Flurry of Deals from Canada to the Permian Basin Close Out 2023

The end of the year spurred a series of upstream dealmaking: Crescent Point Energy completed its acquisition of Hammerhead Energy, adding greater scale in the Alberta Montney Shale. Two more Canadian producers are combining for scale in Alberta’s Kaybob Duvernay play, and Ring Energy finalized a bolt-on acquisition of its own in the Permian Basin.

Crescent Point’s US$1.86 billion (CA$2.55 billion) transaction adds approximately 800 incremental drilling locations to the Calgary-based E&P’s portfolio. At Crescent Point’s current drilling cadence, its premium inventory will grow to more than 20 years with the Hammerhead acquisition.

"Our recent Alberta Montney consolidation marks the completion of our portfolio transformation," Craig Bryksa, president and CEO at Crescent Point, said in a Dec. 21 news release. "Through this strategic transaction, we have enhanced the long-term sustainability of our business, including increasing the excess cash flow per share expected within our five-year plan by approximately 20%.”

Crescent Point also disclosed new plans to divest around CA$140 million in non-core Alberta assets. The company entered into agreements to dispose of its Swan Hills and Turner Valley assets during the fourth quarter.

Production from the divested assets is expected to average approximately 5,000 boe/d (75% oil and liquids) in 2024. Crescent Point said it had not planned to allocate any capital spending to the assets next year.

Crescent Point intends to use proceeds from the asset sales to strengthen its balance sheet. The sales are expected to close early in the first quarter of 2024.

The company’s total average production in 2024 is expected to range between 198,000 boe/d and 206,000 boe/d (65% oil and liquids). Development capex should come in between CA$1.4 billion and CA$1.5 billion next year.

Crescent Point plans to allocate 45% of its 2024 development capex into the Alberta Montney, where the company aims to maintain three active drilling rigs next year.

Approximately 35% of Crescent Point’s 2024 capex budget will be directed toward the Kaybob Duvernay play. The company plans to maintain two drilling rigs in the Kaybob Duvernay next year.

The remaining 20% of capex will be allocated toward Crescent Point’s low-decline assets in Saskatchewan. The company’s Saskatchewan assets are expected to account for about 50% of Crescent Point’s excess free cash flow in 2024.

By 2028, Crescent Point aims to grow average production up to 260,000 boe/d, driven by growth from its Montney and Kaybob Duvernay assets.

RELATED: Crescent Point Buying Alberta Montney E&P in $1.86 Billion Deal

Athabasca Oil-Cenovus Energy transaction

In another Kaybob Duvernay transaction, Athabasca Oil Corp. is teaming up with Cenovus Energy to create Duvernay Energy Corp., a standalone, self-funded entity.

Both companies will jointly contribute assets into Duvernay Energy, the companies announced Dec. 19. Athabasca will own a 70% equity interest in Duvernay Energy; Cenovus will hold the remaining 30%.

Duvernay Energy’s board will consist of three members nominated by Athabasca and one by Cenovus. The new company will be managed by Athabasca through a management and operating services agreement.

Duvernay Energy will be a pure-play E&P in the Kaybob Duvernay play in Alberta, with assets located primarily in the play’s volatile oil region.

The company will have exposure to approximately 46,000 acres of 100% working interest-operated lands that are largely contiguous with existing assets in the area.

The acreage includes new acreage acquired by Athabasca through public land sales in the past 18 months, as well as Cenovus’ contribution of Kaybob Duvernay acreage.

Duvernay Energy will have exposure to about 200,000 gross acres and an inventory of about 500 gross undeveloped well locations, the companies said.

Current production from the Duvernay Energy acreage is approximately 2,000 boe/d (75% liquids). The company plans to boost production up to 25,000 boe/d (75% liquids) in the late 2020s with a self-funded development plan.

Duvernay Energy’s 2024 development plan calls for 12 gross wells (7.1 net wells) on capex of about CA$82 million.

Cash flow from the company’s operations, as well as CA$40 million in contributed seed capital, is expected to fund Duvernay Energy’s 2024 development plan.

RELATED: Murphy Oil Closes $104MM Divestiture of Non-Core Canada Assets

Ring Energy

In the U.S., Permian Basin E&P Ring Energy made a deferred payment to finalize its acquisition of Central Basin Platform assets from Founders Oil & Gas IV LLC.

The Woodlands, Texas-based Ring Energy had originally agreed to $75 million in cash to acquire the Founders assets, including $60 million at closing and a $15 million deferred cash payment four months after close.

Ring said the deferred cash payment was reduced from $15 million to $11.9 million as a result of purchase price adjustments in the final settlement, according to a Dec. 21 news release.

The Founders deal included approximately 3,600 net acres and about 50 undeveloped drilling locations in Ector County, Texas. Ring announced officially closing the Founders transaction in August.

Separately, Ring disclosed Dec. 21 that it had shed $1.5 million worth of non-core assets located in Gaines County, Texas.

Proceeds from the divestiture will be put reduce outstanding borrowings on Ring’s credit facility. The company’s borrowing base was reaffirmed at $600 million under a $1 billion senior revolving credit facility.

“We remain focused on maximizing free cash flow generation through cost reduction initiatives, the disposition of non-core assets, and the acquisition of high margin, low break-even assets and applying the excess cash from our operations to accelerate paying down debt,” Paul McKinney, Ring chairman and CEO, said in the release.

RELATED: Ring Energy Bolts-on Assets in Permian’s Central Basin Platform