The Cardium formation has billions of barrels of recoverable oil and is considered a repeatable, low risk light oil play. It has its origins in the early 1950’s with the discovery of the giant Pembina field in west central Alberta. Since 2008, more than 1,400 horizontal oil wells have been drilled or licensed into this formation. Cardium oil production is expected to surpass the 80,000 bbl/d of oil in 2012 thanks to the advent of horizontal drilling and completion technology. This article will provide an overview on 5 Canadian oil stocks that are well positioned in Alberta’s Cardium resource play. These 5 junior oil producers have an extensive drilling inventory and are all potential takeover targets due to 3 factors:
- Large contiguous land base
- Cardium focused production
- Operatorship and ownership of key producing and gathering facilities
Bellatrix Exploration (BXE.TO $3.02 [+0.01])
Cardium Land: 110 net sections
Bellatrix Exploration’s acreage is distributed mostly among Willesden Green, Lodepole and West Pembina. The company assembled an extensive inventory in the Cardium oil play with more than 650 net locations. At Willesden Green BXE reported some of the best IP rates for horizontal wells. For this year, the company estimates annual average production rate of 16,500-17,000 boe/d with 35% weighted to oil and ngl. BXE plans to accelerate its Cardium focused drilling program in order to increase its liquids weighting guiding for an exit rate in excess of 19,000 boe/d for 2012.
TORC Energy (TOG.TO $5.92 [+0.03])
Cardium Land: 100 net sections
TORC acquired VERO Energy for its land and production along the Pine Creek to Garrington Cardium fairway. The company has an inventory of 300 net HZ oil drilling locations and is exiting 2013 with more than 4,90o boed (75% liquids).
TriOil Resources (TOL.V $N/A [N/A])
Cardium Land: 55 net sections
TriOil assembled more than 35,000 net acres in the Lochend area with a growing inventory of low risk drilling horizontal locations. The Company exited 2012 with production in excess of 3,400 boe/d (88% oil and NGLs) which is more than double it’s Q411 average production. TriOil also offers exposure to a Duvegan light oil play at Kaybob where it is currently meeting with continued drilling success.
Spartan Oil (STO.TO $N/A [N/A]) (acquired by Bonterra Energy)
Cardium Land: 43 net sections
Spartan Oil is lead by the same CEO that built and sold Spartan Exploration. The company is focused on the light, sweet Cardium oil play in Pembina. The company also offers exposure to Bakken oil and Mississipian conventional oil through 54 net sections of undeveloped land it holds in Saskatchewan. Spartan expects its 2012 budget to yield average production of 2,600 to 2,800 boe/d (83% oil and liquids) and exit production of 4,300 to 4,500 boe/d (84% oil and liquids).
Hyperion Exploration (HYX.V $N/A [+0])
Cardium Land: 57 net sections
Hyperion Exploration is another junior player with a lot of leverage to the Cardium formation. The company assembled an initial drilling inventory of 195+ oil focused drilling locations in Garrington, Pembina, Niton-McLeod and Buck Lake. HYX is led by a strong management team that has historically delivered on growth and value. The company exited 2012 at more than 1,500 boed (65% light oil and NGLs).
Midway Energy ( TSE:MEL) (acquired by Whitecap Resources)
Cardium Land: 52 net sections
Midway Energy’s acreage is concentrated in the Garrington area with more than 150 net drilling locations. MEL is currently producing around 5,200 boe/d with 70% weighting to oil. 85% of MEL’s production is from its Cardium wells at Garrington where the company owns key base infrastructure.
Spartan Exploration (TSE:SPE) (SOLD)
Cardium Land: 24.4 net sections
Spartan Exploration is focused on light sweet Cardium oil play in Pembina with an inventory of 94 net drilling locations in 2 core areas: West Pembina and South East Pembina. The company is currently producing 2,150 boe/d with 85% liquids and plans to drill 19 net horizontal wells in 2011.
Strong oil prices will trigger further mergers and acquisitions as larger companies seek to increase their oil weighting and their oil production. These companies are potentially positioned to reap some handsome profits either through the drill bit or by getting bought out like Spartan Exploration and Midway Energy.
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.