatic things I’ve seen” in 30 years of exploration.
• Vaquero Energy drilled eight successful Pembina Nisku wells in 2004, bolstering its proved reserves by 37.2 percent to 6.2 million barrels of oil equivalent, and plans to spend C$28 million this year. It completed a C$15 million equity financing in December, added to its land holdings, and hopes to reach 4,800 bpd by the end of 2005.
• West Energy, whose sole interest is Pembina Nisku, made two recent finds and is targeting 6,000-plus bpd by the end of 2006.
• Kick Energy, better known as a gas producer, reported two finds in 2004 and expects to build 5,000 bpd of production this year.
• Lightning ended 2004 with production of just over 4,000 boe per day, up 2,800 boe per day for the year, and set a budget for 2005 of C$9 million.
