Crescent Point Energy announces strategic Uinta Basin cash acquisition of Ute Energy

Friday, November 2, 2012      
  • Under the terms of the Ute Acquisition, Crescent Point has agreed to pay US$784 million of cash consideration for Ute and expects to assume approximately US$77 million of Ute net debt.
  • The successful completion of the Ute Acquisition is expected to establish a new core area for long-term growth for Crescent Point.

Crescent Point Energy Corp. (TSX:CPG) is pleased to announce that it has entered into a purchase and sale agreement (the "Ute Acquisition") to acquire Ute Energy Upstream Holdings LLC ("Ute"), a privately held oil and gas producer with current production of approximately 7,800 boe/d and approximately 590 (270 net) sections of land in the centre of the Uinta Basin light oil resource play in northeast Utah. The Company believes this multi-zone, large oil-in-place resource play has significant upside potential through the application of vertical and horizontal infill drilling and multi-stage fracture stimulation. Total consideration for Ute is approximately US$861 million (CDN$861 million based on a US$/CDN$1.00 exchange rate), including cash consideration of US$784 million plus assumed debt.

"We're excited about establishing this initial position in the Uinta Basin," said Scott Saxberg, president and CEO of Crescent Point. "This resource play is a new core area for Crescent Point and is consistent with our strategy of acquiring high-quality, large oil-in-place pools with long-term upside potential. We believe we can apply the extensive horizontal multi-stage fracture stimulation expertise that we've developed in Canada to the Uinta Basin to deliver long-term value to our shareholders."

In addition, and assuming the successful completion of the Ute Acquisition on or about November 30, 2012, Crescent Point is upwardly revising its 2012 capital expenditure plans and production guidance. Capital expenditures are expected to increase by CDN$150 million to CDN$1.4 billion, with a portion of the increase expected to be allocated to development capital on the acquired Ute assets. The remainder of the increase is expected to be spent on drilling and completions, building upon the Company's drilling success to date in 2012, as well as land and facilities.

Incorporating successful production results to date and assuming the successful completion of the Ute Acquisition, the Company's average daily production in 2012 is expected to increase to more than 97,000 boe/d from 95,000 boe/d and its 2012 exit production rate is expected to increase to more than 109,000 boe/d from 100,000 boe/d.

Crescent Point also announces that it has entered into an agreement, on a bought deal basis, with a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets and CIBC, and including Scotiabank, TD Securities Inc., FirstEnergy Capital Corp., National Bank Financial Inc., GMP Securities L.P., Macquarie Capital Markets Canada Ltd. and Peters & Co. Limited for an offering (the "Offering") of 18,750,000 Crescent Point shares at CDN$40.00 per share to raise gross proceeds of approximately CDN$750 million. Crescent Point has also granted the underwriters an over-allotment option to purchase, on the same terms, up to an additional 2,812,500 Crescent Point shares. This option is exercisable, in whole or in part, by the underwriters at any time up to 30 days after closing. The maximum gross proceeds raised under the Offering will be approximately CDN$863 million, should this option be exercised in full. Closing is expected to occur on or about November 21, 2012, and is subject to customary regulatory approvals.


Under the terms of the Ute Acquisition, Crescent Point has agreed to pay US$784 million of cash consideration for Ute and expects to assume approximately US$77 million of Ute net debt. The Ute Acquisition is expected to close on or about November 30, 2012.

The acquisition is consistent with the Company's strategy of acquiring large oil-in-place assets with high-netback oil production and long-term upside through the application of vertical and horizontal infill drilling using multi-stage fracture stimulation. Crescent Point believes there is also significant potential upside in Ute's large undeveloped land base, which is located in the centre of the Uinta Basin resource play and has attractive land tenure terms.

Ute's assets are located in the central basin, which is the intersection between two main oil-bearing plays within the Uinta Basin: Monument Butte and Altamont-Bluebell, which have been producing for more than 50 years. Exploration and Development Agreements ("EDAs") with the Ute Indian Tribe govern more than 150 net sections of land that the Company expects to acquire in the central basin, of which the majority is undeveloped. The lands governed by these EDAs were released for development less than 10 years ago. The majority of the EDAs were issued in the last five years and all of the EDAs contain extension provisions regarding drilling commitments that have the potential to provide the Company with up to an initial 15-year term to develop this inventory, which will provide significant operational flexibility relative to other U.S. opportunities.

"The exploration and development agreements provide a strong operating environment and an aligned partnership with the Ute Tribe," said Saxberg. "We have met with the business committee members of the tribe and look forward to a successful, long-term relationship with them as we develop this high-quality asset base."

"On behalf of the Ute Tribe Business Committee, we are pleased to have another quality operator of Crescent Point's capabilities and financial strength operating on our lands and look forward to a long and successful relationship," said Irene C. Cuch, Chairwoman of the Ute Tribe Business Committee.

Key attributes of the Ute assets to be acquired:

  • Current production of approximately 7,800 boe/d, of which 88 percent is weighted to oil and liquids, and 24 net wells recently drilled but not yet completed;
  • Approximately 270 net sections of land in the centre of the Uinta Basin resource play, of which 245 net sections are undeveloped and more than 150 net sections are governed by the EDAs;
  • More than 1,000 net internally identified low-risk drilling locations, of which 253 net proved plus probable locations have been booked to reserves pursuant to an independent engineering report prepared in compliance with NI 51-101;
  • More than 400 net of the internally identified drilling locations are in the Randlett area, which is 100 percent operated, and are low-risk vertical infill wells;
  • Netback of approximately US$40.00/boe based on US$90.00/bbl WTI and US$3.75/MMBtu Henry Hub;
  • Production from the various zones of the central basin is marketed as Yellow wax crude (42° API) and Black wax crude (32°API), which currently trade at a differential to $US WTI of approximately 16 percent to 18 percent;
  • Operating costs of approximately US$9.00/boe, transport costs of approximately US$3.00/boe and royalties of approximately 23 percent; and
  • Tax pools estimated at US$861 million.

Reserves Summary

Independent engineers at GLJ Petroleum Consultants have assigned reserves utilizing NI 51-101 reserve definitions and effective November 30, 2012, as follows:

  • Approximately 55.1 million boe of proved plus probable and 37.6 million boe of proved reserves; and
  • Reserve life index of 19.4 years proved plus probable and 13.2 years proved.


Based on the above expectations for the Ute Acquisition, and after adjusting for estimated land value of US$111 million (approximately US$700 per acre for undeveloped land), the estimated acquisition metrics for the assets expected to be acquired are as follows:

1. 2012 Cash Flow Multiple:
- 6.5 times based on production of 7,800 boe/d (US$90.00/bbl WTI, US$3.75/MMBtu Henry Hub and US$/CDN$1.00 exchange rate)
2. Current Production Multiple:
- US$96,154 per producing boe based on 7,800 boe/d
3. Reserves Multiple:
- US$13.61 per proved plus probable boe
- US$19.95 per proved boe

The Ute Acquisition is expected to be immediately accretive to Crescent Point on a per share reserves, production and cash flow basis.


The successful completion of the Ute Acquisition is expected to establish a new core area for long-term growth for Crescent Point. Consistent with the Company's early recognition of other world-class resource plays such as Viewfield Bakken, Lower Shaunavon and Beaverhill Lake, Crescent Point sees upside potential in the Uinta Basin.

The Uinta Basin in northeast Utah has been producing light oil since the 1950s and, in recent years, has experienced a resurgence in activity with the application of new drilling and completions techniques. Through the application of infill drilling and multi-stage fracture stimulation to both vertical and horizontal oil wells, Crescent Point believes greater potential can be unlocked in the resource play. To develop and exploit the multiple zones in the play, Crescent Point expects to drill both vertical and horizontal wells and to apply infill drilling.


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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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