The Slave Point formation is a layer of sedimentary rock composed primarily of oil bearing carbonate minerals: mostly limestone and dolostone having low permeability (the capacity of a rock or sediment to move water or other fluids through its pore space.)
In the Greater Red Earth area of north central Alberta, the Slave Point formation is a proven oil producer since the 1960’s when the first vertical wells struck oil. In addition to producing light, sweet oil of 35°-40° API, the formation produces low rates of water production and low solution gas volumes. The industry estimates 1 billion barrels of original oil in place
It is a low risk light oil resource play as companies have drilled through this formation for decades. New drilling and completion techniques have opened up the lower levels of this formation that were once deemed uneconomic for development. Thanks to strong oil prices and an attractive royalty regime, activity is heating up in this area where the land is locked up amongst a few players. From a list of several companies with land holdings in Red Earth Alberta, only 2 junior stocks stand out because they are highly leveraged to this emerging light oil play:
Pinecrest Energy (TSXV:PRY)
Slave Point Land: 147,200 net acres
Pinecrest Energy is a pure play on the emerging Slave Point oil play in the greater Red Earth area as this is their primary focus. PRY succeeded in assembling a great land package with at least 460 net drilling locations based on 8 wells per sections. The company’s 2012 capital spending is dedicated to this high netback oil play including the implementation of its first pilot waterflood in the Slave Point. Exit production for 2012 is expected to surpass 5,200 boe/d with a 98% light oil weighting.
Border Petroleum (TSXV:BOR)
Slave Point Land: 19,200+ net acres
Border Petroleum is a new comer to the venture exchange and the second pure player targeting this formation. The company succeed in assembling a potential inventory of 216 locations in one of the hottest Canadian oil plays. It is one of the few juniors that will give you an exposure to the Slave Point oil play at such an early level and is currently drilling its second horizontal well in the Red Earth area. Drilling horizontal wells cost up to $4 million a pop, BOR is constantly on the lookout for acquisition opportunities and farmin or joint venture agreements. Management has been executing nicely as they previously closed 2 deals:
- The acquisition of a privateco with about 21,000 net acres which adds a new core area and more land at Red Earth.
- A joint venture agreement with the Loon River Cree Nation to develop up to 17,120 acres (26.75 sections) of the Slave Point formation in the Red Earth area of north-central Alberta.
There are a host of operators exploiting the Red Earth area for Slave Point oil but only the 2 junior companies mentioned above are highly leveraged to this play as their capital expenditures is focused largely on this area. If you prefer investing in a senior producer, take a look at Penn West Petroleum (TSE:PWT) which holds 200,000 net acres in the greater Red Earth and Swan Hills areas.
Disclaimer: the information presented above is only for informative purposes; it’s meant to serve as a starting point to carry your own due diligence. It is in no way an encouragement to buy or sell the aforementioned securities. If you find any errors in the data please do not hesitate to contact us using the appropriate form or by leaving a comment.