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Petrobankin Bloomerin haastattelu BNN:llä Canadian Oil Sands Shown tiimoilta

Frakkimömmöjen valmistajan CARBO Ceramicsin(NYSE: CRR) presentaatioita aineiden kehityksestä ja ominaisuuksista. Kiehtovaa. Tai ainakin mielenkiintoista.

Murtumia vai vettä?

Petrobakkenin ja Crescent Pointin Bakken strategiat ovat matkalla selvästi eri suuntiin:

Oilweekista:

But there are also some important differences between PetroBakken and Crescent Point, in particular, their view on waterflooding. PetroBakken expects between 20 and 25 per cent oil recovery in the Bakken and has said the formation is not amenable to waterflooding because of its low permeability. Crescent Point believes it is.

"The reason [PetroBakken doesn´t] think waterflood is prospective is because they haven´t done the work," Saxberg says. "We´ve had three years of waterflood pilot projects. Crescent Point has been the only company testing the waterflood potential in the Bakken since day one."

For Saxberg, waterflood is the big prize, providing the highest recovery and best economic scenario. Based on some of this preliminary work, he thinks waterflood could yield upwards of 33 per cent oil recovery in the Bakken. And while Crescent Point and PetroBakken currently use the same technology to drill and complete wells in the Bakken, these different ends are already dictating different means

PetroBakken:

Bakken 3.0
• More fracture stimulations per section improves production performance
• Most capital efficient method for increasing frac intensity is long bi-lateral horizontal wells
• Dramatic increase in the number of fracs per section of land for a minor increase in perwell
cost ($1.7 mm versus $2.3 mm)

Petrobakken on siis sitä mieltä että waterfloodit eivät Bakkenissa toimi ja optimaalisin tapa ryystää mehut maasta on paljon frakkeja ja pitkät lähekkäin olevat horisontaalit. Crescent Pointin Saxberg on sitä mieltä että waterfloodit tulevat toimimaan ja suuri frakkien määrä on turha, koska niillä on vaikutusta vain alkutuotanto volyymiin eikä lopulliseen talteenottooon. Encore Acquisition on USA:n puolella on samaa mieltä Crescent Pointin kanssa frakkien vaikutuksesta.

Kumpi on oikeassa? Aika näyttää. Waterfloodit eivät ole luonteeltaan sen suoraviivaisempia kuin frakitkaan, ja nekin vaativat reservoirin geologian huomioon ottavaa säätöä ja testausta.

News

Petrobank CEO says unit spinoff likely

"Petrobank Energy and Resources Ltd. could distribute its 66.7 per cent stake in Latin American oil producer Petrominerales Ltd. within 18 months, the company’s chief executive said Thursday, and spin off its other businesses within four years.

Petrobank CEO John Wright said in an interview that Petrominerales, which produces oil in Colombia, is a likely candidate to be doled out to Petrobank’s investors soon, with two other business units — a Canadian conventional oil producer now bulking up through a merger, a Canadian heavy oil producer — able to stand on their own in about 48 months..."

Precision CEO sees return to balance in natural gas market

Natural gas supply and demand should start coming back into balance in North America by this winter as severe cuts in drilling lead to a drop in available volumes, the head of Canada’s largest contract driller by rig count said Thursday.

Major reductions in capital spending among energy companies in response to weak gas prices are prompting steep production declines in Canada and the United States, Precision Drilling Trust chief executive Kevin Neveu said.

“We think this aggressive decline rate in both Canadian and U.S. gas is catching up right now with the demand side,” Neveu said at an investor conference in Denver, Colo...

Canada's energy sector open for China: Flaherty

"Finance Minister Jim Flaherty rolled out the welcome mat for Chinese investment in the Canadian energy sector Monday, saying this country's foreign-investment rules pose little hindrance to the growth of a Chinese presence..."

There can be only one

Petrobank and TriStar to Create a Premier Southeast Saskatchewan
Bakken and Light Oil Producer(.pdf)

"Petrobank Energy and Resources Ltd. (“Petrobank”) (TSX:PBG) and TriStar Oil & Gas Ltd. (“TriStar”) (TSX:TOG) are pleased to announce that their respective Boards of Directors have unanimously agreed to the strategic combination of TriStar and Petrobank’s Canadian Business Unit (the “Transaction”). The combination will create a new publicly listed company, PetroBakken Energy Ltd. (“PetroBakken” or the “Company”), that will be a premier, Bakken-focused, light oil exploration and production company..."

Consolidation in the Saskatchewan Bakken continues with a transaction that is only partly unexpected. I was expecting TOG to be bought by Crescent Point and finally CPG would swallow PBG.

Some of the details of the deal:

-"a TriStar shareholder will receive
$14.75 cash, or 0.5350 of a PetroBakken share, or a combination thereof, being approximately $3.75 per share in cash and 0.3989 of a PetroBakken share, for each share held"

-"PetroBakken plans to divest a package of Alberta-based assets
consisting of approximately 9,500 boepd (44% light oil, 56% natural gas), and 40.1 mmboe of proved plus probable reserves to further enhance the focus of PetroBakken on southeast Saskatchewan light oil resource plays. Proceeds from the disposition will be used to further solidify the strong PetroBakken balance sheet"

-"Based upon the underlying strength of PetroBakken’s high-netback light oil asset base and flexible balance sheet, PetroBakken intends to adopt a dividend policy initially targeting payments of $0.96 per share per annum, payable monthly"

Thoughts:

PBG is paying a 70% premium for TOG's equity.

PBG is selling gas to buy oil.

The implementation of a dividend is a bit of a surprise, and might indicate that Petrobank or Petrobakken is putting the heavy oil operations and THAI on the back burner as it is directing over a hundred million worth of annual cashflow out of the company.
EDIT: It seems that PBG is merging only the CBU with TOG, what exactly is going happen to the heavy oil projects isn't clear to me.

There can of course be more than one, but I think it's highly probable that there will eventually be only one major producer in the Canadian Bakken. CPG may buy PBG(the future PBN) or the other way around, it'll happen. May be sooner than later.

BNN:llä tervahiekka spessua

Koko viikko videomateriaalia aiheesta: Shifting Sands, BNN digs deep into the state of the Alberta oil sands.

Mukana tietysti Petrobank:

"Part 5: Petrobank's THAI technology

While there are many new oil sands technologies under development, one stands out as a potential game-changer: Petrobank's THAI technology. The company says it has found a cheaper way to loosen the bitumen and partially upgrade it before pumping it to the surface: igniting an underground fireflood. Petrobank's pilot project is close to proving the theory. BNN goes along for a personal tour and talks to analysts about their outlook for THAI."

Petrobank Q1

Revenues C$173.70 million (+7.6%)
Funds flow from operations C$125.15 million (+1.3%)
Net income C$-1.54 million
EPS C$-0.02


Production(Canadian Business Unit only)
Liquids 19,722 bbls/d
Natural gas 14,179 mcf/d (-7%)
Operating netback: C$34.68

Balance sheet

Asset
Current C$189.53 million
Total C$2,414.14 million

Liabilities
Current C$300.37 million
Total C$1,181.72 million

Equity C$1,051.20 million

P/E 13.67, P/B 2.55

Quotes from the report:

"In 2009, our primary focus will be to maintain our low-cost advantage through selective drilling in the Bakken. We are positioned for continued long term reserve and production growth, despite our reduced pace of development at the beginning of 2009. At current commodity prices we expect to drill a further 50 wells this year and if oil prices improve we are prepared to drill as many as 120 wells in 2009."

"Petrobank pioneered the horizontal fracture stimulation techniques that opened up the true potential of this substantial resource, and we continue to find new ways to improve well performance and expected ultimate recoveries from the Bakken. Our recent efforts to further improve Bakken production have focused on increasing the intensity of fracture stimulation completions (fracs) by 38% in our long (1400 metre) horizontals, by 200% in our short (700 metre) horizontals, and by 400% in our shortbilateral (two 700 metre horizontal legs from a single vertical well bore) horizontal wells."

"Petrobank has also established strong positions in two massive natural gas resource plays; the Montney and the Horn River Basin. The key to unlocking the potential of these plays is through the use of horizontal wells and multi-stage fracture stimulation technologies, similar to those pioneered by Petrobank in the Bakken. We intend to capitalize on our evolving experience with advanced fracturing techniques, with the goal of building a substantial, long-term inventory of drilling locations at a low nearterm cost."

"Whitesands Project
During March and into the second quarter of 2009, P3B operations were stabilized and rateable production was achieved. In the first quarter, P3B operations were ramped up following the A3 injectionwell workover and the commissioning of new plant facilities. Production averaged 248 bopd in March and 256 bopd in April, these restricted production rates correspond to a reduced air injection rate required to balance P2 production operations."

The report(.pdf)

I: PBG has approximately 75 million in credit available so the liquidity remains relatively tight.
The Bakken operations are developing well: the new infrastructure is lowering operating costs and is enabling the recovery of associated gas. New drilling techniques are improwing well productivity as is the case with CPG and TOG.

Petrobank reduces ownership in Petrominerales

Petrobank Announces $101 Million Bought Deal Petrominerales Secondary Offering

"Petrobank Energy and Resources Ltd. ("Petrobank") (PBG) is pleased to announce that Petro International Ltd. (the "Selling Shareholder") has entered into an agreement with a syndicate of investment dealers, led by TD Securities Inc. and Haywood Securities Inc. (the "Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a "bought deal" basis, an aggregate of 9.9 million common shares ("Common Shares") of Petrominerales Ltd. ("Petrominerales") from the Selling Shareholder at a price of $10.25 per Common Share resulting in gross proceeds of $101,475,000 (the "Secondary Offering")..."

..."The Secondary Offering will reduce Petrobank's ownership of Petrominerales to 66.7% and is expected to enhance the market liquidity of Petrominerales through an increased public float. The proceeds from the offering will further improve Petrobank's balance sheet strength and financial flexibility by reducing bank debt outstanding and potentially lead to an expanded 2009 drilling program focused on the Bakken light oil play in southeast Saskatchewan."

PBG's financial situation was pretty tight before this transaction with only 30 million dollars in available credit and the obvious way out of the credit squeeze was the sale of the most liquid asset they had. Coincidentally(?) Petrominerales announced earlier yesterday that its new CORCEL-D3 well had come online with the daily production volume of 8400 barrels of medium gravity crude oil per day.

Based on recent corporate presentations it seems that the Bakken and the Eastern Montney are the only unconventional Canadian plays that are clearly profitable with todays oil and natural gas prices(Galleon Energy says that E-M is "profitable at $3 CDN/Mcf gas price"). So if PBG is going use a portion of the proceeds to drill new wells the Bakken is the on only place their asset portfolio where drilling is economic at the moment. Me thinks.

Bakkenin kunkku

Crescent Point Gets Genuity Buy Rtg On Asset-Base Quality

TORONTO (Dow Jones)--Crescent Point Energy Trust (CPG.UN.T) boasts a high-quality asset base with "excellent" economics, particularly in the Bakken trend, prompting Genuity Capital Markets to start coverage of the soon-to-be corporation at buy, with a C$36.25 target.

Genuity's Brian Kristjansen said the Bakken play and its extensive infrastructure provide "exceptional" economics for Crescent Point. Add in the potential of the Frobisher zone and "these economics improve dramatically," the analyst said.

In Toronto Tuesday, Crescent Point is down 2.2% to C$26.73.

Crescent Point recently discovered four uphole Frobisher pods and believes there are many more to be discovered or extended. Kristjansen said this zone is often as productive as the underlying Bakken and the wells are "exceptionally economic" in their own right.

Crescent Point has light and medium oil and natural gas assets in core areas in central/southern Alberta and southern Saskatchewan. It's the dominant producer in the southeast Saskatchewan Bakken play, a massive oil reserve that stretches across North Dakota, South Dakota, Montana, Manitoba and Saskatchewan.

The trust is in the process of converting to a dividend-paying corporation and expects the conversion to be complete by the end of May. On conversion, it will begin paying a monthly dividend of 23 Canadian cents a share.

Kristjansen said the early conversion to a corporation is meant to allow Crescent Point "unfettered" access to further acquisitions and consolidation opportunities that were previously capped by Canadian-government-specified investment flow-through rules. In October 2006, the Canadian government said it would begin taxing income trusts starting in 2011. Many trusts have already converted, or plant to convert, to corporations before 2011.

"We believe an unshackled Crescent Point will be even more potent competition for area peers Petrobank (Energy & Resources Trust) and TriStar (Oil & Gas Ltd.), and that ultimately the assets of these companies will also one day be swallowed by Crescent Point," Kristjansen said. He added that he expects to see Crescent Point take over private company Shelter Bay Energy, in which it already owns a 21% stake.

Genuity estimates Crescent Point's 2009 production will average 40,508 barrels of oil equivalent a day. Kristjansen said Bakken opportunities anchor the company and production from the horizon accounts for 50% of total production.

Crescent Point is forecasting 2009 production of 40,500 barrels of oil equivalent a day, with resulting cash flow of C$593 million. Genuity puts cash flow at C$609 million, noting its current commodity-price estimates are marginally higher. For 2010, Genuity is forecasting production of 42,197 barrels of oil equivalent a day.

Siis Kanadan Bakkenin, USA:n puoli on oma kuningaskuntansa. Pääsyy miksi Crescent Point konvertoi trustista osakeyhtiöksi jo nyt puolitoista vuotta ennen Kanadan trusti-verolainsäädännön voimaantuloa lienee juuri nuo lainsäädännön rajoitukset kasvulle. Konvertion jälkeen Crescent todennäköisesti fuusioi listaamattoman Shelter Bayn(josta se omistaa 20%) itseensä jo tämän vuoden aikana. Shelter on käytännössä pelkkä holding-yhtiö, jonka toimintoja hoidetaan Crescentin kautta esim. CP:n CEO Scott Saxberg on myös Shelterin CEO.
Seuraava fuusiokohde on varmaankin Painted Pony, jota Crescent jo nyt omistaa Shelterin kautta. Ostolistan kolmonen on Tristar Oil & Gas(näin luulen ma) ja oston todennäköisyyttä kasvattaa se että Talismanilta ostettu omaisuus ja tuotanto tulee yhtiöiden yhteiseen operointiin. Lisäksi Tristarin hallituksen puheenjohtaja Paul Colborne on myös Crescentin hallituksen jäsen.
Petrobank oli ensimmäisiä yhtiötä Saskatchewanin Bakkenilla ja se otti ensimmäisenä käyttöön frakturointi tekniikan, joka on lisännyt Bakkenin tuotannon kannattavuutta merkittävästi. Jos PB:n THAI-tekniikka toimii ja lyö itsensä läpi raskas öljyn tuotannossa, yhtiö on varmaankin valmis luopumaan Bakkenin toiminnoistaan, mutta en usko että CP pystyisi tai haluaisi ostaa Petrobankkia kokonaisuudessaan.
Ryland Oililla on 200 000 netto-eekkerin maa omistus Kaakkois-Saskatchewanisssa ja siksi näyttäisi selvältä CP:n ostokohteelta, mutta yhtiön omistuksiin ja johtoon liittyy joitakin epämääräisyyksiä.
Em. listattujen yhtiöiden lisäksi löytyy joukko pienempiä yksityisiä yhtiötä, jotka toimivat Kanadan Bakkenilla, joista osa päätynee osaksi CP:tä.

Kysyntä-tarjonta tilanteen tukemana kevyt öljyn ja raskas öljyn hintaero on kasvanut taas merkittävästi viime vuosiin nähden, myös maakaasun ja öljyn ja etenkin kevyt öljyn välinen hintaero on kasvanut huimaksi, NYMEXin tuorein hinta öljytynnyrille on $48.05 ja maakaasulle $3.60 per MCF, jolloin yhtä öljytynnyriä vastaava energia sisältö maakaasuna maksaa n. $21.60. Nähdäkseni ainoastaan poliittiset päätökset tukea maakaasun käyttöä voisivat muuttaa tilannetta ja kaventaa hintaeroa. Ja (kevyt) öljyn kalleus tai vahvuus "kilpaileviin tuotteisiin" nähden yhdistettynä Crescentin kevyt öljy reserveihin ja resursseihin tekee yhtiöstä potentiaalisen ostokohteen. CP:n P+P reservit viime vuoden lopussa olivat 191 miljoonaa BOE:ta, jotka kasvavat Talisman-oston myötä kohtuullisesti. Crescent Pointin mineraalioikeusmailla on arvioitu olevan öljyä ja kaasua yhteensä 6 miljardin tynnyrin edestä, joista siis 191 miljoonaa tynnyriä arvioidaan olevan talteen otettavissa tämän päivän teknologialla ja markkinahinnoilla. Teknologian kehitys(horisontaali poraus ja hydraulinen frakturointi) mahdollisti kaupallisen ja kannattavan tuotannon Bakkenista ja mahdolliset uudet innovaatiot ja sovellutukset voivat kasvattaa Crescentin reservejä merkittävästi.
Jos/kun osa tai kaikki edellä spekuloiduista ostoista/fuusioista toteutuu Crescentin kasvattaessa samalla tuotantoaan nykyiseltä mineraalioikeusmaaltaan, tulee yhtiön yhtiön öljyn ja kaasun tuotanto kasvamaan 70 000-100 000 tynnyriin päivässä nykyisestä 40 000.

Alla oleva kuva havannoillistaa Bakken-tuotantoa ja frakturointia, sekä Frobisheria.

Petrobank Q4

Revenue C$206.16 million (+62%)

EBITDA C$138.53 million (+47%)

Funds flow per share C$1.63 (+55%)

Net income per share C$0.34 (-26%)

Balance sheet
Assets
Current C$222.27 million
Total C$2,361.7 million (goodwill 62.3 million)

Liabilities
Current C$272.6 million
Total C$1,145.3 million

Equity C$1,035.2 million

Production 37,618 boepd(oil 93.5%, natural gas 6.5%) (+110%)

Average realized prices
CBU liquids C$57.71 (-28%)
CBU nat.gas C$6.86 (+13%)
LBU C$54.93 (-28%)

Operating netbacks in Q4

CBU liquids C$40.13 per boe(-40%)
CBU nat.gas C$5.03 per mcf (+1%)
LBU C$42.45 per boe(-31%)

Reserves 2P: 156.7 million boe(+65%)
3P 205.9 million boe

Undeveloped land
Petrobank: SE Saskatchewan(Bakken)(oil) 115 000 net acres, Torquay(gas) 87 000 net acres, Montney(gas) 14 net sections, Horn River(gas) 45 000 net acres(65 sections/100% WI + 14 sections/15.5% WI)

Petrominerales: Columbia 1.9 million net acres, Peru 1.43 million net acres

FD&A costs per boe(2P reserves) C$25.46

Available liquidity
Petrobank C$65 million
Petrominerales C$80 million +C$11 million


P/E 7.7, P/B 1.65

The reports: Finance(.pdf), Reserves & Production(.pdf)

Comments: Petrobank's liquidity situation doesn't look at all good. The company will have to issue new equity or sell assets or do both. As the credit lines are tied to the Canadian assets it is Petrominerales or a part of it which will probably be sold if the company can't raise equity.
The tar sands, Montney and Horn River shale gas are high cost resource plays which currently are marginally economic if at all. The Bakken isn't a low cost play either, but it is profitable with todays prices.
THAI seems to be going forward and the political and economic pressure exerted by the Obama administration on tar sand producers should benefit PB and THAI. However as PB is strapped for cash its further development will probably be delayed.

Alberta tightens oilsands water use rules

Upstream:

"Alberta is tightening the rules governing water use in the oilsands in what the province’s energy-industry regulator calls a “transformation” of the regulatory framework... "

"The province wants to cut overall water use by 30% by 2015."

This could give a big boost to Petrobank's THAI process.