Oil producer Veren Inc. saw its share price plunge by more than 14 per cent on Thursday, on news that the company is lowering its production forecast for 2024 and grappling with “under-performance” from some of its wells.
The company, which has operations in Alberta and Saskatchewan and used to be known as Crescent Point Energy Corp., said Thursday it now expects total annual average production of 191,000 barrels of oil equivalent per day, down from earlier expectations for between 192,500 and 197,500 boe/d.
It also announced disappointing results from the Gold Creek area of Alberta’s Montney oil-and-gas-producing region, where it was testing a new type of well design in an effort to improve efficiencies.
The “plug and perf” well design, as it is referred to in industry terms, is used to create multiple hydraulic fractures in a horizontal well. Veren had been enthusiastic about the potential for this type of well design to produce the same output at a lower cost than single-point-entry fracturing.
But at Gold Creek, production results from its test wells failed to meet Veren’s expectations, and the company reported Thursday it will stick to single-point-entry well design in the region after all.
On a conference call with analysts, Veren CEO Craig Bryksa fielded multiple questions about the disappointing well test results and lowered production forecast. He emphasized that it is only a few well pads in one specific region that have under-performed, and said he believes the stock price impact Thursday was an “overreaction.”
“I think this will filter through in the next couple days,” Bryksa said, adding that testing the “plug and perf” design in the area was a learning experience that has served to increase the company’s understanding of the region.
“I think the market will start to see the opportunity in front of them, and I’m excited when we start to look into 2025, knowing we’re so much smarter going into that year than we were going into 2024.”
In recent years, Veren has spent significant energy and capital on the Montney region. The company has been one of the most active Canadian oil and gas companies in recent years on the mergers and acquisitions front, as it sought to restructure its portfolio of assets to focus on the Montney and the adjacent Kaybob Duvernay shale gas play.
A series of blockbuster deals – which included the 2021 purchase of Shell Canada’s Kaybob Duvernay assets for $900 million, the 2023 purchase of Spartan Delta Corp.’s Montney assets for $1.7 billion and the purchase of Hammerhead Energy Corp.’s Montney assets for $2.55 billion shortly after that – has established Veren as the dominant player in two of North America’s most important petroleum plays.
Approximately 85 per cent of the company’s 2025 budget is allocated to its Alberta Montney and Kaybob Duvernay plays.
“We continue to expect 2024/25 to be operationally focused with minimal M&A,” said RBC Capital Markets analyst Michael Harvey in a note.
Harvey called Veren’s third-quarter results “negative” and pointed out that in addition to trimming its 2024 forecast, the company also unveiled a 2025 forecast that came in five per cent below what analysts had been expecting.
