Crescent Point may hike spending for new oilfield

Company acquiring lands over Beaverhill Lake formation

Crescent Point Energy Corp may raise capital spending by 13 per cent to acquire additional lands and boost drilling at a new northern Alberta oil discovery, Canada’s No. 7 independent oil producer said late on Thursday.

Crescent Point said it has spent 18 months acquiring 380 square miles (984 square km) of exploration lands in the Swan Hills region of northern Alberta that lie over the Beaverhill Lake formation, with much of the property held in a joint venture with privately held Coral Hill Energy Ltd.

Oil companies are moving into the Swan Hills region, about 200 km (120 miles) northwest of Edmonton to revisit old discoveries using new horizontal drilling and multi-stage fracturing techniques to produce oil that vertical wells could not tap.

The Beaverhill Lake formation offers high-value light oil and low royalties, and analysts say Crescent Point has been able to establish a significant land base in the region at a low cost.

“They are getting in early and not spending a lot,” said Cody Kwong, an analyst at FirstEnergy Capital.

The company has drilled eight wells into the formation. Three of those initially produced more than 1,000 barrels per day of light oil, well ahead of the 295 bpd the company had expected.

Because of those results, the company is considering raising its C$800 million ($840 million) capital budget by C$100 million in order to double the number of drilling rigs in the region to eight and drill 35 additional wells.

“We’re currently evaluating our capital budget and, with the success we’ve seen in this play, will likely increase spending in the Swan Hills area,” Scott Saxberg, Crescent Point’s chief executive, said in a statement.

A final decision on the increase will be made by the end of September.

The company and Coral Hill also agreed to pay 57 per cent of the cost of drilling 13 wells to gain a 40 per cent interest in 70 square miles of exploration lands in the Swan Hills region held by Second Wave Petroleum Inc SCS.TO.

Crescent Point, which concentrates on producing conventional oil and natural gas in Western Canada, also said it has acquired a further 8 million shares of Arcan Resources Ltd ARN. V at an average price of C$5.08 each, raising its stake in the small oil company that operates in the Swan Hills region to 16.75 million shares, or 19 per cent of the total.

The company said the stake was for investment purposes.

Crescent Point shares were up 88 Canadian cents, or 2.2 per cent, at C$41.65 by midday on Friday on the Toronto Stock Exchange.