viewHillcrest Petroleum Ltd

Hillcrest Petroleum looking to grow production and revenue at West Hazel through 2020


In 2018, the firm announced a strategic tie-up with a private company to pursue oil and gas acquisitions in Western Canada

Hillcrest Petroleum Ltd -

Quick facts: Hillcrest Petroleum Ltd

Price: 0.235 CAD

Market: TSX-V
Market Cap: $49.41 m
  • West Hazel asset is producing
  • Still on the acquisition trail
  • Poised to electrify oil field

What Hillcrest Petroleum does:

Hillcrest Petroleum Ltd (CVE:HRH) (OCTMKTS:HLRTF) is a Vancouver-headquartered small-cap oiler, with assets in Western Canada.

It reckons that after a period of sustained low prices, the Canadian oil industry offers numerous undervalued projects to buy and develop to create value.

In 2017, the company struck a joint venture deal with a private Canadian oil and gas firm, whereby it earns an initial 75% working interest (WI) to operate and re-establish 150 to 250 barrels of oil per day (bopd) production from assets in Western Canada (West Hazel). The field was generating over 200 bopd before being shut down in 2015 by the previous operator.

In 2018, Hillcrest announced a strategic tie-up with a private company to pursue oil and gas acquisitions, also in Western Canada.

The partner has the exclusive right of first refusal on pre-screened opportunities and will be assigned a 25% carried interest in any acquired assets. The partner is to fund 100% of acquisition and development costs.

In January 2019, Hillcrest also inked a memorandum of understanding (MoU) with publicly-listed Australian firm Xstate Resources Ltd (ASX:XST), to pursue onshore oil and gas acquisitions in Canada and the United States.

How is it doing:

Hillcrest boss Don Currie believes the group's management are close to 'turning' the small oiler around after what has been a challenging few years.

In January 2019, production began at the West Hazel project and stabilized in July, August.

In September, the group put out a release, saying that output rates were over 150 bopd. That came after a workover of four wells at the Saskatchewan site in July, boosting production by roughly 70-80 bopd.

And at the beginning of 2020, the firm revealed it was pleased with how the West Hazel operations had performed over the last six months. Daily oil output from four wells at West Hazel averaged around 115 barrels per day, with some days seeing over 200 barrels per day.

In February this year, Hillcrest announced a move to try and further improve West Hazel, by hooking the asset up to the grid. The oiler said it had 'initiated actions' with Sask Power over the process, which involves connecting to nearby main electricity transmission lines and installing the necessary equipment.

The firm said the move will "transition West Hazel production operations from expensive, greenhouse gas-emitting, diesel and propane fuels to clean grid electricity".

"Electrifying the field is the first of a number of value-adding field development activities planned to deliver maximum value from our West Hazel assets," the group added, noting that the move was expected to increase operational reliability (e.g. reduced downtime) and cut direct operating expenses by around $8,000 per month, representing around a 10% operating cost saving.

The firm also said that, as part of moves to firm up its balance sheet, chief executive Currie had converted his portion of a loan to the group into shares, receiving around 5.5 million shares from a loan converted into 11.14 million shares at 5 cents each (around C$557,000).

Hillcrest also said talks were ongoing with other lenders to secure further debt to equity conversions in a bid to retire debt. Earlier this year, it appointed chartered accountant Aaron Triplett as its chief financial officer and corporate secretary.

Hillcrest is also in talks about potential acquisitions in Alberta and is confident it will have news on this during the first half of the year.

Inflection points:

  • Further uplift in output
  • Field electrification
  • Acquisition news

What the boss says:

"We believe that the West Hazel asset, which is doing 170 barrels a day right now, 200 on some days. We believe we can take that to 500 or 600 barrels a day if we're successful with workovers in the two short lateral wells that we'll be drilling," Hillcrest chief executive Don Currie told Proactive's Steve Darling in January.

"That's a pretty good increase for any company and puts a lot on the bottom line and will take away a large part of the remaining debt," he added.

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