Crescent Point to acquire Canadian shale assets from Shell

Crescent Point Energy Corp. agreed to acquire Kaybob Duvernay shale light oil assets in Alberta, Canada, from Royal Dutch Shell PLC affiliate Shell Canada Energy for a total consideration of $707 million (C$900 million).

The transaction includes some 450,000 net acres in the Fox Creek (Kaybob) and Rocky Mountain House (Willesden Green) areas, along with related infrastructure, currently producing around 30,000 boe/d d (57% condensate, 8% NGL, 35% shale gas) from more than 270 wells.

The deal gives Crescent Point entry into an established liquids rich play with more than 10 years of high-return inventory at low risk as the assets “have been delineated over the past decade and key infrastructure and market access are already in place,” said Craig Bryksa, Crescent Point president and chief executive officer in a Feb. 17 release.

The assets are in the core of the condensate rich fairway with attractive reservoir characteristics including higher pressure and pay thickness, Crescent Point said. They include some 500 net sections of contiguous land in the Kaybob area (about 325 net sections undeveloped); 98% Crown land with limited expiration concerns and a high working interest of about 100%; some 200 net internally identified drilling locations, based on conservative well spacing of 600 meters, of which only 36 are booked as 2P in the independent evaluators report prepared by McDaniel & Associates Consultants Ltd. These locations are primarily comprised of two-mile horizontal wells.

Prior to closing—expected in April subject to regulatory approvals—Shell plans to bring a number of drilled and uncompleted wells on stream. Production from the acquired assets is expected to increase to 35,000 boe/d during this year’s second quarter.

Crescent Point plans to manage these assets to target a lower decline rate and longer-term production of 30,000 boe/d at an annual cost of $180 million. Following the initial period of flush production, Crescent Point’s pro-forma decline rate is expected to remain unchanged at 25%.

Crescent Point Energy will retain the field employees and several technical and commercial roles that support the assets. Upon closing, Shell will own 8.6% of outstanding Crescent Point common shares.

2021 guidance

Crescent Point’s revised annual guidance for 2021, which incorporates the impact of the acquisition, includes annual average production of 132,000-136,000 boe/d and development capital expenditures of $575-625 million. The revised budget includes $100 million of development capital expenditures expected to be directed to the newly acquired Kaybob Duvernay assets, with the balance of its program remaining unchanged from prior guidance.

On an annual pro-forma basis, Crescent Point’s sustaining development capital expenditures are now expected to be $800-850 million to generate annual production that is in-line with, or exceeds, the current 2021 annual guidance range.