PetroBakken president and CEO John Wright says the company has been set up to run like a utility
Photograph Colin WayJohn Wright has relegated his company’s old name – PetroBakken Energy Ltd. – to the dustbin of Canadian oil and gas history.
In late May, PetroBakken’s shareholders approved a new name for the company – Lightstream Resources Ltd. It marks a clean break from its days as a spinout of Petrobank Energy and Resources Ltd., a company that has tried – and so far failed – to make its novel Toe-to-Heel Air Injection (THAI) technology commercially viable.
“We wanted to make sure there was no lingering perspective that they were linked companies,” says Wright, PetroBakken’s president and CEO, when asked about the reason for the name change.
On when PetroBakken will develop its natural gas assets:
“The biggest problem with our Horn River and Monias gas assets is the company they keep. They have to compete in our portfolio with phenomenal light oil assets. That doesn’t mean we wouldn’t sell them or at the right gas prices we wouldn’t develop them – just not at these prices.”
On whether the THAI technology will ever be commercially viable:
“THAI is pretty straight forward. We inject air into a heavy oil reservoir and we get oil out. It’s frustrating for all of us that we haven’t cracked the code on commerciality because we’ve cracked the code on technical success.”
On PetroBakken’s low share price:
“The entire Canadian energy space has been undervalued of late. On the light oil side we are subject to pipeline constraints and so the average investor says, ‘I don’t need to buy that stock because I can buy a stock from the U.S. or some other jurisdiction that doesn’t have those problems.’”
Wright has good reason to want to distance PetroBakken from Petrobank (he is still that company’s chairman.) The lack of success in commercializing the THAI technology dragged down the share price of both companies, even though Petrobank is in the business of extracting heavy oil, while PetroBakken has always been focused on producing light oil. Call it guilt by association.
On New Year’s Eve, the company announced it had completed its “reorganization” and Petrobank’s shareholders were taking over the 57 per cent interest the company had in PetroBakken.
Along the way, PetroBakken managed to produce an average of 42,784 barrels of oil equivalent per day, mostly from its operations in the Saskatchewan Bakken and the Cardium in central Alberta. While the company also had production in other western Canadian assets and it has acreage in British Columbia’s Monias and Horn River natural gas plays, the company is increasingly concentrating its efforts in the Cardium where it can drill multiple wells with high rates of success. In its guidance for 2013, PetroBakken says it will spend $290 million to drill 67 new wells in the Cardium, compared to $85 million and 32 new wells in the Bakken. It plans to drill 129 wells in all and have an average daily production rate of 46,000 to 48,000 boe per day.
Although PetroBakken has been known as a dominant player in the Saskatchewan Bakken along with Crescent Point Energy Corp., Wright says the decision to shift its focus to the Cardium is paying off. “It’s our growth engine. In 2010, when we got into the Cardium, you had to line up and take a number to tell me how stupid I was,” he says. “Now it’s the single biggest part of our production base.”
With a share price that was hovering around $8.30 as this magazine went to press, well below the 52 week high of $15.44, it’s clear the markets still aren’t convinced Wright’s strategy is a smart one. But with 10 years worth of drilling inventory in Western Canada – and a new name – Wright is confident investors will come around.
“Provided we keep our cost base down and our netback high, the long term value of the company is our ability to grow and strengthening our balance sheet. We’ve set this up to be almost like a utility.”
2012 in Review
| December |
PetroBakken says it is averaging 51,000 boe per day of production – up 6,000 boe per day since early November |
| October |
Announces the reorganization of PetroBakken and Petrobank |
| April |
Senior vice-president and chief operating officer Gregg Smith resigns from the company |
| February |
Announces sale of 2,900 boe per day of light oil production in Saskatchewan to Crescent Point Energy for $427 million |