Crescent Point, Penn West swap tight oil prop­er­ties

Calgary Herald - - CAL­GARY BUSI­NESS - DAN HEALING

A pair of Cal­gary-based en­ergy com­pa­nies are fur­ther ce­ment­ing dom­i­nant po­si­tions in Al­berta and Saskatchewan tight oil plays with an as­set swap and sale.

In news re­leases Wed­nes­day, Crescent Point En­ergy Corp. an­nounced it would buy 3,500 bar­rels of oil equiv­a­lent per day and 27.5 mil­lion boe of proved and prob­a­ble re­serves mainly in the Lower Shau­navon for­ma­tion of south­west Saskatchewan from Penn West En­ergy Trust.

Penn West, in turn, said it will boost its po­si­tion in the Cardium light-oil play in west-cen­tral Al­berta by buy­ing Pem­bina pro­duc­tion of 600 boe/d and un­de­vel­oped land of 8,300 net hectares, plus take a 50 per cent work­ing in­ter­est in 16,000 hectares of un­de­vel­oped land next to its Vik­ing play near Dod­s­land, Sask. Penn West will also re­ceive $434 mil­lion cash in the deal, ex­pected to close Jan. 15.

“This last six months we’ve been pretty ac­tive in con­sol­i­dat­ing our core plays,” said Crescent Point chief executive Scott Saxberg. “We have the dom­i­nant land po­si­tion in the heart of the Bakken play and now basi- cally con­sol­i­dated al­most the en­tire Lower Shau­navon, which is the third­largest pool dis­cov­ered in West­ern Canada.”

Bill An­drew, chief executive of Penn West, said the in­flow of cap­i­tal will help his trust clean up its bal­ance sheet and pay down debt as it pre­pares to con­vert to a cor­po­ra­tion in 2011.

“We grew very ra pi dly in late 2006 through 2007 with the ac­qui­si­tion of Petro­fund (En­ergy Trust for $2.97 bil­lion) and Ca­netic (Re­sources Trust for $3.6 bil­lion), and we got great as­sets but took on some debt,” he said, adding the prop­er­ties sold to Crescent Point were con­sid­ered to be the small­est and least core par­cel of hor­i­zon­tal drilling op­tions.

Crescent Point shares closed down 22 cents at $39.16 and Penn West units were up 28 cents to $18.64.

Crescent Point also dis­closed its 2010 cap­i­tal bud­get, an­nounc­ing it plans to spend $450 mil­lion to drill 224 net wells in the two Saskatchewan plays.

Saxberg said the cap­i­tal bud­get is 38 per cent higher than in 2009 and about the same as in 2008. How­ever, the com­pany will in­crease the bud­get by $100 mil­lion if oil prices stay at cur­rent lev­els be­tween $70 and $80 US per bar­rel to mid-year, a pos­si­bil­ity he said seems likely.

Spend­ing and div­i­dends will slightly ex­ceed cash flow, Saxberg said, but will re­sult in pro­duc­tion growth of about five per cent, with an exit rate of about 56,500 boe/d.

Penn West slightly low­ered its cap­i­tal plan to be­tween $750 mil­lion and $900 mil­lion, most of which will be in­vested in up to 40 hor­i­zon­tal wells on its Cardium acreage.

The Penn West deal is ex­pected to in­crease Crescent Point’s Lower Shau­navon pro­duc­tion to more than 7,000 boe/d, about 83 per cent of to­tal from the area, the com­pany said. With side­car com­pany Shel­ter Bay En­ergy Inc.’ s stake, the com­pany con­trols 89 per cent of to­tal Lower Shau­navon pro­duc­tion.

Crescent Point’s un­de­vel­oped land hold­ings are ex­pected to in­crease by 78 per cent to 100,000 net hectares. Shel­ter Bay has about 10,000 net hectares in the Lower Shau­navon.

Crescent Point En­ergy CEO Scott Saxberg says the trust is con­sol­i­dat­ing its core oil plays.

Bill An­drew

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