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Going back to the future
By GARY PARK For Petroleum News
For veteran Canadian oilman Grant Fagerheim, it’s a case of regaining control of light oil resource assets that he watched disappear five years ago.
In 2008 he was president and chief executive officer of Cadence Energy when it was sold to help create Barrack Energy, the unit of Barrick Gold, for C$400 million, to provide the mining giant with a hedge against energy costs at its gold operations.
Now president and CEO of fast-emerging Whitecap Resources, Fagerheim has reacquired one-third of those assets, which produce about 9,000 barrels of oil equivalent per day.
The sale by Barrick is part of its strategy to dispose of underperforming assets. For Whitecap, the deal helps consolidate working interests in the Valhalla Montney and Garrington Cardium areas of western Alberta.
Fagerheim said the properties offer “low-decline, high cash flow netback with good growth potential, which means we will have surplus cash flow to pay a dividend.”
“Our team has demonstrated an ability to deliver on the expectations we’ve put out there. When shareholders get a return they’re prepared to invest.”
Once the transaction closes, Whitecap will have 100 percent ownership of producing assets and infrastructure in Valhalla and 91 percent in Garrington.
The addition of 2,900 boe per day (56 percent oil and liquids) is targeted to reach 3,200 boe per day in 2014. Mid-size player The company had first-quarter production of 17,600 boe per day, moving it into Canada’s mid-size league, and Fagerheim believes 35,000 boe per day is within the company’s sights without needing any further acquisitions.
Don Rawson, an analyst with AltaCorp Capital, said the deal makes sense for Whitecap as it proceeds to waterflood the Valhalla asset.
He said Whitecap is one of the few companies that can access capital, putting it in a strong position when buying assets.
Earlier this year, Whitecap paid C$110 million to take over Invicta Energy, gaining Viking a light oil waterflood asset in the Dodsland area of west-central Saskatchewan, adding 900 boe per day (95 percent light oil) to its portfolio and expecting to reaching 1,200 boe per day in 2014.
The Dodsland Viking pool is near Whitecap’s Lucky Hills Vikings assets where it has gained significant horizontal drilling and multi-stage fracturing expertise.
The waterflood is seen as effective in maintaining reservoir pressure, which results in a production decline of 12 percent for vertical development of the pool.
Improved horizontal results There have been continually improving results from the drilling of 25 horizontal wells, which represent 390 net barrels of oil per day.
With cumulative oil production of 24 million barrels (19 percent recovery factor), a current water cut of only 51 percent and offsetting pool results, Whitecap believes there is considerable incremental upside to the pool that can be realized through a combination of horizontal drilling, water injector reactivations and investor conversions.,
Whitecap said it will bring its experience of drilling more than 100 Viking horizontal wells to optimize the results.
The company said that similar to its past Viking and Cardium acquisitions, it expects to improve on initial production 30-day rates over time and with 101 (79.5 net) identified locations, there is a multiyear inventory to maintain and grow production in the pool.
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