Spartan Energy (SPE:TSXV) has delivered on its drilling goals of late, hitting on 100% of its wells in the Viking Light Oil play of West Central Saskatchewan and on its Detrital Oil play of Central Alberta in Q1 2014.
The marketplace has rewarded Spartan Energy as its market cap ballooned to almost $1 billion last week. Spartan was off 6 cents to $4.13 per share Wednesday morning. Spartan, which was previously Alexander Energy, has had one heck of a ride of late.
On December 5th, 2013, Alexander Energy announced a recapitalization financing and a new management team. Included in that press release was a change in the company’s name. New management came aboard and Alexander Energy became Spartan Energy.
That new management team spurred a flurry of investment into the burgeoning oil and gas stock, and for good reason.
Spartan Energy’s current management team has been on a role. The new team, comprised of Richard McHardy, Albert Stark, Ed Wong, Fotis Kalantzis, Thomas Boreen and Michelle Wiggins, outlined in aDecember 5th 2013 press release, previously led Spartan Oil Corp., a light oil producer focused primarily in the Cardium light oil resource play at Pembina in central Alberta.
At Spartan Oil, the New Management Team grew production from approximately 650 boepd to 5,500 boepd in the 18 months prior to its sale to Bonterra Energy Corp. in January, 2013 for approximately $500 million.
Prior to Spartan Oil, this same management team led Spartan Exploration Ltd., a light oil producer with operations focused in the Cardium light oil play at Pembina and the Lower Shaunavon oil play in southwest Saskatchewan.
Spartan Exploration’s production rose from 0 boepd to 2,500 boepd in just over 3 years prior to its sale in June 2011 for approximately $228 million.
So this new management team, the one currently running Spartan Energy, (these guys must have been fans of the movie 300) has become familiar with success.
In 2011 Spartan Exploration was sold for $228 million. In January 2013 the team sold Spartan Oil for approximately $500 million.
Most recently, in March of 2014, the new Spartan Energy finalized its acquisition of Renegade Petroleum. The total transaction value for the acquisition of Renegade by Spartan, including net debt of approximately $168 million, was approximately $495 million (based on a Spartan Share price of $2.76).
Spartan Energy had a market cap of $915 million Wednesday afternoon.
Spartan Energy – 3 Month Chart
Spartan’s stated business plan is to focus on light oil opportunities in Western Canada, employing a targeted acquisition and consolidation strategy, complemented by development and exploration drilling.
In an April 16th press release, Spartan updated its current production to approximately 6,600 boe/d (93% light oil), based on field production estimates.
That press release sent Spartan’s market into a frenzy. In addition to a solid production update, Spartan announced it had hit on 100% of its wells in the first quarter of 2014. The company has a way of delivering well written, easy to understand press releases. Below is an excerpt from April 16th’s release, titled,Spartan Energy Corp. Provides Drilling and Operational Update.
Central Alberta – Detrital Oil
During the first quarter, the Company drilled and completed 3 (2.7 net) Detrital vertical wells with a 100% success rate. Spartan’s 2014 capital program and production forecast assumes first month average production (IP30) rates per well of 70 bbl/d for our Detrital drilling program. Based on initial test rates, we expect the results from these three wells to meet or exceed our expectations. Two of the three wells are currently on production.
West Central Saskatchewan – Viking Light Oil
In the first quarter, the Company drilled 10 (9.5 net) Viking horizontal wells with a 100% success rate. Nine of the ten wells have now been completed and are in various stages of post-fracture stimulation, clean-up and being brought on production. The tenth well will be completed after break up. Results from the Company’s Viking program are consistent with management’s expectations in respect of both production rates and all-in costs.
Southeast Saskatchewan – Mississippian Light Oil
In the first quarter, the Company drilled 6 (5.3 net) horizontal wells targeting Mississppian light oil in our southeast Saskatchewan core area. Included within this number are 4 (3.3 net) wells that were drilled in our Queensdale property targeting the Frobisher/Alida formation. All of the Queensdale wells have now achieved a production history in excess of 30 days, with an average IP30 rate of 189 bbl/d.
Click here to read the entire press release.
Prepare for a busy Q2, Q3 and Q4
The Company expects to spend a total of $66 million in 2014 to drill 58 (53 net) wells. The remaining $8 million will be spent on land, seismic and maintenance expenditures. During the first quarter of 2014, the Company drilled 3 (2.67 net) Detrital oil wells in central Alberta on the Company’s Alexander property. The focus of Spartan’s remaining 2014 capital program will be on the Company’s Mississippian assets in southeast Saskatchewan and, to a lesser extent, on the Company’s Viking prospects in the Dodsland area of west central Saskatchewan. Spartan expects to drill up to 44 (40 net) horizontal wells in southeast Saskatchewan targeting the Frobisher and Midale formations.
Click here to read more about Spartan’s plans in 2014.
Spartan expects its 2014 budget to yield full year average production of 5,100 boe/d (93% oil and liquids) and exit production of 7,300 boe/d (94% oil and liquids).
Spartan estimated on April 16th that its current production is 6,600 boe/d. This would suggest they are more than on track to exceed 7,300 boe/d by years end. Spartan has only drilled and reported on 19 of its planned 58 wells in 2014.
Spartan announced that cash flow is anticipated to be approximately $80 million, after reflecting hedging losses estimated at $9.3 million for the period April through December. An excerpt documenting the company’s current hedges is below:
All of the Company’s current hedges (on 4,000 bbl/d) expire at the end of 2014. Key budget assumptions for 2014 include:
Crude oil = WTI US $90.00 per barrel (Cdn. $93.00 Edmonton light)
Natural gas = Cdn. $4.00 per Mcf
Exchange rate = US/Cdn. $0.90
Operating netback = $49.77per boe
Corporate netback = $42.79 per boe
Click here to read the entire press release from March 31 2014.
On April 16th, the company traded 9.1 million shares and hit a high of $4.39 as more than $38.66 million worth of stock exchanged hands. Spartan hit its all-time high of $4.44 the following day. Its market cap hit a high of $983 million that day.
Spartan Energy has become one of the most liquid stocks on the TSX Venture due to its constant flow of activity and overachievement. It has been regularly witnessing more than 1,000 individual trades per day as investors searching for aggressive growth pile into the oil and gas stock.
