Canadian Well Construction Journal September 2011

The Official Publication of the Canadian Association of Drilling Engineers

Canadian Well Construction Journal Volume 4 | Issue 1 | September 2011

Rain, Rain, Go Away Blame La Ni単a for wet spring and flooding woes

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2 | Canadian Well Construction Journal September 2011

Table of Contents Feature Stories

Rain, Rain, Go Away

President’s Message

Enform Safety

It is with great expectations and enthusiasm that I accept the privilege of taking on the role of CADE president for 2011-12. Looking back over this past year, I am impressed by the energy, dedication and enthusiasm of all of our members and the CADE executive team. I think it is evident that John Garden, our past president, started CADE down a path to recognize the new realities in well construction, where drilling and completion goals and activities are becoming ever more intertwined. On behalf of myself and the CADE executive team, I wish to thank John for his many past and ongoing contributions to our association. It surprises me when I consider the speed of change in our industry in the past few years. Indeed, it seems to me that the industry is still accelerating in its pursuit of optimized reserves recovery, financial returns and a secure and stable future. All the recent industry statistics point to the impact of horizontal multistage well designs as the catalyst for the current renaissance. Only two short years ago in 2009, the industry was skeptical that any potential recovery was on the horizon after a slow and shrinking first two quarters of activity. The contrast between the rather dim future of that day and today’s robust and growing industry excitement is the result of technological change. In addition to opening up massive new unconventional reservoirs, the new technologies are also proving valuable in redefining many of the plays that have been pursued for many decades. Existing infrastructure, road access, power availability and an oil-savvy local population make redevelopment of old fields a potentially rewarding endeavour. Overall, we have experienced an amazing change in fortune and we currently enjoy a future that was not pictured in even the best industry predictions. So, here we sit with our latest prognostications, forecasts glowing with optimism, and what seems to be enough work to do to last decades and beyond. In the fervour, some company mindsets become consumed with getting more done rather than getting things done right. Historically, our service industry has responded by over-building, adding far more capacity than the mid-term and long-term market could use, and fuelling the wild “boomand-bust” cycle that has become an industry trademark. A measured, staged and well-planned approach supported with accurate field data takes time to implement, but the learnings can represent far greater ultimate value than the upside of a quick hit that potentially sacrifices long-term reservoir or wellbore management. The future is uncertain (as always), but in my opinion the engineering and technology professionals can do more to influence the outcome than any other group in the industry. I believe that CADE is well positioned to facilitate the discussion and dissemination of those technologies that bind our drilling and completions operations into an integrated, efficient and effective industry, and to reach out to those engineers on the completions side of our industry as valued CADE members. We, as industry professionals, hold the reins of our industry’s future in our hands. Let us convene, discuss, disseminate and further develop our understanding of our resources and the technologies we use to exploit them. Let our pace be tempered by a determination to avoid costly mistakes that will be paid for by future generations. In the words of Charles Kettering, “My interest is in the future, because I am going to spend the rest of my life there.”

Departments Association News

4-5

Upcoming Events

Member Profile:

News & Notes

Stats At A Glance

On the cover: Rain across the Prairies has severely curtailed production activity. Photo: Joey Podlubny

@CADE_CAN

Canadian Association of Drilling Engineers (CADE) 800, 540-5 Ave. SW, Calgary, Alberta T2P 0M2 Phone: 403 264-4311 | Fax: 403 263-3796 www.cade.ca Managing Editor: Christian Gillis Advertising Sales: Nick Drinkwater Published by: JuneWarren-Nickle’s Energy Group CADE’s mandate is to provide high-quality technical meetings to promote awareness of the drilling & well servicing industry. Through CADE, members and the public can learn about the technical challenges and experience gained from our speakers, who are most often CADE members themselves. We invite you to join CADE and further your professional development. Past issues of CADENews are available online. Current issues of Canadian Well Construction Journal are available via email, to CADE members only. CADE is not responsible for any opinion or statement expressed in this publication.

Eric Schmelzl, P.Eng., President, Canadian Association of Drilling Engineers September 2011 Canadian Association Of Drilling Engineers | 3

Association/Membership News Editor’s Note Welcome back to our first issue of the Canadian Well Construction Journal for 2011-2012. Summer holidays are wrapping up and a number of companies are scrambling to get their summer work done before the fall and winter programs start. Road bans are still on in some places, and have been most of the summer. The rain has played havoc with most companies plans as well as farmers’ plans and campers. If you were lucky enough to get away this summer and be able to sit outside, at least you could sit by the fire to keep the mosquitoes away. The rain hasn’t kept everyone from working, though, as equipment and personnel are hard to find right now and prices for such just seem to keep going up, even though commodity prices seem to keep coming down. This will make for a very interesting winter as there are rumblings already of companies cutting back programs. With all of the talk about weather and rain all summer long, we decided to open up the first CWCJ issue since the summer break with an article from Jacqueline Louie addressing our weather issues, what may have caused them and what is in store for us in the coming months. The weather seems to be affecting everyone and will have a huge effect on how we carry out our business over the next two to three quarters. We are continuing to review ideas for the 2011 Technical Luncheon presentations, as well as story ideas for the journal. Please don’t hesitate to contact us if you have any ideas for upcoming topics or issues you’d like to see presented at the luncheons or in print. We hope you, the membership, will participate and continue to make these events interesting and successful. If you have any issues you’d like to see covered, please email me and we will do our best to get the story. Don’t forget—we would like to publish any of your information and announcements on new products, new technologies and senior personnel changes for publication each month. Please forward any announcements to us, as we would be excited to run them in our new feature section. We appreciate your continued support and look forward to seeing you at the upcoming luncheons and the Conference. Christian Gillis, Managing Editor, Canadian Well Construction Journal

christiang@deadeye.ca | phone: (403) 265-4973

Why Become a CADE Member? For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. As of 2011, CADE has been active for 37 years. With more than 500 members from more than 300 companies, CADE represents a large spectrum of experience in all areas of operations and technologies. The skills and knowledge obtained by your participation in CADE will benefit you and your employer, with direct application to your professional career. CADE offers various means for members to connect and share their insights. Monthly technical luncheons are held with technical and other topical industry presentations. Other membership benefits include our monthly publication the Canadian Well Construction Journal, and a membership directory with the who’s who in the Canadian drilling industry. Our website at www.cade.ca is an excellent focal point for industry events, blogs and news. We are also active on linkedin.com.

Who Can Become a CADE Member? CADE members can be anyone with an interest, or merely employed in the drilling and completions industry. Typical members include drilling and completions engineers, geologists, technical personnel, sales personnel and students. Student memberships are available to any post-secondary student interested in learning more about drilling and completions. Please feel free to share information about CADE with all of the people in your organization who are interested in the drilling and completions industry.

CADE Executive Team 2011/2012

TITLE

NAME

TELEPHONE

President Past President Vice-President Secretary Treasurer Membership Chairman Education Chairman Social Chairman CWCJ Editor Technical Chairman IT Chairman Drilling Conference Liaison Executive Member CAODC Liaison Sponsorship & Marketing

Eric Schmelzl John Garden Robert Jackson Tammy Todd Cecil Conaghan John Burnell Mike Buker Dan Schlosser Christian Gillis Jeff Arvidson Graham Evans Jeff Orita David White John Pahl Scott Payne

403-862-0870 403-265-4973 403-274-2718 403-613-8844 403-667-9812 403-265-4973 403-930-9015 403-531-5284 403-265-4973 403-232-7100 403-991-2066 403-693-7563 403-699-5160 403-292-7966 403-400-4032

4 | Canadian Well Construction Journal September 2011

Association/Membership News Welcome New Members NAME

COMPANY

TELEPHONE

Ankit George

Shell Canada

403-828-3432

ankit.a.george@shell.com

Jolene Hunt

Halliburton Energy Services

403-260-5291

jolene.hunt@halliburton.com

Zach Linkewich

Harvest Operations Corp.

403-233-3681

zach.linkewich@harvestenergy.ca

Katie McQuoid

EOG Resources Inc.

403-297-9189

katie_mcquoid@eogresources.com

403-852-9856

brussell19@gmail.com

Ben Russell Damian Ward

Weatherford Canada Partnership

403-693-7651

damian.ward@ca.weatherford.com

Yergali Yertuganov

Schlumberger Limited

403-984-1347

yyertuganov@slb.com

Members On The Move NAME

COMPANY

TELEPHONE

Paul Matthews

Typhoon Drilling Fluid Mgnt Canada

403-899-5437

paul.matthews@live.ca

Eric R. Olson

Weatherford Canada Partnership

403-693-7831

eric.olson@ca.weatherford.com

Daniel Schlosser

Sabre Well Servicing Inc.

403-237-0309

dschlosser@sabrewell.com

CADE Membership/Change of Address Log on to cade.ca to become a member or update your address using our online form.

CADE Membership Renewals 2011-2012 CADE’s membership year is September to September. Over the summer, CADE members will receive an email and link to the renewal process and site. Please remember that the benefits of being a CADE member include APPEGA’s professional development hour, staying abreast of technological and industry advances, drilling conferences and great opportunities to network. All renewals/applications received on or before November 4, 2011 will be included in the CADE 2011-2012 Annual Directory (unless otherwise requested). Thank you for your support!

CADE Technical Luncheon Date Wednesday, September 14, 2011

Place

The Westin, Calgary

Speaker: TBA

Topic: TBA

Time

11:30 a.m.—Reception 12:00 noon—Luncheon 12:30 p.m.—Presentation

CADE Technical Luncheon Ticket Pricing (includes GST) Members: $45 Non-members: $55

Full tables of 10: $450 Student: $15

Walk-up: $55 GST Registration #R123175036

CADE Technical Luncheon October 3, 2011 The Westin, Calgary

CADE Technical Luncheon November 2, 2011 The Westin, Calgary

Visit cade.ca for all ticket purchases.

Upcoming Events CADE Technical Luncheon September 14, 2011 The Westin, Calgary

September 2011 Canadian Association Of Drilling Engineers | 5

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MEMBER PROFILE

Mike Huculak By Jacqueline Louie

Dodging six-foot-long poisonous snakes on the drilling rig was all part of a day’s work for long-time CADE member Mike Huculak when he was working Down Under in the oil and gas fields of central Australia. Whenever there was a tropical rainstorm in northern Queensland, recalls Huculak, who worked in Australia for nearly eight years, the outback would flood, flushing poisonous snakes out of the bush. “You would find them all over the roads and sometimes on the catwalk on the rig. You had to watch where you were stepping.” Even more exciting for Huculak was working in the middle of Australia in the desert, helping to build up a complete operations department from scratch for Delhi Petroleum Pty. Ltd. “in a new country, in a new area, in a new environment. We successfully accomplished that, to the extent that Esso Australia acquired us to obtain an efficient onshore operation. And the lifestyle in Australia wasn’t bad either,” smiles Huculak, who lived in Adelaide, southern Australia, for five years and then north of Brisbane, Queensland on the Sunshine coast for nearly three years. During his time in Australia, he also spent three months working offshore in the Bass Strait between the Australian mainland and Tasmania. Born and raised in Lethbridge, Alta., Huculak moved to Calgary at the age of 19 to attend SAIT, where he took petroleum operations technology. After completing his education, he went to work for Amoco Canada Petroleum Company Ltd. in Calgary for nine years, then went to Brinco Oil & Gas Limited, where he was drilling manager for two years. Huculak worked in Australia for 7.5 years for Delhi Petroleum Pty. Ltd. and Esso Australia. After returning to Canada in 1990, he consulted with Sceptre Resources Ltd. and Elan Energy Services, then joined Sceptre Resources as drilling superintendent. After a short stint with Canadian Natural Resources Limited, which acquired Sceptre, he worked for two years as drilling manager

for Archer Resources Ltd., which later became Dominion Energy Canada Inc., before establishing his own drilling consulting company from 1999-2006, working for a number of small to mid-sized oil and gas exploration and production companies. In 2006, Huculak accepted the position of drilling manager for Advantage Oil & Gas Ltd., an independent oil and gas producer active primarily in the glacier field in northwestern Alberta, with a significant Montney natural gas resource play. The company recently split off the majority of its oil properties into a separate company, Longview Oil Corp.; Advantage is the majority owner of Longview and manages Longview’s day-today operations as well. Longview’s current operations are primarily situated in central Alberta in the Nevis and Westerose areas and in southeastern Saskatchewan. At this time, approximately 95 per cent of Advantage’s/Longview’s drilling work is horizontal. As drilling manager at Advantage, Huculak handles everything from overseeing surveying to lease and road construction, cleanup and drilling.

What Huculak, 60, enjoys most about being a CADE member is “the networking and interaction with a lot of like-minded people in the oilpatch, and the exchange of knowledge and experiences that goes with it. I enjoy going to the CADE talks, seeing what’s new and getting information and experiences from other people.” He is optimistic about the future for the Canadian oil and gas industry. “We obviously need and someday expect to see better natural gas pricing. In my time, I’ve experienced a lot of highs and lows and I’m assuming this is just an extended down period. I would hope for a recovery in natural gas prices in the next few years.” For young people starting out in the industry, “it’s probably a good time to be getting into the oil and gas business,” Huculak says. “There are a lot of baby boomers in the oilpatch, such as myself, who hope to be retiring within the next five years or so. The industry is short of trained personnel right now and it’s only going to get worse. I think it’s a good opportunity for young people who want a rewarding career. “I have certainly enjoyed the challenges over the years and the business has been very good to me and my family.”

September 2011 Canadian Association Of Drilling Engineers | 7

Feature Story

Rain, Rain, Blame La Niña for the wet conditions—and delays in getting equipment moved By Jacqueline Louie

ain, floods, severe thunderstorms, drought—western Canada has been pummelled by the weather this past summer, enduring extreme weather and some of the wettest conditions ever seen in late spring and early summer. “Even when the roads were passable and we could move equipment, we couldn’t get it onto the locations because it was just too soft, or if you had the rig in place, you couldn’t get it off the location,” says Don Herring, who retired last month after 28 years as president of the Canadian Association of Oilwell Drilling Contractors (CAODC). “It’s slowed activity down from what we had anticipated.” In the second quarter of 2011, the industry ran an average of 190 rigs in western Canada, off slightly from what had been forecast (200 rigs in the second quarter of 2011). “It’s probably more of a concern in terms of what contractors viewed as market potential,” Herring says, noting that drilling contractors could have exceeded that forecast had they had the opportunity to access more locations. 8 | Canadian Well Construction Journal September 2011

“We’re not as busy as we should be,” says one contractor, pointing to 2011 as the worst year he’s seen in the past decade. “At one point in early July, a quarter of the drilling rigs that were supposed to be working were sitting waiting for locations. We’re still busier than we were last year or the year before, even with the weather, just because the market has recovered so much. But in terms of how much work we’re missing, it’s quite bad. Everybody is going to make less money than they would have otherwise. For service rigs in particular, they’ve got a waiting list of work that has to happen. All of the work will eventually get done, but it creates a backlog.” Work at another contractor, Trinidad Drilling Ltd., also got off to a slow start this past spring. But, as of early August, things had dried up enough that Trinidad was seeing a spike in rig activity, with the company running at 84 per cent utilization, compared to 68 per cent utilization at the same time last year. “The work is there right now. The operators are scrambling, looking for extra rigs so they can catch up

, Go Away In the third quarter of 2011, the CAODC is looking forward to utilization rates of approximately 55 per cent. At those levels, “it’s a much more profitable and optimistic industry,” Herring says. The roots of this past summer’s weather misery go back to 2010, according to Environment Canada’s senior climatologist David Phillips, author of the bestselling Canadian Weather Trivia Calendar. “If we wanted to look at a culprit, it would probably be La Niña—a phenomenon that typically occurs once every four to seven years, when the water temperature in the tropical Pacific stays at least half a degree colder than normal for at least three months,” Phillips explains. “La Niña affects weather patterns above the ocean and as the ocean goes, so goes the seasonal weather.” Last year, La Niña began in mid-2010 and seemed to intensify throughout the year. “What 2010 represented was the wettest year on record,” Phillips says. While the system should have been over by February, it seemed September 2011 Canadian Association Of Drilling Engineers | 9

Photo: ©photos.com

on their programs,” says Trinidad vice-president of Canadian drilling operations, Darcy Reinboldt. For the third quarter of this year, the CAODC had been forecasting 467 active rigs in western Canada, and the numbers for August have been a bright spot, with 504 rigs operating in western Canada during the week of Aug. 23. That’s up from the start of August, when there were 450 rigs running. “Certainly in August, we are meeting and probably exceeding that forecast,” Herring says. “It’s been picking up to the point where we’re over 500. Now we’re getting back to the levels we had hoped for. Conditions are much dryer. We are able to access locations, and that’s reflected in these much higher active rig numbers.” In comparison, July’s numbers were lower than expected—a reflection of the very wet weather seen in areas across western Canada this past spring. The numbers were down by 25 per cent from what had been forecast, at around 360 rigs running.

At a Glance: La Niña La Niña describes an extensive cooling of the waters in the tropical eastern Pacific Ocean. To qualify as a full-fledged La Niña, the cooling must persist for at least three seasons. La Niña events are cyclical, recurring every three to five years, but the interval can vary from two to 10 years. Most episodes last about nine to 12 months, although some events persist for as long as two years. The cooler waters of La Niña gener-

North America typically feels the effects of La Niña during the winter and early spring. Wetter-than-normal conditions occur across the Pacific Northwest, British Columbia and Alaska. During La Niña winters in Canada, the jet stream assumes its more normal mid-continental location. Because the mild air and cold air are never too far away, winters usually comprise alternating bouts of freezing and thawing. Overall, in western and central Canada, most La Niña winters tend to be colder than normal by one or two degrees Celsius, and snowfall

ally weaken and modify the circulation

amounts are greater than normal from

of the jet stream, which in turn has a

the interior of British Columbia to the St.

marked effect on the normal weather

Lawrence Valley.

patterns for most of the globe.

— David Phillips, The Canadian Encyclopedia

to linger on until June. “What you tended to get was more wet weather and colder weather—therefore more snow and a delay to everything,” Phillips adds. Because of the lingering wet conditions, water was still brimming in the soil late in the year when winter arrived and “you had an almost instant freeze.” The moist conditions continued through last winter, which saw more snowfall than normal across the Prairies. Heavy snow cover stayed longer and the ground stayed frozen longer. And the long winter was followed by one of the coolest springs across the Prairies in 63 years.

10 | Canadian Well Construction Journal September 2011

The fact that it was colder than normal meant that everything was delayed—while at the same time, the Prairies were still dealing with record amounts of precipitation from 2010 and a healthy amount of snow cover. And when the melt finally came, it all went out at once and the ground became saturated. “It’s that combination of extraordinary amounts of precipitation, a cold spring and some heavy doses of rain in June and July, which delayed the drying out,” Phillips says. Weather patterns varied across western Canada. However, almost everyone got a dose of misery at some point, Phillips says.

“It’s that combination of extraordinary amounts of precipitation, a cold spring and some heavy does of rain in June and July which delayed the drying out.” — David Phillips, Senior Climatologist, Environment Canada

Southern Saskatchewan and Alberta saw extremely wet spring conditions with record rainfalls in some areas. Areas such as the Peace River Country and northeastern British Columbia weren’t hit until May, June and July when they received record amounts of rainfall. Fort St. John, for example, saw a record 321 millimetres of rain—more than double the normal 154 millimetres. As far as what’s in store for the weather this fall, Environment Canada models suggest a possible return to La Niña. The weather agency is forecasting cooler-than-normal conditions in British

Columbia, Alberta and most of Saskatchewan in October, November and December, while the majority of Manitoba is forecast to see near-normal temperatures this fall. “The farther you look out, the more uncertain it is,” Phillips cautions. “We always do a better job describing what we’ve gotten, rather than what we’re going to get, and the farther you look out the more uncertainty there is going to be. “I always tell people we aren’t always right and we do change our minds. At the beginning of August, it’s a little tough to tell what the weather in November or December is going to be.”

September 2011 Canadian Association Of Drilling Engineers | 11

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News & Notes Photo: CNG Group/Ivanhoe Energy Inc.

Ivanhoe Spuds First Exploration Well In Mongolia Ivanhoe Energy Inc. and its wholly owned subsidiary, Sunwing Energy Ltd., announced that N16-1E-1A, Sunwing’s first exploration well on its Nyalga Block XVI in Mongolia, spudded Aug. 13. Surface casing has been run and cemented. “This is an important step in our exploration program in Mongolia,” David Dyck, president and chief operating officer of Ivanhoe, said in a release. “Given the results of our 2-D seismic study, we are optimistic of the potential to discover oil resources in Mongolia.” The well is located on a structure approximately 32 square kilometres in size and will be drilled to a total depth of approximately 2,500 metres. The well is being drilled by the Daqing Exploration Company and drilling of the well will take approximately 30 days, with completion and testing to be carried out as required. The company intends to drill two wells on two separate structures, with the option to drill up to three additional wells in this initial exploratory program. Ivanhoe Energy and Sunwing Energy have started drilling their first well in Mongolia.

Seven-month rig release count up nine per cent over last year Operators rig released 6,431 wells across the country in the first seven months of the year, up nine per cent from 5,897 wells rig released during January to July of 2010. Of the wells drilled across Canada to the end of July, 1,835 still have no final status (oil, gas, dry or service). Of those with a status designation, 3,019 (about 66 per cent) were reported as oil wells and only 998 (22 per cent) were listed as gas wells. In comparison, in 2006 9,223 gas wells (68 per cent) were rig released over the January to July period. This year’s seven-month rig release figure for oil wells is off slightly from last year’s count of 3,069, as rainy weather and forest fires across western Canada in May and June impacted drilling activity. With the increased use of horizontal drilling, however, metres drilled across Canada

during the first seven months of the year climbed to 11.54 million metres, up about 12 per cent from 10.32 million metres in the comparable period last year. Alberta saw close to a seven per cent rise in rig releases to 4,165 up to July, compared with 3,904 in last year’s first seven months. Saskatchewan’s rig-release count rose to 1,666 wells, up about 26 per cent from 1,318 wells during January to July in 2010. Saskatchewan’s rig-release total included 203 outpost holes versus 184 in Alberta. Meanwhile, Alberta drilled 147 new pool wildcats versus 65 in Saskatchewan. The rig-release tally in British Columbia has declined to 373 wells in the first seven months of the year from 435 wells in the comparable period last year, while the

count in Manitoba declined by six wells year-over-year to 214 in the 2011 period. Operators rig released 1,076 wells (excluding experimental wells) in July, down slightly from 1,096 wells rig released a year ago. Alberta operators drilled 636 wells, off seven per cent from last July, while Saskatchewan operators drilled 369 wells, up about 27 per cent from a year ago. In Alberta, 499 of the wells that were rig released in July had oil or bitumen as an objective, up from 371 a year ago. Oil was an objective for 350 of the wells in Saskatchewan in July, up from 283 in the year-prior period. In July, well spuds rose to 1,194 (excluding experimental wells) from 1,146 the prior year, while the seven-month spud tally is 6,483, up from 6,005 in 2010. —Daily Oil Bulletin

September 2011 Canadian Association Of Drilling Engineers | 13

More than half of July permits for horizontal holes Operators licensed 1,341 wells in July, according to recent Daily Oil Bulletin records, up 11 per cent of 135 wells from July 2010, with about 54 per cent of the permits for horizontal wells. Over the first seven months of 2011, the well count stands at 10,388, up 20 per cent over the January to July period last year and the highest tally since 2008, when 12,606 wells were approved by governments across Canada. A record 5,204 of the permits issued to the end of July this year were for horizontal holes, 50 per cent of the total. In 2008, almost 16 per cent of the well authorizations were for horizontal holes. The operators securing the most horizontal permits to the end of July were: Canadian Natural Resources Limited (357 licences), Penn West Exploration (265), Crescent Point Energy Corp. (240), Husky Energy Inc. (188) and Encana Corporation (182). The most frequently licensed total depth zones for horizontal wells were the Viking (745 licences), the Montney (556 permits), the Cardium (545 licences), the Bakken (359 authorizations) and the McMurray (198 permits). This year’s licence count includes 1,083 oilsands evaluation permits, up from 783 to the end of July last year and the most since 2008, when the seven-month tally was 1,737 oilsands evaluation permits. A decade-high 893 licences were approved for oil or bitumen targets last month, up from 757 oil-intended targets in July 2010. For the year-to-date, 6,678 of the permits in the four western provinces were targeting oil, up 49 per cent from the first seven months of 2010. Of the seven-month total, 2,756 of the oil permits were in Saskatchewan (up from 1,766 last year), while 3,562 were in Alberta (up from 2,380 last year). In Manitoba, operators obtained 324 oil permits to the end of July, one less than the total for January to July in 2010. Gas and coalbed methane permits were still at a decade low of 311 last month, down from 358 in July 2010. For the month of July, the peak year for gas licences was 2004 when 1,645 permits were granted. — Daily Oil Bulletin 14 | Canadian Well Construction Journal September 2011

Canyon Services feels wet weather impact Canyon Services Group Inc. says it completed only 159 jobs in the second quarter of 2011, about half the 308 jobs completed in the same quarter a year ago, because its core customers were not active in pad-well projects, the type of work typically less impacted by spring breakup or weather conditions. However, Canyon was able to double its average consolidated revenue per job to $147,078 in the second quarter of 2011 from $74,095 in the second quarter of 2010 due to its continued focus on the deeper segments of the market. The second quarter of 2011 experienced worse-than-expected operating results as prolonged and extremely wet weather conditions across the Western Canadian Sedimentary Basin resulted in many exploration and production companies delaying drilling and completions activity to the second half of the year. In June 2011, normally a month that sees a return to robust activity following spring breakup, drilling rig utilization levels were lower than in June 2010 due to the inclement weather and lease conditions, said Canyon. Although its customers were more weather-delayed than normal in the second

quarter, the company believes its expanded equipment fleet will be fully utilized during most of the remainder of 2011, thanks to a backlog in demand for fracturing services caused by the drilling delays of the second quarter and strong industry fundamentals. Canyon’s pressure pumping fleet has grown to 125,500 hydraulic horsepower (HHP) at the beginning of 2011 from 25,500 HHP in 2009. All equipment built since 2009 is of heavy-duty specification, suitable for deployment in the Deep Basin where pumping pressures, rates and durations have increased significantly. The company’s $82-million 2011 capital program will add a further 50,000 HHP, bringing the company’s fleet to 175,500 HHP by the end of 2011. Canyon has started receiving delivery of the first equipment units. Canyon’s equipment fleet has almost doubled to average 125,500 HHP in second-quarter 2011 from 69,500 HHP in second-quarter 2010. Its $82-million 2011 capital program is on schedule and on budget and will result in the expansion of its fracturing equipment fleet by 40 per cent to 175,500 HHP by year-end. — Daily Oil Bulletin

Alberta oil well completions at 30-year high Operators continued to pursue oil development across western Canada in July, pushing the seven-month tally for oil well completions to another high. Development completions for oil in the four western provinces soared to 3,727 wells in the January to July period, close to 62 per cent of total development completions, and up from 2,434 development oil wells in last year’s comparable timeframe. With strong crude prices and stagnant gas prices, July marked the eighth straight month (beginning December 2010) that operators completed more oil development wells than gas development wells. Exploratory oil completions in western Canada are also at a high. During the first seven months of the year, exploratory oil completions rose to 554, up from 407 in the first seven months of 2010. Still, the percentage of exploratory wells being completed in western Canada continues to decline, at only 17 per cent of the wells to date this year.

Industry and governments reported that 8,120 wells were completed across the country from January to July, up 33 per cent from 6,102 completions in the comparable period last year. This year’s total includes 4,285 oil wells, 2,755 gas wells, 827 service wells and 253 dry holes. In Alberta, oil well completions (excluding experimental wells) to the end of July rose to 2,556, up 67 per cent from 1,533 wells since last year. It’s the highest number of oil well completions in 30 years of records compiled by the Daily Oil Bulletin. Saskatchewan’s oil well completions during the first seven months of the year climbed 37 per cent to 1,492 (up from 1,091 last years), and there were 194 oil well completions in Manitoba (compared with 204 from January to July in 2010). For the month of July, 500 wells were completed across Canada. The tally included 300 oil wells and 97 gas wells. A total of 13.3 million metres of hole have been completed year-to-date, with 890,000 metres completed in July. — Daily Oil Bulletin

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SAFET Y

Safety Alert (#15—2011) Yoke Failure on Snubbing Unit Description of incident: ➤ A Rigless Snubbing Unit was preparing to stage the production

tubing string into a well in northern British Columbia. The average wellbore pressure was recorded at 28 megapascals (4,000 pounds per square inch). At that pressure it is required to snub the tubing using the ram-to-ram staging method. As the snubbing operator was staging the coupler of joint #44 into the staging chamber of the snubbing unit, the lower stripping Quick Ram Change (QRC) rams were closed, the chamber was de-pressurized and the upper stripping QRC rams were opened. Immediately after the upper QRC rams were opened, there was a natural gas release from the closed annular blowout preventer (BOP) on top of the snubbing stack. The operator closed the upper QRC rams and investigated the cause of the release. It was then noticed that the lower stripping QRC rams had malfunctioned and did not close properly due to a failure in the operating yoke of the QRC stripping ram breaking on the left side, making it impossible to apply the correct closing pressure to the QRC stripping pipe ram to achieve a seal on the tubing. The tubing hanger was staged in using the upper stripping QRC rams and the damaged QRC rams were removed from the snubbing stack and sent for analysis of the failure. Prior to commencing operations, a safety meeting was held and a review of the company’s ram-toram staging Job Safety Analysis was completed. These actions were documented with all personnel on location.

What caused it: ➤ The immediate cause of the incident was the failure of the operating

yoke on the QRC. The original purchaser of the rams had requested that the manufacturer modify the original equipment design to improve overall ease of handling, rigging in and rigging out of the BOP. The underlying causes of the failure included a faulty design from the manufacturer that did not account for the conditions in which the QRC was being used. A full management of change review was not conducted prior to the changes made to the equipment and assumptions were made about the strength and durability of the operating yoke and QRC.

Corrective actions: ➤ The manufacturer has been instructed to issue recall notices when

any design flaws are identified and not to wait until customers

Incident Type: High Potential Equipment Failure Release Date: July 22, 2011 Location: Western Canada

bring equipment in for service or inspection. In this occurrence, the manufacturer was aware of the design flaw and had been informing those customers of the flaw when they brought the QRC in for service and repairs. ➤ The manufacturer has been instructed to contact all customers who purchased the QRCs to inform them of the design flaw and remove all smaller faulty design yokes from service pending an engineering analysis on the new design. ➤ The snubbing company has six sets of the faulty QRCs and all were upgraded with new, heavier yokes. The yokes that were removed from service were sent for non-destructive testing and it was discovered that they were all cracked in the same spot. ➤ Snubbing operators are advised to add a visual inspection of BOP components to the supervisor’s daily checklist. ➤ Snubbing operators are advised to utilize original equipment manufacturer (OEM) or an OEM-approved vendor for BOP service and recertification. ➤ Enform, the oil and gas safety association, has been asked to send out a safety alert informing the industry of this high potential incident. ➤ The Petroleum Services Association of Canada has actively contacted all companies that purchased this BOP to ensure that the hazard is known. ➤ All companies that purchase manufacture equipment must not take for granted that all designs are flawless and to ensure that a management of change process is developed and followed when any changes are made to equipment or processes.

Additional information: ➤ The BOP involved in the incident was 1.5 years into its three-year

certification and the inspection performed 1.5 years ago did not detect any damage or irregularities at the time of inspection. ➤ The certification was performed by a third-party BOP recertification facility.

Further reading and references: ➤ Industry Recommended Practice 15 Snubbing Operations <http://

maildogmanager.com/link.html?url=1826&amp;client=CPSC& amp;campaign=597&amp;email=dlunan@junewarren-nickles. com> 2nd Edition Published July 2007.

Contact: Enform | 1538 – 25 Avenue NE | Calgary, Alberta, Canada T2E 8Y3 | E: safety@enform.ca | T: (403) 250-9606 | www.enform.ca DISCLAIMER: This Safety Alert is designed to prevent similar incidents by communicating the information at the earliest possible opportunity. Accordingly, the information may change over time. It may be necessary to obtain updates from the source before relying upon the accuracy of the information contained herein. This material is presented for information purposes only. Managers and supervisors should evaluate this information to determine if it can be applied to their own situations and practices. September 2011 Canadian Association Of Drilling Engineers | 17

Stats At A Glance Drilling Rig Activity August 19, 2011

Canadian Wells Rig Released July 2011

547

262

809

68%

Quebec

New Brunswick

Newfoundland

Eastern Canada Total

547

265

812

67%

Western Canada Total

Canada Total

Service Rig Activity August 19, 2011 ACTIVE

DOWN

Alberta

377

304

681

55%

Saskatchewan

149

196

76%

British Columbia

52%

Manitoba

63%

553

372

925

60%

Quebec

100%

Eastern Canada Total

100%

554

372

926

60%

Western Canada Total

Canada Total

TOTAL % ACTIVE

2009

2010

Dec

100%

Nov

2011

Active Drilling Rigs in Canada July 2011 700 600 500 400 300 200 100 0

2009

2010

Dec

Oct

Nov

Manitoba

Sep

68%

Oct

Aug

Sep

Jul

British Columbia

Aug

79%

Jun

154

Jul

Jun

122

May

Saskatchewan

3,500 3,000 2,500 2,000 1,500 1,000 500 0

May

63%

Apr

553

Apr

202

Mar

351

Mar

Alberta

Feb

% ACTIVE

Feb

TOTAL

Jan

DOWN

Jan

ACTIVE

2011

Active Service Rigs in Canada July 2011 1,000 800 600 400 200

18 | Canadian Well Construction Journal September 2011

2010

Dec

Nov

Oct

Sep

Aug

Jul

Jun

Apr

Mar

Feb 2009

May

Information in this publication may be sourced through a variety of contributors. Members are encouraged to email their suggestions regarding articles, general content and statistical graphs and charts to Dale Lunan at dlunan@junewarren-nickles.com.

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