The Cardium formation, located in western Alberta in the AthabascaRiver region, has become a hotbed of resource-rich shale deposits. As horizontal drilling and fracking technology advances, improved oil and gas recovery rates in the Cardium have been the focus of much development in the past year.
IN PICTURES: 10 Options Strategies To Know

Overview of the Cardium
Beginning in late 2009, M&A speculation within the area placed high valuations on firms operating in the area. Similar to the Bakken oil fields of Saskatchewan, where firms like Crescent Point Energy (TSE:CPG) bought out many E&P junior players, a similar trend has emerged in the Cardium.

Canadian mid-tier oil producer Petrobakken (TSE:PBN) acquired Result Energy and Berens Energy at the beginning of 2010, and followed with subsequent activity later on the year. Recently, TSX Venture firm Triple 8 Energy also acquired Cardium assets to gain access to the light oil and gas abundant in the region.

While the wave of M&A activity that was expected to soar through the Cardium has not yet come to full fruition, many oil and gas players are strategically targeting these shale formations. Of the 1,040 sections, covering 665,000 net acres, Penn West Energy Trust (NYSE:PWE) holds over 50% while ConocoPhillips (NYSE:COP) has slightly under 20% ownership. The total cost to construct and operate a well here runs at approximately $3.1 million, which is significantly more than wells in the Amaranth and Colorado Group regions, which cost $1.4 and $1.1 million respectively. Nonetheless, the horizontal drilling techniques have tremendously increased the potential oil & gas recovery.

Increasing Production
NAL (TSE:NAE-UN) has the majority of its capital focused on 17 net wells in the Cardium. Despite that a Peters & Co. report in March questioned the valuation of Cardium operators as extraction rates fell below expectations, NAL's operations have been on par with forecasts.

Similar to NAL, which plans to expand its Cardium exploration and production activities in upcoming quarters, Bonavista Energy Trust (TSE:BNP-UN) intends to almost double the number of horizontal Cardium wells in 2011. Sixteen wells are budgeted for 2010, and 30 for 2011.

Likewise, Anderson Energy (TSE:AXL) reported on June 20, 2010 that it will drill 21 gross wells in the region in 2010, as fourth-quarter production is expected to reach 1,500 barrels of oil per day. Light oil horizontal drilling in the Cardium has enabled Anderson to increase its portfolio focus on oil and NGL as natural gas prices remains depressed.

The Bottom Line
The Alberta Government has decreased the amount of royalties that oil companies are forced to pay, from a maximum of 50% in 2009 to 40% effective as of 2011. Such measures are intended to energize investment in Alberta, as companies become more profitable and appealing to shareholders.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  2. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  6. Stock Analysis

    The 5 Best Buy-and-Hold Energy Stocks

    Understand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
  7. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  8. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  9. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  10. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!