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Big News for Arcan (and Second Wave)

I’ve owned Arcan Resources (ARN.v) since November 2009, when Sculpin2, an Investors Village poster, introduced me to the company.  Its been a love, hate relationship, with the hate culminating during the second half run last year when pretty much all stocks went up but Arcan did nothing.

Now, I am rarely so patient but in this case I was, and I held on to Arcan through it all, increasing my position in the stock until it was (and is) the largest in my portfolio.  Why?  Because it was clear that the Beaverhill Lake formation had a lot of untapped oil, I was confident that clever reservoir engineering now equipped with the new weapon of horizontal mult-fracs would eventually figure out how to tap that oil is a consistent and profitable way (being one of these myself I may be biased in my enthusiasm here), and it was clear that Arcan had a wonderful land position to take advantage of that success.

Well it looks like that investment is really beginning to flower now.  Last night Crescent Point Energy released this news release.

  • Identified the Beaverhill Lake formation around Swan Hills as an emerging oil resource play that they have taken a large position in
  • Announced the “acquisition of ownership and control over 16,750,000 common shares of Arcan, representing approximately 19% of the issued and outstanding common shares of Arcan”
  • Announced three recently successful wells in the area producing well above their expectations, “with average first-month production rates exceeding 1,000 bopd gross.”
  • Significantly expanded their capital budget to drill wells into the Beaverhill Lake, saying they “could spend up to an additional $100 million on capital expenditures in the play this year”

This is all great news.  The evidence is suggesting that Crescent Point may eventually take Arcan out. But maybe not.  I’m not in Arcan for a short term takeover so I would be equally happy to let the company continue to drill out their land and increase production. I suspect there will be more surprises (like these recent 1,000+bbl/d IP wells) as the engineers and the geologists figure out better ways to optimize getting the oil out.

Second Wave is looking better and better as well.  I’m glad I bought what I did a few days ago, but I do wish now that I had been even more aggressive.  Oh well, that’s how it goes.

There was also a good post on Seeking Alpha about Arcan that came out last night, discussing the possibility of a takeover.

Update

I caved and bought more Second Wave this morning.  It probably sounds stupid to buy a stock up 10%.  Maybe.  But this is a case where there are good well results coming out, where the stock is still trading within the range it has traded at before the news came out, and you should start to see more investors take an interest in the story as they hear about the Crescent Point interest in the play.  I am betting this 10% is the first of many.

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