How significant is Crescent Point’s attention turning from Saskatchewan to Alberta?
By Brian Zinchuk
Earlier this week, I posted a significant story entitled, “Once Saskatchewan’s largest oil company, Crescent Point plans to spend 70% of its capex in Alberta.” One person online wondered about its significance. And indeed, he had a point. After all, what has Crescent Point meant to Saskatchewan?
It turns out, a lot. So let me lay out some context for the average Saskatchewan resident:
The “Bakken Boom” of 2008-2014, which included over a billion dollars of land sales in 2008, was largely driven by Crescent Point. Most of that billion dollars in land sales that year, the year Saskatchewan paid off a huge chunk of debt, was directly from Crescent Point. Remember when the provincial government had that huge surplus in 2008? Crescent Point was a huge factor in that.
Their prodigious activity drove thousands of high paying jobs in Estevan, Weyburn, Carlyle, Carnduff, Midale, Stoughton, Torquay, Lampman, Benson, Arcola, Redvers, Gainsborough, Oungre, Shaunavon, Kindersley and more, literally spending billions per year, mostly with oilfield service companies, who in turn paid wages. See, in Saskatchewan, the oilpatch isn’t really about the oil companies, but the hundreds of oilfield services companies who employ thousands of people that work for those oil companies. And those people then bought trucks, quads, boats, RVs, houses, Riders tickets, restaurant meals and more.
Millions of people across Canada, through mutual funds or direct stock ownership, or pension plans or other institutional investors, made billions off Crescent Point.
This happened because this was the era of the junior oil producer. Many of the oil majors once had a significant presence in Saskatchewan. Mobil was around Gull Lake. Shell was at Midale. Imperial Oil was northeast of Estevan. But over time, they all left. And junior oil producers rose up in their place.
The junior producer model worked like this – start a company, build up some land and production, often to around 1,000-1,500 barrels per day. Sell it to a larger company, and start over. And over. And over. Some management teams did this four times, or more. And who was the buyer in many of those cases? Crescent Point.
At one point, Crescent Point accounted for roughly one out of every four barrels of oil produced in Saskatchewan. And at that time, oil royalties were paying up to 20 per cent of the provincial budget’s revenues, while health care was consuming about 39 per cent of the budget’s expenses. That meant that oil was paying for roughly every single doctor, nurse, hospital, old folks home, Xray, MRI and more south of Lumsden – including Regina – and Crescent Point was paying for roughly one quarter of that half.
On health care – it was Crescent Point that got the ball over the line in leading the fundraising to get STARS air ambulance finally going in Saskatchewan. While Potash Corp eventually donated a lot more money, Crescent Point was the key leader in that endeavor. If they hadn’t done that, it might have been several more years before getting a helicopter air ambulance here. If we had STARS in 1997 when my grandfather had a stroke, maybe he wouldn’t have been stricken so badly, eventually dying a slow death as a shadow of what he once was. STARS also responded the night my sister died. It matters. And because of STARS, fewer families have gone through what we did, because corporate citizens like Crescent Point stepped up.
Before they started selling off land in 2018, Crescent Point controlled huge swaths of land across southeast and southwest Saskatchewan. Over the course of something like 30 acquisitions, almost every one of those made the sellers rich, and those sellers often went on and reinvested a large portion of that money back into Saskatchewan (see above).
They were really hard on oilfield service providers to cut costs when the 7-year downturn hit around Christmas of 2014. But when nearly all other oil companies pulled their horns in and stopped spending money, Crescent Point did not. They kept going, even if they were paying less. That kept a huge portion of the industry afloat for several years, even if those service companies weren’t exactly happy about the situation. For several of those years, Crescent Point often employed more drilling rigs in Canada then the No. 2 and No. 3 oil companies combined. They may have been lean times, but lean was better than starvation, which is what most of the rest of the oil business was doing. In February, 2018, Crescent Point employed 29 drilling rigs, 27 of which were in Saskatchewan. They kept the industry afloat when no one else was.
Despite being based in Calgary, Crescent Point, along with Husky, were Saskatchewan’s oil industry corporate champions – Crescent Point for a decade, Husky for decades.
And now, Crescent Point’s activity and involvement in Saskatchewan is a shadow of its former self. While Whitecap Resources has in a small way picked up where Crescent Point seems to have left off, at this point it’s nowhere close. And as a result, all those towns listed above, and the province as a whole, are feeling the difference.
While Crescent Point is still very much present in Saskatchewan, and still one of the top oil producers, it is abundantly clear that its attention has turned to greener pastures in Alberta. Their budget announcement on Sept. 11 said, “The remaining capital budget will be allocated to the company’s long-cycle assets in Saskatchewan. This area provides Crescent Point with a combination of high-return locations and low-decline production that generates significant excess cash flow.” In other words, it’s a cash cow to be milked.
On Tuesday, I drove through Crescent Point’s Torquay field. I saw one frac spread and two service rigs there, but no drilling rigs. At one point, they had nine drilling rigs working in an area not much larger than a township, service rigs everywhere, and a few frac spreads to boot. The quiet, today, is deafening in comparison.
Love them or hate them, without Crescent Point from 2008-2018, almost everyone in Saskatchewan, and Saskatchewan itself, would have been poorer as a result.
So is Crescent Point’s attention turning from Saskatchewan to Alberta significant? You bet it is. This has happened before, and will likely happen again. But in the meantime, we in the industry wonder who will be the next driver in southern Saskatchewan’s oilpatch? Time will tell.
Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca.