Crescent Point Energy Corp announced its $1.8 billion capital budget for 2018 on Jan. 9, of which 55 per cent is expected to be spent in the Williston Basin. That roughly equates to just under $1 billion. While the company does have some activity in North Dakota, almost all their “Williston Basin” efforts are in southeast Saskatchewan.
Southwest Saskatchewan (including the Kindersley area) is pegged for 20 per cent, and the Uinta Basin in Utah. That basin is getting increasing attention from the company, as noted by this budget and its associated press release. Crescent Point established a significant position in the Uinta Basin in late 2012, a stacked multi-zone, light oil resource play.
Torquay area
Of the 26 drilling rigs Crescent Point had working in Saskatchewan as of Jan. 12, 25 were in Saskatchewan, and nine were working in an area roughly the size of a township, southwest of Torquay, between Highway 18 and the United States Border. It’s an area the company refers to as “Flat Lake.”
Ryan Gritzfeldt, Crescent Point vice president of marketing, told the Mercury on Jan. 12 that concentration was not by design, but rather a product of licensing and their drilling schedule. “In general, Flat Lake will be a bigger area this year, no doubt,” he said. “in general, you could see that Flat Lake area busier than Viewfield.”
Asked what formations they are pursuing there, Gritzfeldt said “It’s Torquay and Ratcliffe, specifically.”
As for their announcements in October of a major land purchase to the northwest of there, with the intention of pursuing the Lodgepole formation (also known as the Souris Valley Beds), he replied that is still in very early stages, and that nearly all the drilling in that region would be on Torquay and Ratcliffe. A handful of Lodgepole wells were planned for this year.
Uinta
The company also successfully identified new drilling locations during 2017, including additional horizontal locations in the Uinta Basin. At year-end 2017, Crescent Point’s risked Uinta Basin horizontal inventory increased to approximately 850 net locations, up from 120 at the end of 2016. The company noted these new higher rate locations have the potential to generate significant production and increase the productive capacity of the company’s drilling inventory by approximately 70 per cent compared to the prior year.
Crescent Point also updated its estimated original oil-in-place for the Uinta Basin, which grew by over 60 percent to approximately 8.5 billion barrels. Put in perspective, in 2013, the United States Geological Survey’s assessment of the Bakken and Three Forks formations in North Dakota said, “The assessments found that the formations contain an estimated mean of 7.4 billion barrels of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought.”
“Our operational execution was highly successful in 2017,” said Scott Saxberg, president and CEO of Crescent Point. “We added new drilling locations in each of our core areas and advanced new plays for future development. In Uinta, our risked horizontal drilling inventory increased to approximately 850 net locations and can potentially increase to over 1,700 based on the continued success of our newly acquired lands on the western portion of the basin, new zone development and additional down-spacing.” Crescent Point’s budget remains focused on allocating capital based on returns and balancing longer-term development goals for its core areas. Over 75 percent of net wells drilled in 2018 are expected to payout in two years or less at US$55.00/bbl WTI.
“Each of our core areas are expected to generate growth in 2018,” said Saxberg. “Our Williston Basin and southwest Saskatchewan areas continue to generate free cash flow and support our growth strategy in the Uinta Basin. Our 2018 focus in Uinta will include two-mile horizontal wells, multi-well pad drilling for improved efficiencies, new zone development and further delineation on the western portion of the basin.”
Waterflood
Throughout 2017, Crescent Point advanced its injection control device (ICD) waterflood systems, which resulted in improved water injectivity and production rates. Within the company’s Bakken waterflood in the Williston Basin, ICDs doubled water injectivity and increased oil production by approximately 25 percent. In 2018, Crescent Point is targeting total waterflood capital expenditures of approximately $35 million, an amount similar to the prior year.
The company’s 2018 budget also includes investments in climate change initiatives as well as additional remote field monitoring and automation pilots to further improve efficiencies.
During fourth quarter 2017, Crescent Point executed additional non-core asset dispositions for a total value of approximately $40 million, of which approximately $20 million are expected to close in first quarter 2018. These transactions are in addition to the $280 million of previously announced 2017 dispositions. Crescent Point continues to market non-core asset packages, with proceeds providing increased balance sheet strength and financial flexibility.
“In 2017, we captured over 400,000 net acres in our core areas that provide three times the potential upside relative to the noncore assets we disposed throughout the year,” said Saxberg. “These transactions provide us with significant future production, reserves and inventory growth potential. We are currently marketing non-core asset packages and may also look to sell larger non-core assets to further strengthen our balance sheet, should market conditions allow.”
The company's 2018 budget is expected to generate annual average production of 183,500 boepd and exit production of 195,000 boepd. This represents annual growth of approximately five percent and year-over-year exit growth of approximately seven percent. These growth rates are in addition to the company’s monthly dividend income provided to shareholders.
Crescent Point announced it achieved a 2017 exit rate of 183,000 boepd, which represented year-over-year production growth of approximately 10 percent, both on an absolute and per share basis. This growth was realized despite executing several non-core asset dispositions throughout 2017.
