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Crescent Point Energy marches on
Gary Park For Petroleum News
Crescent Point Energy has taken another step toward claiming a dominant role in the Lower Shaunavon and Bakken resource oil plays of southern Saskatchewan — both of them Canadian extensions of the Williston basin in North Dakota and Montana.
Extending a series of takeovers of small oil producers, Crescent Point has offered C$770 million for junior producer Wild Stream Exploration.
The focus of the transaction is the growing Shaunavon and older Battrum/Cantuar properties in southwest Saskatchewan west, which are contiguous to existing Crescent Point holdings.
If the deal is completed on schedule by March 15, Crescent Point will add 4,900 barrels of oil equivalent per day to its existing 10,000 boe per day of Shaunavon production, while adding 128,000 net acres and 190 low-risk drilling locations.
As well, Crescent Point will inject an extra C$50 million into its 2012 capital budget, hiking planned spending to C$1.15 billion.
The bundle also includes 23,700 acres in Battrum/Cantuar and 9,600 acres in the emerging Beaverhill Lake light oil resource play in west-central Alberta, which line up with Crescent Point’s light oil development in Alberta’s Swan Hills area.
Current combined production is 5,400 boe per day, which Crescent Point expects will boost its 2012 output by 4 percent to 83,500 boe per day, with an exit rate for the year of 90,000 boe per day, having started out as an energy trust in 2003 with a mere 6,000 boe per day.
Crescent Point said independent engineers have estimated the deal involves 28.7 million barrels of proved plus probable reserves at a purchase price of C$20.66 per boe, or C$109,800 per producing boe.
Buying out competitors Crescent Point Chief Executive Officer Scott Saxberg said the deal fits well for both companies, which get to monetize and de-risk a large portion of their enterprises into a larger company.
Saxberg’s company has been willing to pay substantial amounts to buy out competitors, confident its technological skills will boost production out of existing fields.
The use of water injections allow it to increase the portion of oil it can extract from reservoirs to 30 percent from 20 percent, Saxberg said, noting that technology in the Lower Shaunavon and Bakken alone has the potential to double the company’s reserves.
UBS analyst Matt Donohue said the metrics of C$109,800 per flowing boe and C$34 per barrel for proven reserves are slightly less than historical Shaunavon averages, but “in terms of strategic rationale, we see the acquisition as a nice tuck-in deal for Crescent Point.”
The remaining 1,000 boe per day of Wild Stream’s current production will be transferred into a new junior exploration company, which will assume C$43.5 million of existing Wild Stream debt and have a net asset value of C$120.4 million.
The deal further stokes competition among Crescent Point, PetroBakken and oil sands-focused Cenovus Energy to secure rights in the Bakken region, which attracted only sporadic drilling over 50 years until horizontal drilling and well-fracturing techniques opened up tight oil plays across North America.
The Shaunavon is viewed as more challenging than the actual Bakken play — an extension of the Williston basin in North Dakota and Montana — because of its tight mix of crystal and limestone. The trend contains reservoirs at depths of 4,000 feet, with net pays of 13 feet-50 feet, containing 22 degree API crude.
To spur industry interest, the Saskatchewan government offers a royalty holiday on output from horizontal wells, with companies paying 2.5 percent on the first 37,000 barrels.
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