Land swap bolsters Crew stock
New drilling rights area ‘ more than offsets the acreage that was given up’
Analysts and the market applauded Thursday after Calgary- based Crew Energy announced it had swapped 17,000 hectares of Crown drilling rights in northeastern B. C. for 13,700 hectares of more promising land.
President and chief executive Dale Shwed said the agreement reached with the province replaces drilling rights that Crew had accumulated through the purchase of four other companies from 2008 to 2014 — which it could not use because of a 2004 access ban the province imposed to protect hunting, fishing and cultural rights of the Saulteau First Nation.
“We’ve been working on this for a number of years now and it’s nice to see something come to fruition,” Shwed said.
“To facilitate their needs and ours to access our mineral rights, we agreed to the swap which tends to make sense for both parties because now we have a big block of land that’s contiguous to our existing land bases and also close to our infrastructure in the area.”
He said the formula used to determine how much land Crew received was based on the thickness of the Montney pay zones and how much resource was therefore likely to be found there. Crew received a smaller parcel but the resource is believed to be more concentrated than in the native lands in the Peace Moberly Tract, a region between the Peace and Moberly rivers.
In early trading on the Toronto Stock Exchange, Crew stock was up as much as seven per cent to $ 5.45. It closed at $ 5.27, up 17 cents.
In a report Thursday, analyst Brian Kristjansen of Dundee Capital Markets said the deal is very beneficial to Crew and increases its “wet gas” ( liquids- rich) inventory to 68,600 net hectares from about 62,000.
“The forfeited Moberley lands are drier and thinner ( 165 to 190 meters of total Montney pay) relative to the acquired Groundbirch lands ( 175 to 275 meters of total pay) and were realistically never going to be drilled given the comparative economics and development restrictions,” he wrote.
Analyst Juan Jarrah of TD Securities agreed the Peace Moberly Tract lands were unlikely to be developed. He pointed out that the swap had no transaction costs and the new drilling rights are on land that is more prone to liquids and “more than offsets the acreage that was given up.”
Spokeswoman Sandra Steilo of the B. C. Ministry of Natural Gas Development confirmed the deal with Crew, noting it was required because of the province’s “new relationship and reconciliation agreement” with the area natives.
“As a result, the Saulteau First Nation’s concerns about possible oil and gas activity within the Peace Moberly Tract are addressed,” she wrote in an email.
Crew also reported second- quarter production of about 17,600 barrels of oil per day, beating the upper end of its target range, despite the 25- day planned shutdown of a third- party gas processing facility which took 2,500 boe/ d off- line for 25 days.
It reiterated its 2015 capital budget of $ 185 million and average production target of 20,000 to 22,000 boe/ d, with a year- end exit output of 24,000 to 25,000 boe/ d.
Financial results are expected on Aug. 6.
We’ve been working on this for a number of years now and it’s nice to see something come to fruition.
DALE SHWED