• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 703 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

Oilprice.com

Oilprice.com

Writer, OilPrice.com

Information/Articles and Prices on a wide range of commodities: We have assembled a team of experienced writers to provide you with information on Crude Oil,…

Contact Author

  1. Home
  2. Markets
  3. Other

Is This Where Investors Should Be Looking When Oil Recovers?

When oil prices recover-and plenty of analysts think the climb back up will start soon-Canada's western frontier of Saskatchewan and neighboring Alberta will 'still have the edge', according to a report from TD Economics.

Depressed oil prices may have skewed the view from Canada's oil-producing west, but this will be one of the better places to bet on the oil rebound.

Saskatchewan remains the last highly accessible onshore North American oil frontier and it is home to part of the prolific Williston Basin.

And as the industry gears up for the Williston Basin Petroleum Conference(WBPC) on 28 April, the message is clear: Saskatchewan is still alive and kicking.

Those companies who overleveraged themselves based on $90-$100 oil may be in trouble, but those who prepared for the possibility of an oil price downturn, and those who have made acquisitions on this downturn are poised for bigger long-term gains.

And companies are still buying up land. The April sale of petroleum and natural gas rights in Saskatchewan raised $5.3 million in revenue for the province, bringing 2015 land sale revenues after two sales to a total of $22.8 million.

The highest price paid for a single parcel was $558,280. Prairie Land & Investment Services Ltd. acquired the 1,036-hectare lease north of Gull Lake. The highest price on a per-hectare basis was $6,312 and is shared by two parcels.

The next sale of Crown petroleum and natural gas rights will be held on June 8.

One indication of the continued optimism surrounding the potential of Saskatchewan despite the current oil price environment was the late March sale-at 'full price'--of Beaumont Energy Inc. to Whitecap Resources for $587 million.

At the end of the day, Whitecap paid 2.5 times Beaumont's value at current oil prices. Analysts were, of course, shocked.

For Beaumont, which had purchased the Saskatchewan Kerrobert area light oil resources in 2012 for only $110 million-the March sale price was brilliant.

More than anything, this deal demonstrates that Saskatchewan is still on the savvy investor's radar, and good management can see past current oil prices and prepare for the rebound.

"The key is to watch out for companies that are making fundamental acquisitions based on present-day oil prices and valuation metrics-companies that didn't overleverage themselves based on $90 oil," says Andrew Rees, President of Canadian explorer WellStar Energy, which also swooped in with a Saskatchewan acquisition in February-under current oil prices.

What most are eyeing in Saskatchewan is the province's portion of the prolific Williston Basin, which extends from the oil-bearing formations of North Dakota and Montana into Canada.

While the Williston Basin already produces over 1 million barrels of light crude oil per day, projections are that it could be producing double that as new wells come on line over the next few years. The Williston basin's top Bakken producers are Whiting Petroleum Corp. (NYSE:WLL), Hess Corp. (NYSE:HES) and Continental Resources (NYSE:CLR).

And as Rees points out, this is a well-developed thick Bakken sand trend.

"In Saskatchewan, investors and the bigger companies are looking for the smaller players who can deploy capital to low-cost, low-risk development opportunities that can immediately increase production," he said. "When oil prices start to rebound, those who made smart Saskatchewan acquisitions will be well ahead of the game."

At the other end of this equation, the debt-hobbled producers in the 'Saskatchewan Bakken' and Pembina Cardium-such as Lightstream Resources Ltd. and Penn West Petroleum-will have a hard time going forward in the current price environment. Both companies have severely curtailed activity, according to the Globe and Mail.

Only a year ago, companies such as these were riding high on three-digit oil prices and attracting tons of capital, pumping it all into massive drilling and new acquisitions. Since June 2014, however, oil prices have plunged 60% and these companies are now in trouble.

The weeding out of the good deals from the bad deals has now begun to restore a balance to Saskatchewan, which maintains the promise of a highly attractive final frontier in which smart management makes all the difference.

And as TD economics opined in its recent report: "Our long-term view has not been altered by recent events in the global oil market. The West will again be the best."

 

Source: http://oilprice.com/Energy/Oil-Prices/Is-This-Where-Investors-Should-Be-Looking-When-Oil-Recovers.html

By James Stafford of Oilprice.com

 

Back to homepage

Leave a comment

Leave a comment