CALGARY - An old technology with a new wrinkle is a “game-changer” in Saskatchewan’s unconventional light oil plays, Scott Saxberg, chief executive of Crescent Point Energy Corp., said Monday.

He told the company’s annual general meeting the application of water flooding, along with infill drilling, could allow the company to more than double reserves within five years.

“Crescent Point has a dominant position in two of the largest and most economic unconventional resource plays in Western Canada, the Lower Shaunavon and Bakken,” said Saxberg.

“These mainly untapped resource pools provide Crescent Point with over 5,000 drilling locations and the potential to add over 500 million barrels of reserves, which could potentially double our current net asset value.”

The Calgary company announced a few weeks ago it would buy back its private sidecar company, Shelter Bay Energy Inc., in a deal valuing it at $1.3 billion and expected to close in July.

It also increased its capital budget for 2010 to $750 million from $625 million ($425 mil­lion for Crescent Point Energy and $200 million for Shelter Bay).

At year-end, the two companies had a combined total of about 320 million barrels of oil equivalent of proved and probable reserves.

In an interview, Saxberg said two years of tests at an initial pilot project in the Bakken — and more recent results from a second test — show that injecting water into formations being tapped by nearby horizontal wells with multiple fracture stimulations can help boost recovery from about 10 per cent to 30 per cent of oil in place.

“We’ve seen very strong results,” he said. “What it’s done in the pilot over the past two years is give us flat production.

“Without it, it’s 10 per cent, and with infill drilling you might get to 20 per cent. And then with water flood it’s 30 per cent. That’s huge.”

Normally, after an initial “flush” of production in the first year, Bakken oil output drops off by about 70 per cent, Saxberg said.

Crescent Point plans four more pilot projects throughout the field over the next year.

The company’s shares slipped eight cents to $38.92 in trading on the Toronto Stock Exchange on Monday.

Analyst Kyle Preston of Canaccord Adams cautioned that Crescent Point’s water flood strategy is promising, but not necessarily proven in all areas of the Bakken.

“This water flood technology is not really new. What’s new here is applying the water flood to a tight rock reservoir which, to my understanding, hasn’t been done very successfully in the past,” he said.

He pointed out PetroBakken, the second-largest player in the Bakken, doesn’t believe in water flooding.

Preston carries a buy recommendation on Crescent Point with a 12-month target of $46. The Bloomberg consensus of analysts is $47.15.

Trent Stangl, Crescent Point’s vice-president of investor relations, explained the company’s strategy is to let a central well produce for about a year to take advantage of Saskatchewan’s royalty holiday on new horizontal wells before converting it into an injector well.

Forcing water into the well builds pressure underground to push more oil out of surrounding wells, a technique commonly used in conventional oil plays.

Saxberg said the company is also experimenting with cemented liners on the horizontal part of the wells instead of steel pipe, allowing adjustments in the number of fractures as the well ages.

He added the company is pleased to hear about the Alberta government’s new royalty incentive plans, including lower royalties for deep wells and horizontal wells, but he has no immediate plans to spend money in Alberta.

He said he doesn’t regret not getting into the popular Alberta Cardium oil formation, noting its ownership is “fragmented” and it would have been too difficult to get a dominant position.

Crescent Point created Shelter Bay in early 2008 to facilitate its Bakken consolidation without violating growth restrictions placed on income trusts. In 2009, Crescent Point converted from a trust to a corporation.

dhealing@theherald.canwest.com