Crescent Point, Penn West swap tight oil properties
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.