Crescent Point eyes oil-by-rail options in Utah

Intermediate reports higher production, net loss in fourth quarter

CALGARY — Crescent Point Energy Corp., an intermediate producer with capacity to move half of its total oil production by rail, said Thursday it hopes to add a “rail option” later this year to transport newly acquired output in Utah.

Using railway cars to get around bottlenecks in pipelines is now considered a price protection strategy akin to forward selling oil, the company said on a conference call with analysts following release of its fourth quarter 2012 results.

“In 2012 we improved operational flexibility by adding 50,000 barrels per day of rail capacity,” said president and chief executive Scott Saxberg on the call.

“This gives us the flexibility to positively impact our corporate differentials.”

He said the company hopes to find rail options in Utah by the middle of the year to help offset a $15 US per barrel differential in area oil prices.

“We know it will be definite benefit to the area and benefit to us, long-term,” said Saxberg.

Oil produced in Western Canada and the northern United States has been receiving discounted prices because there’s not enough room on pipelines to get it all to refineries in the eastern and southern U.S.

Analysts estimate four to seven per cent of North American oil production is being shipped by rail, with the higher cost versus pipeline offset by better prices at tidewater.

During the fourth quarter, Crescent Point closed the $784 million US purchase of Ute Energy Upstream Holdings LLC, thus adding about 8,000 barrels of oil equivalent per day of northeastern Utah output to its Saskatchewan, Alberta and North Dakota core areas.

Vice-president of marketing Trent Stangl said so far there have been no limitations on crude deliveries to Salt Lake City refineries despite a tight market that has prompted refinery expansion proposals but added rail capacity will improve competitive forces.

The company said that it has used term rail contracts along with its derivatives deals to lock in prices of more than $90 US per barrel for more than 15,000 bpd of its production for the next 18 months.

During the fourth quarter, Crescent Point said it moved an average of 19,000 barrels per day of oil through its expanded Stoughton rail terminal and 2,000 bpd through its Dollard rail terminal, in southeast and southwest Saskatchewan, respectively.

In a note, analyst Brian Kristjansen of Dundee Securities said Crescent Point beat the Street’s expectations on production, cash flow and reserves growth in its fourth quarter report.

Revenue from oil and gas sales rose to $727 million from $630 million as the company achieved record output of 108,000 boe/d (90 per cent oil and liquids), up 33 per cent over 81,000 boe/d in the same period of 2011.

Cash flow was $430 million or $1.18 per share, up from $382 million or $1.32 per share despite lower average realized prices.

Its net loss was $95 million compared with $86 million in the same period last year.

Crescent Point completed more than $3 billion in acquisitions during 2012 and increased proved plus probable reserves by 43 per cent to 609 million boe.

In December, the company revealed a 2013 capital budget of $1.35 billion, up 23 per cent from its $1.1 billion 2012 budget, although it actually spent $1.5 billion in development capital last year.

It has promised to revisit the 2013 plan at mid-year.

It is guiding to average 112,000 boe/d this year, with an exit rate of 114,000 boe/d. Analysts pointed out on the call Thursday that the company is likely already ahead of guidance because of the Ute acquisition.

dealing@ calgaryherald.com