Crescent Point Energy Corp. , one of the hungriest buyers of rival energy companies, has drawn another small oil producer into its fold as it works to cement its position in a series of Western oil plays.
On Wednesday, the company announced the $611-million acquisition of Wild Stream Exploration Inc. , a small energy producer that owns a series of oil and gas fields geographically near existing Crescent Point assets.
The deal will raise Crescent Point’s output by 5,400 barrels of oil equivalent a day – fully 91 per cent of which comes from fields contiguous to places Crescent Point is already pumping oil.
“This is a very logical deal,” said Don Rawson, managing director of institutional research at AltaCorp Capital.
The deal also provides Wild Stream shareholders with stock in a new company, yet to be named, that will be staffed by Wild Stream executives and will focus on finding oil in less-explored areas. That new company, according to Crescent Point, has a net asset value of $120.4-million.
The Wild Stream deal is just the latest for Crescent Point, which was originally formed as an energy trust in 2003. The company has spent billions snapping up competitors to establish large positions in a series of plays – Saskatchewan’s Bakken and Lower Shaunavon are just two examples – that have become significant new sources of oil.
The result has been major growth for Crescent Point, which produced 6,000 barrels of oil equivalent per day in 2003, and now expects to end 2012 with more than 90,000 barrels a day, following the Wild Stream deal.
But the Wild Stream deal may also mark an inflection point. Although Crescent Point has added numerous barrels through its own drilling, its acquisition strategy has been an important one. It has been successful enough, however, that it’s getting increasingly difficult to find companies to buy – especially companies with enough production to make an impact on Crescent Point’s numbers.
“It’s hard to grow as aggressively as they have in relation to their size, so I think that they need to become more of an exploration company,” Mr. Rawson said.
There are, however, several companies that Crescent Point has either partnered with, or taken an ownership stake in, that could still become future acquisition targets, including Second Wave Petroleum and Coral Hill Energy Ltd., said Greg Bay of Vancouver-based Cypress Capital Management, a long-time Crescent Point investor.
The company also has plenty of ways to grow on its existing lands, Mr. Bay said,.
Saskatchewan has proven an important new source of crude, which has come from reservoirs tapped using the new technologies – horizontal drilling, multiple-stage underground fracturing – that have revolutionized the oil and gas industry.
The company has been willing to pay substantial amounts to buy out competitors, in the belief that its technological prowess would allow it to significantly boost production out of existing fields. Crescent Point chief executive Scott Saxberg pointed to its use of water injections, which are allowing it to boost the proportion of oil it can extract from reservoirs from 20 per cent to 30 per cent.
That is an immense gain, especially written across the breadth of the company’s current landholdings.
Using that kind of technology, “with both the Shaunavon and Bakken – each of those fields alone has the potential to double our reserves as a company,” he said.