After demonstrating recently that Equal is sitting in the Cardium sweet spot at Lochend; we see here that Equal sitting at the top IRR location at the Viking.
For those who don't know the Viking, the Viking is a large formation spread
between Alberta and Saskatchewan. The Viking has different production zones, the main ones are:
Halkirk
Provost
Redwater
Dodsland
Harmattan
Each one of those locations has a different production and return profile, also each region has a concentration of players, follows are they key players in each:
Halkirk
Cutpick, Equal, Charger
Provost
Westfire
Pennwest Charger
Verity
Redwater
Sure, Westfire
Dodsland
NAL, Novus, Compass, Pennwest, Husky, Westfire
Harmattan
Angle
Some of those on the map:
In early 2011, Macquarie Research did a full study of the Viking:
https://www.northernpatriot.com/REPORTS/viking-report-macquarie.pdf
and established that the best IRRs are in the Halkirk area (where Equal is
located):
Since that time however Cutpick further improved the IRRs in this area further
improved through converting to a monopore drilling/fracking technique. According
to Cutpick in Sept 2011, the IRRs improved from 100% to 160% under thew new
method:
https://podcast.newswire.ca/media/cutpick20110914.mp3
Cutpick acquisition by Crescentpoint
(https://www.crescentpointenergy.com/documents/news/CPG-2012-05-03.pdf) is an
excellent comp for us since their land is directly offsetting to our Viking
Halkrik acreage (First Energy had a map showing that acreage during Cutpick
strategic review, but they have pulled it from their website).
Cutpick had a total of 300 net sections at Halkrik with 83 sections prospective
for light oil (27.6% of the total). Cutpick produced 5600 barrels at Halkirk
(65% oil).
Equal has 54 net sections (35K acres -
https://www.scotiawaterous.com/equal_2012/overview.html), 26.6 sections of those are prospective for light oil (50% of the total -
https://www.equalenergy.ca/en/presentations/2012_equal_investor_presentation_june\_30_final.pdf). Equal currently produces 560 (530 net, 75% oil)
This is how much how Crescentpoint paid for Cutpick:
Production:
- $73,036 per producing boe based on production of 5,600 boe/d
Reserves:
- $19.95 per proved plus probable boe based on independent engineer assigned
reserves
- $33.52 per proved boe
Applying those metrics to Equal we get a value of $40m per flowing barrel, and
$42m per P+P at $19.95. I am using the same metrics despite the fact we are more
oily to account for slightly lower oil prices and the fact that Cutpick has tax
pools, which something a buyer wont have with an asset sale.
It is clear that the company Lochend Cardium asset, and Viking asset are in
desirable areas and adjacent to natural consolidators; this should further
enhance shareholders confidence that Equal will get a good price for its
Canadian portfolio once the review is concluded in early August.
Regards,
Nawar
PS. More recent overview of the Viking:
https://www.beatingtheindex.com/the-viking-oil-play-in-alberta/