Low-Cost Light Oil Production Drives Viking M&A Deals

Low-cost light oil production is the key factor driving dramatic and sustained volumes of M&A activity within Canada’s high-profile Viking formation.

More than Cdn$8 billion in asset and corporate deals involved Viking light oil assets in Eastern Alberta and Saskatchewan in 33 separate deals since 2014, according to CanOils M&A data. Among these deals were Teine Energy’s Cdn$975.0 million acquisition of Penn West assets – the third biggest M&A deal in Canada in 2016 – and Tamarack Valley Energy’s Cdn$407.5 million acquisition of Spur Resources.

Analysis of data from three typical Viking wells reveals that costs are not only low, but that total drilling costs(1) fell even further between the winter drilling seasons of 2015 and 2016. The cost cuts year-on-year, when analysed in relation to the total measured depth(2) of the well, were between 5% and 9% for each Viking type well.

This well cost data is available within the Petroleum Services Association of Canada’s (PSAC) latest well cost study, which has now been digitized for the first time in its 35 year history. Learn more here. The study demonstrates how these costs compare with other prolific Canadian formations, as well as how total drilling costs and the costs of over 100 drilling cost components in the Viking have changed over the past few years.

The three Viking type wells in the study are:

  • AB4D, East Central Alberta, Halkirk area, Horizontal well, Total measured depth 2,150m
  • SK1A, Central Saskatchewan, Dodsland area, Vertical well, Total measured depth 700m
  • SK1C, Central Saskatchewan, Dodsland area, Horizontal well, Total measured depth 1,550m

PSAC Viking Jan17 Chart 1-1.jpg

Source: PSAC Well Cost Study, powered by CanOils. Find out more here.

“While drilling and casing cost cuts have been important, it’s crucial to note the scale of cost cutting that has taken place in the Viking formation when it comes to completing a well, because they make up a larger portion of total costs,” said Karl Norrena, Manager, New Product Development at JWN Energy.

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