Alberta has long been Canada’s dominant energy producer.
Thanks to its share of the Western Canadian Sedimentary Basin — which happens to contain North America’s largest reserve of oil and natural gas — Western Canada has morphed the country into a global energy powerhouse.
A few days ago, I was on my way to the heart of Alberta’s energy industry.
One quick turn off course and I was suddenly giddy with excitement.
It was one of those spur-of-the-moment decisions that costs you a plane ticket. Rather than catch my flight back to the streets of Baltimore, I was headed to a place that investors have either forgotten about or completely overlooked…
It turned out to be the best eighteen-hour detour I’ve ever taken.
We’ve covered the ongoing energy war between Alberta and Saskatchewan several times in the past.
On the surface, overtaking Alberta’s energy throne seems impossible.
But it’s this very line of thinking that leads the average investor to completely overlook one of the best growth opportunities in Canadian energy.
The Drilling Boom Off Investors’ Radar
It’s not that we didn’t see this coming. Since 2006, we’ve had a feeling that Saskatchewan hasn’t been getting the attention it deserves.
Oil and gas land sales in the province were being bought at a feverish pace. In 2008 alone, the oil and gas industry shelled out more than $1 billion for parcels of oil and gas rights.
You see, Saskatchewan has a leg up over its neighboring province.
We’ve talked before about the struggles Alberta’s conventional oil production has been facing. Between 2006 and 2010, Alberta’s light oil production fell a slight 2.3%.
Meanwhile, Saskatchewan’s light oil production jumped more than 60%. And the best part — the part that most investors don’t see coming — is that at this pace, Saskatchewan will overtake Alberta’s light oil production within ten years.
Although the land rush has calmed since 2008 (the province’s August land sales generated only $21.7 in revenue, bringing the 2011 cumulative total to a modest $214.9 million), it’s time for these companies to get to work.
Drilling activity has increased more in Saskatchewan than anywhere else in Canada. The well count this year is expected to increase by 17% compared to 2010.
Even though we won’t immediately dismiss Saskatchewan’s own oil sands resources in the northwestern part of the province, we can see much more attractive opportunities in the light, conventional pools in the south.
On top of that, the province has an ace in the hole: its share in the now-famous Bakken formation.
As it stands right now, the U.S. side of the formation holds up to 4.3 billion barrels of recoverable oil — and that amount is about to jump even higher.
As Saskatchewan continues to ramp up drilling, a win-win situation will unfold for investors.
And on Tuesday, I’ll take it a step further when I tell you exactly which producers have already set up shop in Saskatchewan… and how you can get in on this oil boom.
Enjoy your weekend,
Editor, Energy and Capital