Two of the biggest players in Canada’s Williston Basin region are moving in opposite directions and both are satisfied with where they are heading.
In a deal between the two, Crescent Point Energy added muscle to its expanding sub-Bakken Torquay (Three Forks) stake in a C$378 million purchase of assets in Saskatchewan and Manitoba, including 3,300 barrels of oil equivalent per day, from Lightstream Resources.
For Lightstream, the transaction enables the company to surpass its asset sales goal 15 months ahead of schedule by notching C$729 million in divestitures this year, trimming its corporate debt to C$1.5 billion from C$2.3 billion at the end of 2013.
For Crescent Point, Chief Executive Officer Scott Saxberg said the new properties build his company’s drilling inventory to C$2 billion of future investment in the Torquay play alone.
He said that once a string of recent deal making is completed and increased capital spending takes effect, Crescent Point expects to grow its production per share by more than 7 percent this year.
The company is now targeting an exit rate for 2014 of 155,000 boe per day, with daily production for the year expected to average 140,000 boe per day, while cash flow from operations is forecast at $2.6 billion.
Package details
The Lightstream package provides almost 50,000 acres of Mississippian conventional formations and 27,000 acres of undeveloped freehold interests.
Crescent Point will also pick up three parcels of Bakken rights near its Creelman enhanced oil recovery project in southeastern Saskatchewan.
Other attributes include 72 net internally identified drilling locations, expected free cash flow of C$51 million over the next 12 months, tax pools of C$375 million, and netbacks of about C$62 per barrel based on West Texas Intermediate prices of US$100 per barrel and C$4.65 per thousand cubic feet of natural gas at AECO prices.
Independent engineers have assigned reserves to the properties, with 13.2 million boe listed as proved plus probable and 8.6 million of proved, generating a reserve life index of 11 years proved plus probable and 7.1 years of proved.
The acquisition metrics are estimated at C$99.394 per boe of production at the current output level, resulting in a netback of C$62 per boe, while reserve prices are calculated at C$24.85 of proved plus probable and C$38.14 of proved.
The company said that in addition to consolidating its core operating area, the assets offer high-netback, conventional light oil assets with low decline rates, with the majority of undeveloped land located in an emerging fairway with “significant exploratory potential.”
Torquay expansion
Crescent Point said it continues to delineate and expand its Torquay resource play in several directions with successful step-out drilling results in southeast Saskatchewan.
It disclosed that so far 15 vertical delineation and eight horizontal step-out wells have been drilled across the play, all with “encouraging results.”
Based on the results and refined geological mapping, Crescent Point said it has added about 40,000 net acres and 140 net drilling locations to its Torquay inventory.
Most recently, a step-out well on lands previously acquired in the Flat Lake area has extended the play about 36 miles to the west, with a well yielding an average 250 barrels per day over the first month and “trending above the company’s current internally generated 175,000 barrels of expected ultimate recovery type well.”
Crescent Point said that at a C$3.2 million all-in well cost for a 1 mile long horizontal well, a 175,000 barrel type well generates a rate of return of about 130 percent and pays out in 11 months based on a WTI price of US$97.50 per barrel.
The company said that this year it has been actively consolidating land in the Torquay fairway at Flat Lake through land sales and acquisitions, giving it exposure to 614,000 net acres.
To extend that pace of development it has hiked its 2014 capital budget to C$314 million from an original C$200 million and now expects to drill up to 57 net wells this year, 12 of which are step-out horizontal wells.
Saxberg said Crescent Point is “very excited about our successful step-out wells that have expanded the play in several directions.”
Other operations
The company also reported that current production at its Uinta Basin in Utah is 13,800 boe per day, up 6,000 boe per day since its Ute acquisition almost two years ago and credited the rise to an operated program of recompletions and vertical drilling, including 39 gross non-operated horizontal wells.
It said a review is under way involving the sale of non-core assets in Alberta to further sharpen the focus on its asset base.
The proceeds from any divestitures will help accelerate development of the core Bakken, Shaunavon and Uinta Basin plays.
“We’ve been very active this year on the acquisitions front, but we remain disciplined,” Saxberg said. “We continue to balance our debt levels with our growth prospects.”
If the Crescent Point deal is completed as scheduled by Sept. 30, Lightstream said its asset sales this year will have involved 20.9 million boe of proved plus probable reserves, C$112 million of net annual operating income and a reduction in capital outlay by C$88.7 million.
Lightstream’s new guidance
By factoring in the sale of its remaining southeast Saskatchewan assets, Lightstream has revised its 2014 guidance to an average 40,000-42,000 boe per day from 41,000-43,000 boe per day a month ago, lowering its exit rate for the year to 36,500-39,500 boe per day from 40,000-43,000 boe per day.
The company said it currently has four rigs operating in southeast Saskatchewan and central Alberta and plans to drill 38 wells within its Bakken and Cardium business units, with 31 brought on stream before the end of the year.
