“A small change of recovery over a large oil field is significant and adds a tremendous amount of value,” says Scott Saxberg, President and CEO of Crescent Point Energy Corp. (TSX: T.CPG, Stock Forum), arguably seen as the industry leader in the waterflooding revival.
“A lot of these unconventional plays (tight oil) are in high decline. By implementing waterfloods, we can lower the declines in the field, and increase reserves. There’s huge value to that.”
Crescent Point started waterflooding its properties five years ago when multi-stage fracking (MSF) was new on the scene. Now they have five years of knowledge that the method works, and that they can use it across all of their fields.
“We recognized right away to implement a strategy to increase the recovery factorPercentage of oil recoverable vs. what is the Oil Originally In Place on a multi billion barrel pool,” says Saxberg. “If you change even 1%, that ends up being huge.”
“Waterflooding is the next step past in-fill drilling (ie. drilling more holes in less space to increase ultimate recovery). It takes a lot of time to accrue knowledge and data on how to properly implement it. The sooner you start, the better data you have.”
According to Saxberg, waterflooding is more than just a cheap way to float balance sheets.
Over the course of Crescent Point’s five-year waterflooding program, they’ve developed hundreds of different combinations of waterflooding techniques coupled with fracking techniques, well spacing and plenty of other factors.
“Water flooding is basic, in that you pump water into the ground,” says Saxberg. “So to enhance that, you have to look at what type of patterns are in your reservoir. Now these are unconventional tight reservoirs, so the question was, can they actually be water flooded?”
Again, the Big Answer is Yes, and management teams are now using the promise of waterfloods as a cheap way to float their balance sheets earlier in a resource play. But Saxberg says waterfloods are truly more long-term value.
“They are a long term day-after-day technical grind and process. So it’s not the same as drilling a well and seeing 100bbls/day. It’s a lot of ups and downs and a lot of long term view.”
There’s only one negative here that I see—how will all that cheap oil affect North American pricing, when the continent is already swimming in the stuff?
In the short term, the pro-forma economics of waterfloods are making a splash with both management teams and the market.
But medium term and beyond, it will create a quandary for juniors—the easy money comes after huge capital spending.