Crescent Point Energy has an overriding operating belief that “if we aren’t drilling no one is,” says Chief Operating Officer Neil Smith.
For every aspect, the company is the leader in Canada’s Bakken and Shaunavon plays - production, drilling, advances in technology - and now for strategic moves it might take to consolidate assets in its core holdings.
Chief Executive Officer Scott Saxberg, without discounting talk that Crescent Point is eying distressed companies and engaged in discussions with various parties, made the point in early March that the corporate approach is one of prudence and caution.
He said the objective is to determine whether prospective acquisitions would meet his company’s prerequisites of low risk and the easiest to “bring in house,” and mentioned that Colorado “is an area of interest.”
For now, there is no avoiding the widely held view that Crescent Point might take a prominent role if an oil patch fire sale catches alight in North America.
The company is seen as a possible suitor in the Bakken region, especially now that hopes of a rebound in oil prices are crumbling.
Analysts analysis
Neal Dingmann of SunTrust Banks in Houston said that as the industry comes to terms with the price outlook there is a growing acceptance that “deals will start to happen sooner rather than later. You can only kick the can down the road for so long.”
Kyle Preston, an analyst with National Bank Financial, said Crescent Point occupies the “driver’s seat” as a likely buyer of assets or companies and topping the list of candidates is Lightstream Resources, which has struggled to sell its Saskatchewan Bakken assets, prompting speculation that the whole company is a target.
Preston values Lightstream’s Bakken assets at C$1 billion, compared with its market capitalization of C$204 million.
Katrina Karkkkainen, who covers junior E&P companies for First Energy Capital, includes Crescent Point on her shortlist of companies that combine strong balance sheets with active hedging that has blunted the impact of oil’s price drop.
Technology innovations
Whatever happens on the merger and acquisition front, Crescent Point is eagerly rolling out its latest technology breakthrough, which involves a closable sliding sleeve that facilitates the movement of fracturing water around a reservoir.
Smith told analysts the innovation is a “huge technical change” and that a year of testing has yielded positive results.
The company said the closing sleeve has the potential to “increase the efficiency and productivity of (its) waterfloods in both the Viewfield Bakken and Shaunavon resource plays.”
“This technology will allow increased control over water displacement and, in combination with the waterflood, could lead to significant increases in recovery factor.”
Crescent Point also hopes the closable sleeve will lower capital costs by reducing the frequency of well clean-outs and is counting on using the technique across all of its operations.
In combination with a waterflood the technique has the potential to generate significant value for shareholders, with “increased recovery factors and capital savings when applied across our large drilling inventory,” the company said.
Having set a new production high of 153,822 boe per day in the final quarter of 2014 - up 7 percent from a year earlier - Crescent Point believes “the steps we are taking now, in terms of lowering our cost structure and improving our efficiencies, will benefit the company in all price environments,” Saxberg said.
The year ahead
The plans for 2015 include advancing and growing a “highly economic discovery” at the Torquay (Three Forks) zone in southeast Saskatchewan’s Flat Lake play, where the company drilled 16 net oil wells in 2014.
Over the past year the company has doubled proved plus probable reserves at the play to 33.6 million boe, setting the stage to start a waterflood pilot project in mid-2015.
Saxberg said the achievements at Flat Lake demonstrate “the strength of our business strategy of acquiring, developing and exploiting large oil-in-place pools with low recovery factors.” A new Flat Lake discovery in 2014 added 1 billion barrels of original-oil-in-place to kick start a play covering 614,000 acres.
In its other core United States operation in the Uinta Basin of Utah, Crescent Point has increased proved plus probable reserves by 58 percent since 2012 as it tests new well completion techniques and builds its resources in what Smith described as “one huge field.”
While joining its peers in cutting spending at the start of 2015 and shrinking its capital budget by 28 percent, Crescent Point still has a drilling and completions program of C$1.27 billion on its books and expects to review those plans after the spring breakup.
To maintain a “financially strong organization,” Crescent Point said it increased its syndicated credit facility in the fourth quarter by 40 percent to C$3.6 billion ― a position it views as “increasingly important given the current low oil price environment.”
Supporting its ongoing operations, the company said it has hedged 56 percent of its oil production for this year at an average price of C$89 per barrel and 33 percent of its 2016 production at C$84 per barrel.
It is also making a “concentrated effort” with its contractors to reduce costs, projecting savings since 2014 of 15 percent to 20 percent in “certain projects.”
