While the junior has done well in an oil price environment that has smashed every oil sector player since mid-2014 with production and cash flow enabling it to pay the bills and manage some debt, chief financial officer Simon Adams told Energy News the company now wants to change tack, as investors clearly want more.
"We have to buy fields that are not too big where there is some drilling upside," he said, saying that would likely be the Williston Basin which covers Montana, North and South Dakota and up into Canada -as "we like that area. There's still quite a bit of potential there."
The US Geological Survey estimated mean undiscovered volumes of 3.8 billion barrels of undiscovered oil, 3.7 trillion cubic feet of associated/dissolved natural gas and 200MMbbl of undiscovered natural gas liquids in the Williston Basin Province which coverse more than 90 million acres across North Dakota, Montana, and South Dakota.
"We're priced where we are because people can't see the growth. What's the upside story? It's been a saving grace over the last couple of years while oil prices have been low to have the cash flow, but there is no upside with exploration drilling," Adams said.
"So we need to buy fields where we can at least put a bit in the ground. that's where the little Borie field we have there wells we've identified that are conservative as they're proven undeveloped wells, so are more infill drilling than exploration, but at least we can show that we can extract value out of those and it's a starting point."
Perhaps most importantly, the new strategy will give US-based CEO John Whistler, whose whole track record is getting value out of the drill bit, the chance to do what he does best.
"We haven't given him the opportunity to do that - not because we haven't wanted to, but because we haven't had the capital to buy the asset that really needs that," Adams said.
Adams recently compared the production and enterprise value of Incremental's ASX peers at their dollar value not at their barrel of oil equivalent, which indicated that investors are paying for the likes of Australis Oil & Gas and Winchester Energy's "blue sky" potential as they have upside and more wells to go and drill.
"People are paying for that blue sky, which is what the Aussie market is always looking for," Adams said.
"It's not looking for boring old fields that will always decline."
Last month the junior announced that its proven certified reserves would rise by 55% to 2.1 million barrels of oil equivalent once its newly acquired Borie field in Wyoming's DJ Basin closed, with the transaction also adding 756MMboe to 1P reserves.
That helped balance out its portfolio back towards oil from gas, but Adams told Energy News that wasn't so much to do with oil price optimism but project economics.
While the Silvertip asset in Wyoming was well balanced when Incremental bought it, the oil has dropped off so is now heavily weighted in gas.
"Being the bean counter, what I find frustrating on the gas side is there's always the conversion of 6-1, which is the energy conversion of oil per barrel - 6mcf per barrel, but when you use that on the financial side of things, it's not 6 times the price, it's more like 13 times the price," Adams said.
"So when you're either evenly balanced or more oil weighted you get a more true barrel of oil per day comparison."
Incremental was trading at 1.2c this morning.
