Estevan – The level of drilling activity going on in Saskatchewan right now for Crescent Point Energy Corp will not vary much for the remainder of the year, according to president and CEO Scott Saxberg. When asked about oilfield service companies’ ability to adjust rates that they charge, he spoke about efficiency and technology.
Saxberg spoke to Pipeline News via phone on Aug. 25.
For most of the past several years, Crescent Point has been leading all of Canada for the number of active drilling rigs it employs in – often in the mid-20s. However, as of Aug. 25 that number was 13 for all of Canada. All but one were in Saskatchewan, the last one in the Swan Hills area of Alberta.
The company has more active rigs, but they’re across the border, in its active Uinta play in Utah.
Saxberg said, “We have a very strong business plan and budget. We’re ahead of our targets. We revised up our average production for the year. We’ve got a strong development program exiting the year. We’re just setting up for 2018. I would say 2017 is probably one of our best operation new play discovery years we’ve ever had as a company. We’re excited about our future and where that development is heading – super strong results in our Uinta play that we’re excited about and will come out as the year unfolds.”
The Uinta play in Utah has been growing in prominence in Crescent Point’s quarterly statements over recent years, and was front-and-centre in the July 27 statement.
There have been times when Crescent Point had more rigs working than the number two and three oil companies combined, but now Tourmaline Oil Corp. leads with 17 rigs in Canada. Regardin their reduced numbers, Saxberg said, “We’ve got more capital moving into our Uinta Basin. A lot of that capital is moving into Utah. I think we have 18 rigs working right now, 13 in Canada, so there’s a bit of a shift of capital into Utah, and just a balancing out of our drilling program into Q4. So I think it’s more of a balancing from Q2 to to Q3 to Q4.
Asked if 13 is the new normal for Canada, he said, “No, I think we has had as 27 in Q1. It’s just really how our capital is broken out through the quarters, so we’re going to have a more consistent Q3, Q4 program, and then ramp it up into Q1 a little bit more. It’s more of a normal sort of spread, with a little more capital spread into the U.S.”
“I think we’ll be in this range consistently through the end of the year, then a ramp up into Q1, plus or minus three or four rigs,” he noted.
Saxberg wouldn’t comment on the Cenovus Weyburn being up for sale, but did reply, “We’re not looking at any acquisitions at this time.”
Is there a magic number?
Last month CEOs from both Corex Resources Ltd. and Tundra Oil and Gas Limited told Pipeline News that US$50 dollars per barrel for WTI oil is an important number, when it comes to their expenditures. Asked if that applied to Crescent Point, Saxberg said, “We’re an obviously larger company, and longer term viewpoints. We’re managing our inflow, outflow for cash flow and growth rates. We manage, between our hedge book and oil prices, with our future cash flows, stay in and around 100 per cent. That’s kind of how we manage that growth rate.
“Obviously, the higher the oil prices are, the more excess cashflow we have. We’ll put that excess cashflow to paying down debt, increasing our capex program – basically the two prongs, where that goes. At higher oil prices, we’ll spend a little bit more capital to grow at higher levels.”
Does Crescent Point have a magic number?
Saxberg replied, “We’re sort of just managing between US$45 and US$55 oil. We’re trying to improve our efficiencies at the US$45 level to increase our drilling and growth rates and again to increase our excess cash flow as prices go up. We’re really trying to drive costs down in the US$45 price environment effectively so that we build that same efficiencies and costs at those lower prices levels and not worry it is US$45, US$50 or US$55.”
Will there be relief on rates?
Asked if there was any relief in sight for oilfield services who have been working with sharply reduced rates for several years now, Saxberg said, “Technology has really improved over the last several years. We’re continually improving that technology. And so, although day rates and those kinds of things may be stagnant, we feel efficiency gains will improve and will widen those margins for service companies and companies like ourselves. So we’re focusing on using the equipment less, and becoming more efficient with that equipment, to drive costs, and not necessarily drive their margins lower.
“So we’re kind of working from that perspective. We’ve really worked along with our service providers to make sure they have consistent programs that we can give them and consistency in our drilling programs so they can then improve their efficiencies as well and increase their margins. We look to work together with those groups so that everybody is successful,” he said.
With regards to the pronounced lack of recapitalization by oilfield services companies during this downturn, especially when it comes to their not buying new equipment, Saxberg said, “Again, it’s more around the technology and doing things differently. We’re looking at field automation, data collection, and access through WIFI across all our fields, creating an ability so that those companies can become more efficient, which provides them with a bigger margin, which provides them with the ability to reinvest and grow their business.
“Really, there’s going to be a large shift here with some new technology we’ve been working on, that hopefully works, that really changes how oilfields are managed and how services are provided. Sort of the lag from the iPads and the use of applications and how they are being used today. I think there’s been a lag in the oil industry from that and the hands-on, driver-truck approach versus technology and data capture and artificial intelligence that are starting to happen. We think things are going to get more efficient, which will provide that.
“The silver lining in this drop in price environment, and the length of this drop in price environment, I think is where that creates a lot of this new knowledge and different approaches to business,” Saxberg concluded.
