CANADA VENTURE: Renegade Petroleum Blazing Trails in Bakken

The Bakken shale formation, in the oil- and potash-rich Williston Basin that spans Saskatchewan, Montana, North and South Dakota, and Manitoba, is generating a lot of buzz. It could contain as much as 413 billion barrels of oil in place, according to the U.S. Geological Survey. That's bigger than Saudi Arabia's Ghawar field, which has 125 billion barrels. Saskatchewan alone could be sitting on 25-to-100 billion barrels, provincial experts say.


Calgary-based Renegade, an upstart junior light, sweet, crude oil exploration and production company, is drilling wells, winning deals, and snaring land. The company has plays in Saskatchewan and North Dakota. The team, led by Chief Executive Michael Erickson, 34, are cultivating their connections to acquire land or production.


"The big thing that caught our attention was their relationships with the private oil-and-gas consortium in Saskatchewan," says Steve Buytels, an analyst at Dundee Capital Markets in Calgary. "That's what sold me on them."


The two biggest players in Saskatchewan are Crescent Point Energy Corp. (CPG.T) and PetroBakken Energy Ltd., (PBN.T) which was created in last year's merger of TriStar Oil & Gas Ltd. and Petrobank Energy & Resources Ltd.'s (PBG.T) Canadian unit.


Renegade, now up to 20 employees, has a solid team and track record, Buytels says.

"It's a younger management team and they're here to prove themselves," he says. "I think they'll beat most of their early forecasts."


Erickson co-founded the predecessor company, Renegade Oil & Gas, with his mentor William Ambrose, a 35-year oil industry veteran. They grew Renegade Oil & Gas to 1,000 barrels of oil equivalent per day entirely through the drill bit, before selling it in September 2009 to Legacy Oil Gas Inc. (LEG.T), formerly Glamis Resources Ltd.


This time, Erickson intends to combine drill-bit growth with acquisitions.

In the six months since launching Renegade Petroleum through Colonia Energy Corp., the team has made five acquisitions, raising their production to 1,250 boe a day from 140 boe a day. In January, Renegade bought Duce Oil Ltd. and its working-interest partners for C$35 million, enabling it to position itself as a high-growth light-oil player in Saskatchewan. Last week, it bought Prairie Hunter Energy Corp., a closely held Regina-based producer.


"Saskatchewan is full of a couple-hundred-barrel a day (producers) that are owned by farmers, or group of businessmen, who've held on to this for cash flow, but all of a sudden can see this huge potential growth in Renegade, and are willing to take stock in Renegade instead of just selling for cash," says Buytels.

The stock is down 1 Canadian cent to C$3.40 on the TSX Venture Exchange on Wednesday. Buytels has a C$5.75 target price.


Renegade, with a 100% success rate in first-quarter drilling, projects 2010 capital expenditures of C$42-to-C$44 million, 75% of which will be spent in southeast Saskatchewan on the Bakken play. The remainder will be focused on the province's Dodsland Viking play. That's expected to result in 1,800-to-1,900 boe a day. About 95% will be light crude oil.


Erickson says he's targeting 5,000 boe a day before they think about selling Renegade, and aims to be around 2,400-2,500 boe at year's end. "We always take five-year time frames to build sustainable companies," he says.


Source:  Dow Jones Newswires