Crescent Point Acquires Shell’s Duvernay Shale Position in Alberta
TSX-listed Crescent Point Energy Corp. has entered into an agreement with an affiliate of Royal Dutch Shell Plc to acquire its Duvernay shale light oil assets in Alberta for a total consideration of C$900 million (~US$707 million) in cash and stock.
Under the terms of the deal, Crescent Point will acquire Shell Canada Energy Plc’s Duvernay shale position in exchange for a cash payment of C$700 million, plus the issuance of 50 million Crescent shares valued at C$200 million. Upon closing, Shell will hold an ~8.6% stake in Crescent Point.
The assets acquired cover approximately 450,000 net acres of contiguous land in the Fox Creek (Kaybob) and Rocky Mountain House (Willesden Green) areas, with a high working interest of almost 100%. The acreage produces from over 270 wells and includes 200 net internally identified drilling locations that are comprised primarily of two-mile horizontal wells. Shell plans to bring certain drilled and uncompleted wells on stream prior to deal closing.
Total proved plus probable (2P) reserves attributable to the assets (as of December 31st, 2020) is 107.4 million barrels of oil equivalent (MMboe), and production currently averages approximately 30,000 barrels of oil equivalent per day (boe/d), 57% of which is oil. It is estimated that average daily production will increase to 35,000 boe/d during Q2-2021.
“The acquisition is aligned with our core principles to focus on strategic initiatives that enhance our balance sheet strength and sustainability. It is expected to enhance our free cash flow generation, leverage ratios and ESG profile. The depth of high-return drilling inventory also provides optionality within our capital allocation framework,” said Craig Bryksa, President & CEO of Crescent Point.
“Divesting these assets underpins Shell’s effort to focus the upstream portfolio to deliver cash. While we believe these assets hold value, the divestment allows us to focus on our core upstream positions like the Permian Basin, with integrated value chains, thereby building a resilient, lower-risk and less complex portfolio,” added Wael Sawan, Upstream Director at Shell.
Calgary-based Crescent Point is currently operates both in Canada and the United States, with upstream interests in Alberta and south-west Saskatchewan, and the Williston Basin in south-east Saskatchewan and North Dakota.
Scotiabank and BMO Capital Markets are advising Crescent Point on the deal.
The transaction, which is subject to customary closing conditions, consents and regulatory approvals, is expected to close in April 2021.