April 4, 2023
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Dominating the news last week, after a drop in M&A activity caused from volatile oil prices, was the acquisition of Spartan Delta Corp’s (“Spartan Delta”) oil and liquids rich Montney assets by Crescent Point Energy Corp. (“Crescent Point”)
On March 28, 2023, Crescent Point purchased Spartan Delta’s assets for $1.7 Billion. With the deal, Spartan Delta is divesting of one of its two main core areas, and focusing on its deep basin play (their remaining Montney assets will be transferred to a subsidiary spin off, Logan Energy Corp). The assets involved count for approximately half of Spartan Delta’s production.
We’ve looked at both companies through a few different lenses using our AssetSuite software tools, that allow you to compare the companies and gain some insight of your own regarding this deal.
These are very different corporate entities with almost all of Spartan Delta’s production assets in Alberta, where Crescent Point has a broader range of Saskatchewan and Alberta Assets. Spartan Delta is almost all gas to Crescent Point’s much larger oil portfolio.
Figure 1 – Spartan Delta/Crescent Point Provincial Distribution
Figure 2 – Company book for Crescent Point and Spartan Delta
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Looking at a map of the assets we’ve estimated were part of this deal, you can see that they are contiguous to Crescent Point’s 2022 purchase of Duverney assets from Paramount. https://www.crescentpointenergy.com/invest/news/crescent-point-acquires-kaybob-duvernay-assets-and-increases-base-dividend-25
Looking at the core area of this deal (estimated to be 14-72-7W6 to 17-59-15W5), we see that the top producer is Arc Resources Ltd. who owns 30% of the area, with their production accounting for about 56% of their total WCSB assets.
Figure 3- Top 10 companies in area
Arc has been extremely active in this area, drilling approximately 130 net wells in the last 12 months, but the chart below shows how active the top 10 players have been in the last 36 months:
Figure 4 – Drilling activity levels for the top 10 players in the area over the last 3 years
It is worth noting Spartan Delta Corp is in this list with over 20 net wells drilled in the last 12 months.
To get a sense of potential liabilities associated with this transaction we have used XI’s ARO Manager which assumes working interest and allows you to run different scenarios based on cost model, inflation/discount rates etc. Using the government LLR cost model the estimated liabilities are approximately $49M.
Figure 5 – Working interest liability, total and discounted using Government LLR Cost Model
We can see that they are relatively new producing assets with very few inactive wells in the mix.
Figure 6 – Breakdown of liabilities by activity, age and risk class
Assets in the area are generally low in Scope 1 GHG intensity, varying from operator to operator, but range in the 0.02 to 0.01 tC02e/BOE range. Taking an over-the-fence look with AssetBook Emissions report, we estimate the Spartan Delta assets are approximately 0.01 tCo2e, and will have a small, but net-negative effect on Crescent Points overall corporate intensity. Spartan Delta however, on divesting of lower intensity assets, will see their post-transaction corporate intensity rise from approximately 0.020 to the 0.029 range.
While it’s interesting to analyze deals after they are announced, our data and software solutions provide the tools required to look at your own deals or proactively find deals to create better value. For more results, or if you would like to learn more about how XI’s AssetSuite software can analyze potential mergers, acquisitions, and opportunities, including examining potential liabilities and emissions, contact XI Technologies.