In a world of floundering trusts, Scott Saxberg president and CEO of Calgary-based Crescent Point Energy Trust, has pulled off some impressive numbers. The oil and gas trust recently announced a $200-million increase to its 2008 capital spending budget. And its units hit a total return of nearly 59% in 2007. Crescent Point’s secret? It has a lot to do with developing resources in Saskatchewan. Saxberg spoke with Calgary contributor Michelle Magnan about the discovery of a lifetime, royalty review fallout and why Saskatchewan is attracting tons of oil and gas dollars.
About 75% of Crescent Point’s resources are in Saskatchewan. Why is the province such a good play?
Our main play there is the Bakken [a formation that traverses the southeastern part of the province that’s been around for years but only became profitable recently thanks to new technology]. What’s exciting about it is it’s the second-largest pool discovered in Western Canada, which I think has been a little lost on people. It’s also the largest pool discovered since the 1950s. It’s a once-in-a-lifetime type of event. Even guys previous to my generation never had those discoveries. It’s one of those unique situations where it’s really not valued in the market yet because it is so new.
Has the Bakken play changed perceptions of exploration in Saskatchewan?
I think it’s exciting for Saskatchewan because that basin was looked upon for many years as being fully developed and people were just sort of picking around the edges for the last 10 years. This new discovery has opened it up all over again. It’s like a fresh start. I don’t think there’s an equivalent play in Alberta at this stage. It also gives people a view that maybe the Western Canadian basin isn’t done yet — there are other things to be found.
Crescent Point has always been active in acquiring other companies. Is that becausethe income trust and royalty changes have made those opportunities available?
We’re kind of a foreign company, because we’re primarily based in Saskatchewan. We weren’t at all affected by the royalty changes. When you think about an Alberta-based junior oil and gas firm that was completely affected by the changes, the oil’s still there, the gas didn’t go anywhere, but the economics around them have changed. It completely altered a lot of how companies attract or spend. Put a lot of companies in play for sale. I would argue almost every company is for sale at this stage. At the same token, there’s not a lot of equity available. We’re almost in a stagnation phase of the sector right now. A lot of big players aren’t selling assets because they’re uncertain as to the value, and there are a lot of juniors that just don’t have good assets that can’t even merge or do anything because there’s no market momentum for it.
Has it always been your strategy to focus on Saskatchewan, or have royalty changes really driven the strategy?
We’ve always been a Saskatchewan-based company as far as production goes. We really like working [there]. We find it less competitive, or it was until the royalty changes. The government is very accessible there, [as far as] licensing wells and drilling. And the regulations are so much better than in Alberta. It’s also year-round access, and it’s easier to operate in Saskatchewan. It’s oil-based and has bigger pools, so that’s been our focus. We’re in Alberta and B.C. as well, but we’ve found we’ve been more competitive in the southeast of Saskatchewan.
You’ve noticed a change in competitiveness since the Alberta royalty review?
The royalty review made a lot of people rethink Saskatchewan and B.C. For many, many years Saskatchewan was where larger companies took the cash flow from and bumped it into Alberta, because in theirminds there was a perceived difference in the economics of Saskatchewan versus Alberta. The market always looks at Alberta as the No. 1 place to invest. A lot of companies are pressured to develop plays in Alberta. With the change in royalties, that kind of put a halt to it, and I would say the flow now is out of Alberta and into Saskatchewan and B.C. That, plus the fact that Saskatchewan is more oil-weighted, which means with higher oil commodities, versus gas, more money’s being poured into Saskatchewan.
So you’re seeing more entrants to the market there?
A lot of people … looked at Saskatchewan and realized that it’s very competitive, and a few players really dominate — and we’re one of those guys. It’s very difficult for somebody to come in now and gain a position. A lot of them thought, “We can’t even compete.” The people that are there still are now more willing to hold on to their assets and production in the province, more so now than six months ago, because of the change in royalties.