Crescent Point Energy expects to ramp up drilling in the remainder of 2016
Despite second quarter loss, Crescent Point Energy pushing ahead with aggressive drilling plans
By Darrell Stonehouse
Aug. 11, 2016, 11:19 a.m.
Despite reporting a second quarter loss of $226 million, tight oil producer Crescent Point Energy expects to ramp up drilling in the remainder of 2016 to take advantage of lower development costs.
During the second quarter, the company spent $51.4 million on drilling and development activities, drilling 12.2 net wells. This is down 81 per cent or $219.3 million from second quarter 2015 drilling and development spending when it drilled over 142 net wells.
The significant reduction from the previous year is due to lower costs, as well as strong first-quarter 2016 production levels that allowed Crescent Point to shift approximately $100 million of capital to the second half of the year. Crescent Point also spent $28.8 million on land, seismic and facilities in second quarter 2016, for total development capital expenditures of $80.2 million.
Second quarter netbacks of $31.22 per boe were strong relative to average selling prices of $42.45 per boe, due to lower year-over-year operating costs and royalties, as well as the company’s conservative hedging program, which contributed $7.62 per boe of realized gains on derivatives during the quarter.
Crescent Point successfully reduced its operating expenses during the first half of 2016 to $10.53 per boe. It expects its 2016 operating expenses to equate to an average of approximately $11.40 per boe, which is approximately $0.85 per boe or $50 million lower than in its original 2016 budget. The company’s cost reduction initiatives have been successful in improving its transportation and hauling, chemical, labour and service costs, as well as logistics around maintenance.
In the Viewfield Bakken resource play, the company’s focus during second quarter was on the continued advancement of its waterflood and the expansion of the Viewfield Bakken pool. Crescent Point drilled one step-out well during second quarter to further expand the resource play and the inventory of potential drilling locations. The company said it is also pleased with results from its closeable sliding sleeve technology that is now being fully utilized throughout the play. Since implementing the technology in 2014, the company has fully eliminated well clean-outs due to proppant flow-back following fracture stimulation, which has reduced completion costs in the play by approximately 15 per cent. During the second half of 2016, Crescent Point plans to drill approximately 74 net oil wells in the Viewfield Bakken resource play.
In the Flat Lake area, Crescent Point drilled one step-out well, targeting the Torquay zone. Over the last several years, its step-out program has been successful in expanding the Flat Lake area by adding over 300 gross sections, which includes significant drilling locations in each of the Torquay, Midale and Ratcliffe zones. Crescent Point plans to build on this success with five step-out wells planned during the second half of 2016. Following positive results in the Viewfield Bakken resource play, the company is now fully utilizing closeable sliding sleeve technology throughout the Flat Lake area.
“We’re very excited about the significant upside potential in our recently discovered conventional Ratcliffe pool with 12 wells currently on production,” said company president and chief executive officer Scott Saxberg.
“This pool has minimal recovery to date and provides us with an additional inventory of low-cost drilling locations. These conventional wells are highly economic with payouts of less than two years in this low commodity price environment.”
Two oil wells were drilled in the company’s conventional assets in southeast Saskatchewan during second quarter. Crescent Point plans to drill approximately 68 net oil wells in the second half of 2016 throughout the rest of the company’s conventional and unconventional asset base in southeast Saskatchewan and Manitoba.
In the Shaunavon resource play, Crescent Point resumed its drilling program subsequent to second quarter. The company plans to drill 76 net oil wells during the second half of 2016, targeting both the Lower and Upper Shaunavon zones. Approximately 45 per cent of Crescent Point’s 2016 capital budget in the Shaunavon resource play is directed towards the Upper Shaunavon zone, which compares to approximately 34 per cent in 2015 and 18 per cent in 2014. This growth demonstrates the expansion of the resource play beyond the Lower Shaunavon zone and the benefit of targeting large oil-in-place resource plays with multi-zone potential.
In the Saskatchewan Viking resource play, Crescent Point drilled three oil wells in second quarter. During the second half of 2016, it plans to initiate its waterflood pilot and test longer lateral wells, up to one-mile in length, for increased productivity and reserves. Crescent Point also plans to advance its down-spacing activity in the Viking resource play during the second half of the year, with the continued testing of 100-metre down-spacing and the initiation of a 150-metre pilot. Down spacing could increase Crescent Point’s economic drilling inventory in the resource play by approximately 20 percent or 180 locations.