Profiler - June 2010

June 2010

2010 GPS Profiler

Canadian Oilpatch

Recovery Expected Through 2010 PUBLICATIONS MAIL AGREEMENT NO. 40069240

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PROFILER 1

GPS Profiler June 2010 3 Recovery Mode

Higher oil prices boost oilsands and conventional activity, while natural gas producers continue to face challenges

9 On The Move

publisher Doreen McArthur | Tel: 403 209-3527 E-mail: dmcarthur@junewarren-nickles.com advertising sales Tony Poblete | Tel: 403 209-3532 E-mail: tpoblete@junewarren-nickles.com

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design/production Andrew Brien | Tel: 403 209-3528 E-mail: abrien@junewarren-nickles.com

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advertising traffic coordinator Elizabeth McLean E-mail: atc@junewarren-nickles.com contributing writers Jim Bentein, Jacqueline Louie, Elsie Ross, Paul Wells

New Opportunities

CSUG report pegs Canada’s natural gas in place at almost 4,000 tcf

Advantage Products Inc.

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OBC Aker Solutions

Ellen Fraser | Tel: 403 265-3700 x151 E-mail: efraser@junewarren-nickles.com

creative services Janelle Johnson, Natasha Paterson

Oilsands producers looking at promising decade

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Athene Offices & Services

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Baker Hughes

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20 Eagle Drilling Services Ltd.

www.eagledrillingservices.ca

22 Ensign Energy Services Inc.

www.ensignenergy.com

7 Europump Systems Inc.

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www.europump.ca

Government of Yukon

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32 Lea-Der Coatings

JuneWarren-Nickle’s Energy Group 2nd Floor, 816 – 55th Avenue NE Calgary, Alberta, Canada T2E 6Y4 Tel: 403.209.3500 Fax: 403.245.8666 Toll Free Phone: 1.800.387.2446 www.junewarren-nickles.com

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Nexxa Industries Ltd.

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Pajak Engineering Ltd.

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ParaSolve

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Park Derochie Coatings Ltd.

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Penetrators Canada Inc.

www.maxperf.ca

Penta Completions Supply & Services Ltd.

www.pentarods.com

44 Radcan Energy Services Inc

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www.radcan.com

Stewart & Stevenson Canada Inc.

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Thompson Rivers University

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VAM Canada Inc.

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Volant Products Inc.

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PROFILER 3

“Suddenly heavy oil, which was viewed as a dirtier oil because of its higher carbon content, looks a lot safer than oil from offshore.”

— Robert Peterson

Recovery Mode

Higher oil prices boost oilsands and conventional activity, while natural gas producers continue to face challenges

by Jim Bentein

The massive oil spill in the Gulf of Mexico, caused by an explosion on a BP offshore platform that occurred in mid April, will lead to a shift towards more oilsands development in Canada, says a Houston-based energy industry consultant.

Robert Peterson, a vice-president with Charles River Associates (CRA), predicted that the explosion, which killed 11 workers on Transocean’s Deepwater Horizon rig and caused a spill that threatened the shorelines of several southern U.S. states, will lead to a moratorium on drilling in the Gulf, where 25 per cent of U.S. oil and gas supplies come from.

Peterson, who specializes in the oilsands sector, said that as a result, the spill will likely lead to U.S. politicians not allowing offshore development in the Pacific or the Atlantic, where U.S. President Barack Obama recently lifted drilling restrictions.

“The Gulf of Mexico incident will also lead to a moratorium on drilling in the Gulf of Mexico that will last one or two years, during which the details of the catastrophe will need to be better understood,” he noted.

He said the most likely outcome is that concerns about “dirty oil” from the oilsands will fade into the background.

“Suddenly heavy oil, which was viewed as a dirtier oil because of its higher carbon content, looks a lot safer than oil from offshore.”

He predicted the disaster may also restrict the development of offshore oil and gas in Atlantic Canada.

After the 2008 credit crisis hit, several oilsands projects were postponed. But the sector has started to make a comeback, one that Peterson thinks will only accelerate as a result of the disaster in the Gulf of Mexico.

He predicts U.S. federal legislation that might have targeted oilsands crude will now be on the backburner, as U.S. lawmakers begin to realize the country, which imports a total of over 11 million barrels a day (bbl a day) of crude and liquids, 57 per cent of its needs, is able to rely less on offshore production.

“There could be a significant shift to the oilsands,” he said.

CRA believes oil prices will be somewhat volatile but will average in the $70 a barrel range, which Peterson said provides for a good return.

“Supply costs [to develop oilsands projects] are down somewhat but it is still

4

PROFILER CSUG Technical Luncheon

Canada’s Natural Gas Resource Base Total Gas In Place Resources 3915 Tcf ( 111x 1012 m3 ) 692

1111

801 1311

Conventional (remaining)

NGC/CBM

Tight Gas

Shale Gas

Estimates from Petrel Robertson Resource Assessment Study completed for CSUG April 2010 Source: CSUG

costing $55 to $60 a barrel to develop projects,” he said. “That still provides for a good, solid return. It’s like investing in a 30-year annuity.”

Peterson predicts the environmental performance of oilsands operators will only improve, as oilsands miners improve their tailings management and water use and steam

but he’s also not as sure that will lead to a ban on new drilling in the Gulf.

“If [President Obama] puts a ban on offshore drilling, his energy security policy will go out the window,” said the CERI head.

“What I could see is the development of a new offshore protocol, where a relief well needs to be drilled before companies drill

“The shift will be towards resource plays, such as shale gas. Only the big companies with deep pockets can afford to go there, since it requires economies of scale.”— Peter Howard assisted gravity drainage (SAGD) operators improve the technology.

He also believes environmentalists will now shift their attention to offshore production.

“After all, look what can happen offshore, compared to the known of on-land development.”

Peter Howard, president of the Calgarybased Canadian Energy Research Institute (CERI), said he wouldn’t disagree with Peterson’s view that the focus of the environmental movement will now shift from the oilsands to offshore energy development,

into their target areas.”

That would drive up the cost of offshore development.

He agrees with Peterson that offshore development in the Atlantic and the Pacific is likely to be prohibited.

All things being equal that should lead to a spurt of oilsands development, he said, except there are signs labour and material costs are “creeping up again,” after they dropped 15 per cent and more during the Great Recession.

As a result, Howard believes only larger,

cash-rich companies will look at new projects, beyond what is already known.

CERI has forecast oilsands production will reach about three million bbl per day by 2020, and Howard believes that will still be the case. But it also believes there will be a new spurt of development from 2020 through to 2040, when oilsands output will hit 4.4 million bbl per day.

Oilsands resurgence Oilsands project planning and development has escalated since the 2008 financial collapse. Cenovus Energy announced plans earlier this year to spend US$500 to US$600 million to increase production from its SAGD projects. Devon Energy revealed plans to build a third phase of its Jackfish project, which would take total production above 100,000 bbl per day, and also announced it was spending $500 million to acquire 50 per cent of BP’s interest in the Kirby oilsands project, which the two plan to expand to as much as 170,000 bbl per day.

BP announced plans in March to partner with Calgary-based junior Value Creation to develop the firm’s Terre de Grace in situ project; China Investment said it will invest $817 million to develop oilsands assets held by Penn West Energy in the Peace River area; and Husky Energy has completed front-end engineering for its proposed 60,000-bbl-per-day first phase of the Sunrise project (BP is a partner).

In addition, Suncor Energy is proceeding with a 62,500 bbl per day expansion of its Firebag SAGD project and there have been a number of smaller announcements regarding SAGD projects.

Oilsands mining projects are starting to move ahead as well, with Imperial Oil spending

PROFILER 5

$8 billion on phase one of its Kearl project, which will produce 110,000 bbl per day (it would eventually produce 354,000 bbl per day) and Royal Dutch Shell is well underway with the 100,000 bbl per day expansion of its Athabasca Oil Sands Project, which would lift production to over 265,000 bbl per day.

CRA has been predicting total oilsands production will reach three million barrels a day by 2020, from about 1.5 million a day now. But the offshore catastrophe may lead to an increase in that forecast, Peterson said.

As for the conventional oil sector, production will get a boost because of the growth of shale oil plays such as the Bakken, but even at that Howard said CERI doesn’t see production reaching much more than 200,000 bbl per day, up from about 70,000 to 80,000 bbl per day now.

CERI believes oil prices will average between $77 and $81 West Texas Intermediate this year.

Natural gas While most paint a bright picture for oil development in Canada, the country’s natural gas sector still faces challenges. The problem is that North America is awash in the stuff, thanks to the advance of horizontal drilling and other technologies that have unlocked huge shale and tight gas resources.

Calgary-based Canadian Society for Unconventional Gas (CSUG) released a report in May that illustrates just how much gas there is in Canada—and supplies are even more impressive in the United States.

The report concluded that Canada’s natural gas in place resource is almost 4,000 trillion cubic feet, with the marketable portion being 700 to 1,300 tcf.

A recent report by the U.S. Potential Gas Committee, which looked at the natural gas potential in the Lower 48 states, reached the same general conclusion, predicting that there are 1,836 tcf of technically recoverable gas resources in those states.

CERI’s Howard said that means natural gas prices will stay in a range of $4 to $6 per mcf for many years.

“The shift will be towards resource plays, such as shale gas,” he said. “Only the big companies with deep pockets can afford to go there, since it requires economies of scale.

Unfortunately, that creates a problem for small companies.”

Juniors will try to survive by developing the “edge plays,” mostly shallow gas reserves that larger companies find uneconomic.

“But what if a junior invests in a shallow play and the next year gas prices drop to $3 per mcf?”

He predicts there will be a good deal of merger and acquisition activity, as companies have to grow larger to survive.

“One of the big challenges faced by gas producers is what it can do as an industry to create new markets,” added Peterson.

The best immediate potential market is in the conversion of coal-fired power plants in the United States to cleaner-burning gas, since about half of the electricity in the United States is produced by coal-fired plants.

But he said the “coal lobby” in the United States is preventing this from happening.

As a result, CRA also sees natural gas prices ranging between $4 to $6 per mcf for the foreseeable future.

“My experience tells me most operators need $5-plus gas and even $6 to make a profit,” Peterson said.

Encana, Canada’s largest natural gas producer, has taken a lead in finding growth markets for future production, working with groups in the United States and Canada to present a case of more gas consumption in the power and transportation sectors.

Howard said there is a growth opportunity for gas-fired power in Ontario, where the shift to renewables such as wind and solar requires a backup power source such as natural gas (which burns about 50 per cent cleaner than coal). But he doubts the shift will be widespread across North America.

“Coal is here to stay,” he said.

Mike Dawson, president of CSUG, agreed that finding new markets is critical.

One hopeful development is plans by Kitimat LNG to spend $3 billion to develop an export terminal to send liquefied natural gas (LNG) from the Port of Kitimat, British Columbia, to Asian gas markets. Apache Canada recently agreed to acquire a 51 per cent interest in the project, in which the state-owned Korea National Oil Company also plans to invest. That company also recently announced plans to invest US$1.1 billion to jointly develop Canadian gas fields with Encana.

Dawson said the use of horizontal drilling and multi-stage fracturing to unlock shale gas plays has fundamentally altered the natural gas business in North America.

“There’s strong confidence the gas is there, so the risk profile is changed from geology to engineering,” he said. “It becomes a manufacturing process and you have to be a low-cost operator.”

Dawson isn’t ready to write off juniors.

“But they’ll have to redefine their business model,” to survive in a world of

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PROFILER

Regional Tight Gas Resource Estimates (Tcf) 1600 1400

Marketable Gas Low

No tight gas estimates have been made for Quebec or Maritimes

Marketable Gas High Original Gas In Place

1200 1000

1111

800

* Resource estimate for Alberta Montney is based upon pers. com.

600 400

450 67 30

11

120 43 19

430 100

166 77

15

155

33

230

69

C

H

Ba

509

Source: CSUG

B

ee p D C B

22 10

62 23

si n al fw ay /D B oi C g Je an M ar ie B C D oi g B C M on A lb tn er ey ta M A on lb tn er ey ta * D ee p Ba si n

0

62

L

200

TO TA

187

permanently lower gas prices, he said.

However, the National Energy Board (NEB), Canada’s main energy industry regulator and forecaster, isn’t quite as pessimistic.

Paul Mortensen, technical leader for hydrocarbon resources at the Calgary-based agency, said there’s no doubt shale gas has been a “game-changer,” but the NEB believes

day in 2009 from 15.8 bcf daily in 2008—will decline to 13.04 bcf per day by 2012.

The impact on the drilling sector of the decline in gas production has been devastating, Mortensen said.

“We’re calling for 4,800 gas wells to be drilled in 2010. [In 2009, 4,000 were drilled],” he said.

“There’s strong confidence the gas is there, so the risk profile is changed from geology to engineering. It becomes a manufacturing process and you have to be a low-cost operator.”— Mike Dawson it’s too soon to assume prices will stay low for many years.

He said the NEB now expects gas prices to average about $5.50 per mcf this year, rising to $6 in 2011 and $6.75 in 2012.

But the trend is not Canada’s friend, as exports of natural gas to the United States continue to decline.

In 2009, for instance, gas exports dropped by almost 11 per cent, caused by falling demand because of the recession and growing U.S. supplies. The NEB recently forecast total Canadian production—down to 14.4 bcf per

The all-time high for wells drilled in Canada was in 2005, when 25,000 were punched. In 2009, one of the worst years in recent history for the drilling sector in Canada, only 8,400 wells were drilled across the country.

The Petroleum Services Association of Canada recently predicted there will be 11,250 oil and gas wells drilled in Canada this year, up from an earlier forecast of 8,000.

The shift to unconventional gas has meant wells are costlier to drill and take longer (an average of nine days, as opposed to less than six in the past per well).

Despite the shift to unconventional gas, shale gas wells are still only a small percentage of the total. For instance, of the 4,000 gas wells drilled last year only 300 were in the Montney basin, the hottest shale gas play. In total, less than 500 mmcf of shale gas was produced last year in Canada.

“It will be a long time before unconventional gas matches production from conventional gas areas,” said Mortensen.

In the United States, where 56 bcf of gas a day was produced last year, only 8.7 bcf came from shale gas plays.

However, the share of shale and tight gas production will rise over time to crowd out conventional production, he said.

A similar trend towards unconventional oil production is occurring in Canada, he said.

By 2020, the oilsands share of total Canadian production is expected to double, from about 40 per cent now to 80 per cent, reaching about 2.8 million to 2.9 million barrels per day.

However, oilsands production could be much higher than that, depending on economic and other factors, he said.

“The trend towards more unconventional production [of both oil and gas] will be gradual,” said Mortensen.

And although natural gas producers face challenging times, especially with accessing U.S. markets, he said Canadian crude and liquids will continue to maintain and even grow its market share, especially as more oilsands crude is brought on. Canadian crudes and liquids are already responsible for about 2.49 million bbl per day of the 11.1 million bbl per day imported by the United States, according to the U.S. Energy Information Administration.

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PROFILER

On the

PROFILER 9

“The U.S. Gulf Coast is the deepest heavy crude market in the world; it is the most liquid.”

— Harold “Skip” York

Move

Oilsands producers looking at promising decade

by Elsie Ross

With ample pipeline capacity out of western Canada and into the United States and higher demand for heavier slates coming in the short term from Midwest U.S. refinery expansions and later on from Gulf of Mexico refineries, oilsands producers should see relatively narrow differentials and high bitumen prices this decade.

With the more moderate pace of oilsands development, there should be plenty of transportation out of western Canada, initially to the U.S. Midwest, until late this decade. By 2013, significant volumes could potentially be heading as far as the Gulf of Mexico, where heavy crude markets already used to handling are eager for an additional source of supply to replace the declining volumes of Venezuelan and Mexican crudes.

Both TransCanada’s 435,000 barrel (bbl) per day Keystone pipeline from Hardisty, Alberta, to Wood River/Patoka, Illinois, and Enbridge’s 450,000 bbl per day Alberta Clipper pipeline from Hardisty to Superior, Wisconsin, are expected to be in operation by the end of this year.

Combined with the existing Enbridge mainline, Express Pipeline and Kinder Morgan Canada’s TransMountain pipeline to the West Coast, producers will have access to 3.35 million barrels per day out of western Canada, far more than production capacity.

In 2011, the Keystone extension will add another 155,000 bbl per day from Steele City, Nebraska, to Cushing, Oklahoma, extending its reach into southern PADD II, while Keystone XL, which would transport 700,000 bbl per day of Canadian crude from Hardisty to the Gulf Coast by 2013, already has National Energy Board (NEB) approval in Canada and is waiting for U.S. approvals.

In the short term, the U.S. Midwest, the traditional market for Canadian bitumen, will offer additional opportunities as several large-scale refinery conversions and expansions are underway to accommodate heavier Canadian crudes.

“There’s a good chance that when they start up, there actually will be a shortage of crude in the Midwest,” Tom Wise, vice-president in the Calgary office of consultants Purvin & Gertz, said in an interview.

10 PROFILER

Canadian & U.S. Crude Oil Pipelines All Proposals Canadian & U.S. Crude Oil Pipelines All Proposals

Enbridge Gateway Kinder Morgan TMX Northern Leg Kinder Morgan TMX2 Expansion TMX3 Expansion Burnaby

Edmonton

Trans Mountain

Hardisty Altex

Anacortes

Enbridge Alberta Clipper Enbridge (North Dakota) Expansion

Express

Enbridge Enbridge

TransCanada AB-USGC Keystone XL TransCanada AB-California

Guernsey

Salt Lake City

Enbridge

Flanagan

TransCanada Keystone

BP/Enbridge GAP Phase 2 Centurion Pipeline

Wood River

Chicago Toledo

Cushing

Patoka

Enbridge Trailbreaker Portland Pipeline Reversal Portland

Buffalo

Lima

BP

Montreal

Sarnia

St. Paul

Platte BP/Enbridge GAP Phase 1

Southern Access Expansion Southern Access Extension

Sunoco Buffalo to Philadelphia

Enbridge Ohio Access Enbridge Spearhead Expansion (North)

Philadelphia Sunoco to Toledo Mustang Expansion

Mid Valley Capline

BP/Enbridge GAP Phase 3 ExxonMobil/Enbridge Pegasus Expansion

TransCanada Louisiana Access Sunoco to USGC Houston

St. James Source: Canadian Association of Petroleum Producers

“It was like that in the 1990s, when the Midwest was importing heavy crudes from the Gulf Coast.”

This time, though, Midwest refineries likely will find it difficult to bring in crude from the Gulf because that area also will be short, he said. “There just won’t be enough to go around, and that bodes well for the heavy producer here at least for that period.”

Last year in its annual market study, the Canadian Association of Petroleum Producers forecast that total oilsands and upgrader production under a moderate growth scenario would increase to 2.57 million bbl per day in 2015 and 3.33 million bbl per day by 2020.

Gulf Coast opportunities The largest project in the Midwest, BP’s modernization in Whiting, Illinois, will increase the facility’s ability to process Canadian heavy crude by 260,000 bbl per day, although the overall capacity of the refinery will not increase, according to a report by consultants Wood Mackenzie for Imperial Oil and Suncor Energy Marketing submitted to the NEB. In late 2009, BP indicated the project is on schedule to be completed in the second quarter of 2012, said the consultant, which assumes a second-quarter 2012 commissioning.

Canadian crude into the Gulf Coast but At Wood River the WRB-Wood River project, “then it comes down to at what price does it a joint venture between ConocoPhillips and go in and we won’t really know until we get Cenovus, will increase the facility’s heavy oil there,” he said. However, in looking at the processing capability by about 150,000 bbl upstream projects both in Canada and in per day, although total capacity will rise by Latin America compared to anticipated only 94,000 bbl per day to 400,000 bbl per demand, Wood Mackenzie expects there will day. Wood Mackenzie assumes the expanded be more demand than supply. capacity will be commissioned by the second Adding to demand in the Gulf will be quarter of 2011.

Motiva Enterprises LLC’s refinery expansion A Marathon expansion project in Detroit project at Port Arthur, Texas, says Wise. A with an estimated third-quarter 2012 start-up joint venture of Royal Dutch Shell and Saudi will increase Canadian heavy crude capability Aramco, Motiva is increasing its refinery by 70,000 bbl per day, although the refinery’s capacity to 600,000 bbl per day, making it total capacity will increase by 15,000 bbl per the largest refinery in the United States. day, according to the consultant.

According to York, the light to heavy But it is the Gulf Coast’s massive refining differential should remain narrow in the Gulf capacity that holds the promise for a Coast because “there is always a home for significant new market for Canadian crude that next heavy barrel.” over the next 10 years, according to the Wood Mackenzie doesn’t foresee a consultants, situation where there is so much heavy crude “The U.S. Gulf Coast is the deepest heavy coming out of Mexico, Venezuela, Brazil, and crude market in the world. it is the most Canada that somebody has to evacuate the liquid,” Harold “Skip” York, vice-president, market, he said. “You are still pulling in a downstream consulting-Americas, for Wood long-haul barrel like an Arab heavy barrel from Mackenzie, said in an interview. “As long as the Middle East, and if it’s on the margin, Mexican and Venezuelan production Crude Oil Forecast, Markets & Pipeline Expansions iii that’s going to put support under the other continues to decline, it makes room for Brazil heavy crude prices from Canada and Brazil.” and Canadian barrels, plus we are going to While York believes Gulf access is have expansions [on the Gulf].” important for Canadian oilsands producers, York believes there will be room for

PROFILER 11

he also has some words of advice.

“Those guys [Gulf cokers] have been running heavy crude economics and playing heavy crude producers off each other for about 20 years now,” he says. “You are going to go into a market where the buyers are very well versed at getting you to bid against the Brazilians, and against the Vens [Venezuelans], and against the Mexicans,” he said.

“They [Canadian producers] are going to have to be very smart and on their toes….

They should put their best commercial people on it and work it really hard,” according to York. “These are guys who are used to skinning people, and they would sell their mother-in-law for a nickel.”

Upgrader economics While the current light to heavy differentials are just the ticket for producers of blended bitumen, Syncrude Canada’s recent announcement that it is delaying its second upgrader may be a sign of things to come, as the economics will make it increasingly difficult to justify new upgraders in Alberta, despite the provincial government’s desire to see more value-added products.

Total E&P’s proposed Joslyn oilsands mining project and the associated upgrader are still awaiting regulatory approval, and the company expects to make a final decision on whether to proceed with the first 100,000 bbl per day phase of the project within the next two years, the company’s top Canadian official, said recently. However, Jean-Michel Gires head of the company’s Canadian unit, told a forum that oil prices have to stay above $80 per bbl to justify the multi-billion-dollar price tag for an oilsands mine and upgrader.

A company planning on building an upgrader in Alberta in the current economic environment faces two major issues: capital costs and the narrow light to heavy differential. “The capital cost is always going to be an issue,” said York. “It is just so expensive to do a project in the Edmonton/Fort McMurray area relative to putting the exact same steel in the ground in the Gulf Coast, and that’s just reality,” he said. “It’s a big issue and it’s a tough issue.”

Oilsands consultant Bob Dunbar, president of Strategy West, agrees that the cost of building an upgrader in Alberta rather than the Gulf is a major impediment. “It’s not just the cost but the opportunity that is available to add conversion capacity,” he said. “At an existing refinery, you already have infrastructure and different things like that in place.”

Second, the economic viability of an upgrader depends on a wide differential (35 to 40 per cent) between light and heavy crudes, and there is currently a narrow

differential in the Gulf Coast. In the first quarter of this year in Alberta, the differential for Koch Lloyd Blend was under 10 per cent.

If crude from western Canada were once again to become pipeline constrained and the differential in Hardisty or Edmonton were to begin to widen, that would help upgrader economics, but an upgrader would still have to overcome the capital challenges, said York.

Dunbar said he’s not seeing any shift towards upgrading, and most people say they believe margins are going to stay pretty tight for a while.

Suncor Energy’s decision not to proceed with a second Voyageur upgrader after spending one-third of the $10-billion estimated cost is “a pretty good signal that the economics are not very good,” he suggested. “Long term, maybe that situation will change.”

it now appears that will result in surplus capacity until late this decade. Southern Access added 400,000 bbl per day from Superior, Wisconsin, to Flanagan, Illinois, in 2009. The original plan was for Enbridge to expand the line to 700,000 bbl per day to balance inbound and outbound capacity at Superior and add additional takeaway capacity downstream of Flanagan, which would provide access to the transportation hub at Patoka, Illinois.

However, in two tries before the Federal Energy Regulation Commission (FERC), Enbridge was unable to obtain approval for its tolling proposal for the Southern Access extension from Flanagan to Patoka, where it would have connected to the proposed Texas Access project to the Gulf—a project that has been shelved.

“It’s not just the cost but the opportunity that is available to add conversion capacity. At an existing refinery, you already have infrastructure and different things like that in place.”— Bob Dunbar

In the meantime, though, there is the potential for a merchant upgrader that would process bitumen acquired from the Alberta government, which will take bitumen in lieu of royalties under its bitumen royalties in kind (BRIK) program. Although Dunbar doesn’t think the timing is right for additional upgrading in Alberta, “forecasting what politicians are going to do or forecasting markets is difficult,” he noted.

The Alberta government announced May 18 that negotiations are underway to build a new bitumen refinery northeast of Edmonton as part of its BRIK initiative. North West Upgrading’s proposed 150,000 bbl per day refinery would process 75,000 bbl per day of royalty in-kind bitumen on behalf of the province.

Pipeline capacity Responding to the forecast growth in oilsands and industry concerns that crude could be pipeline constrained, Enbridge added significant additional transportation capacity to serve Midwest markets. However,

“Without a Southern Access expansion and additional takeaway capacity downstream of Flanagan [Southern Access Extension], incremental Alberta Clipper volumes would bottleneck at Superior, rendering the Alberta Clipper capacity ineffective in reaching additional refining markets,” said Wood Mackenzie.

While producers aren’t averse to some spare capacity on a pipeline system, some Enbridge shippers are concerned. They worry that because Alberta Clipper tolls are rolled into the Enbridge mainline tolls, shippers will not only be paying an additional toll for a pipeline that is no longer needed but that remaining shippers will face higher tolls as some volumes shift to Keystone. Imperial Oil and Suncor Energy Marketing have filed a complaint with the NEB, asking it to exclude the Clipper toll cost from mainline tolls until Enbridge can demonstrate the line is needed.

Although the board has yet to rule on how it will handle the complaint, in the U.S. FERC rejected a similar objection.

12 PROFILER

PROFILER 13

“The magnitude of these numbers may blow you away.”

— Mike Dawson

“ ”

New Opportunities

CSUG report pegs Canada’s natural gas in place at almost 4,000 tcf

by Paul Wells

The potential prize just got a whole lot bigger as a study recently released by the Canadian Society for Unconventional Gas (CSUG) says that abundant shale and tight gas resources have dramatically changed the picture of Canada’s gas potential.

The report includes both conventional and unconventional resources and concludes that Canada’s natural gas in place resource is almost 4,000 trillion cubic feet (Tcf)—the marketable portion being between 700 and 1,300 Tcf—numbers CSUG president Mike Dawson said are truly staggering.

“The magnitude of these numbers may blow you away,” Dawson said just prior to his presentation of the report’s findings to an industry audience in Calgary. “We have an awful lot of natural gas potential lying within the country.”

Of the estimated 700 to 1,300 Tcf of marketable gas, the CSUG report said 357 Tcf are conventional and between 376 (low case) and 947 Tcf (high case) are unconventional.

CSUG’s low- and high-case projections of marketable resources are about two to four times higher than previous estimates.

In a 2006 report, the Canadian Gas Potential Committee determined that

Canada’s marketable gas resources were at 367 Tcf, about one-quarter of CSUG’s updated numbers.

And Dawson noted that the numbers will almost certainly grow higher, as the assessment doesn’t include some plays that industry is only now beginning to tinker with.

“We have collectively over 100 years of natural gas resource potential, even at marketable and low-case [projections],” Dawson said.

“These resource numbers do not include the emerging [shale] plays…in the Duvernay, the Horn River extension up into the Northwest Territories, or the Liard Basin [in northeastern British Columbia, west of the Horn River play] for example. Those numbers have not been quantified, so they’re not part of the assessment.”

Other excluded plays included the Alberta Montney formation; the Devonian shales in the Mackenzie Valley corridor; the deep thermogenic Colorado group of shales in western Alberta; the St. Lawrence Lowlands, save for the part of Quebec’s Utica shale where estimation methodologies could be identified and included; the Central Maritimes Basin, located predominately in the Gulf of St. Lawrence with an onshore component in New

14 PROFILER

Brunswick and the southern tip of Newfoundland; and natural gas hydrates.

“This study doesn’t address gas hydrates, and that’s a whole different order of magnitude in terms of resource potential in the country,” Dawson said.

The findings of the CSUG report mirror a similar undertaking conducted by the U.S. Potential Gas Committee, which in 2009 said that the Lower 48 states also have about a century’s worth of gas supply—about 1,836 Tcf of technically recoverable natural gas resources.

Dawson said that during the past several years, the development and widespread deployment of a variety of horizontal drilling and companion reservoir stimulation technologies has demonstrated that vast

(WCSB) is still Canada’s lynchpin for resource potential.

“The lion’s share of the resources still lie in the WCSB,” he said, noting that of the estimated 692 Tcf of conventional gas in place, 482 Tcf are in western Canada.

“People think the basin is a bit tired and it’s declining, which it is. But there’s still tremendous potential there of conventional resources still available.”

To reach the estimates in its report, CSUG first commissioned Petrel Robertson Consulting to prepare a report summarizing the range of assessments of Canada’s natural gas resource base. Using the Petrel Robertson report, CSUG then estimated the total Canadian marketable gas resource, and the numbers it came up with—700 to 1,300

“With natural gas demand increasing in our country and around the world, our abundant supply positions all regions to benefit from responsible natural gas development.”— Mike Dawson additional natural gas resources within coal seams, tight gas reservoirs, and shales will play a major role in shaping Canada’s long-term natural gas supply opportunity.

According to the report, Canada’s gas-in-place estimates by resource type are: Conventional (692 Tcf), CBM (801 Tcf), tight gas (1,311 Tcf), and shale gas (1,111 Tcf).

The report said that the emerging nature of much of Canada’s unconventional gas resource is reflected in the “broad range” of potential marketable gas. Broken down by resource type, the CSUG report estimates conventional marketable natural gas at 357 Tcf, coalbed methane (CBM) at between 34 and 129 Tcf, tight gas (including B.C.’s Montney play) in the 215 to 476 Tcf range, and shale gas at between 128 and 343 Tcf. “In the past, numbers regarding Canada’s [gas] resource potential have been skewed and all over the map,” Dawson said. “As far as we know, this is the first time all these numbers have been put in one place. No question, these numbers are big.”

Not surprisingly, Dawson noted that the new overall gas in place estimates show that the Western Canadian Sedimentary Basin

Tcf—”reflect the emergent nature” of many of Canada’s unconventional resources.

Brad Hayes, president of Petrel Robertson, said his group focused on gas in place, as most reliable reports address this.

However, predicting recovery and surface loss factors to come up with marketable gas reserves is difficult, and would add “considerable uncertainty and potential error” to the report.

“So CSUG took our results and produced estimates of marketable gas by applying these correction factors as consistently as possible across the board,” he said.

Hayes said that most of the data Petrel Robertson used was generated by provincial regulatory agencies, the National Energy Board, and the Geological Survey of Canada, although tight gas and shale gas estimates came from more diverse sources.

“We tabulated conventional gas resources, shale gas, CBM, and tight gas separately. The conventional gas numbers are pretty tightly constrained—particularly in the Western Canadian Sedimentary Basin—but even elsewhere there’s enough drilling to put some statistics behind the figures,” he said.

“CBM figures have actually been generated by regulatory agencies in Alberta, B.C., Saskatchewan and the Maritimes Basin. There could be some CBM in the Yukon, but it has not been assessed there.

There are very few figures for shale gas and tight gas, as we are still struggling with being able to quantify these resources reliably and consistently.”

As such, Petrel Robertson tabulated some broad volumetric estimates, but Hayes said the numbers that CSUG reported “are sums of those numbers only – there has been no reliable attempt to quantify shale gas resource potential in Ontario or in the North, and very little work on the Utica and other eastern trends.”

“Similarly, there are tight gas values only for the Western Canadian Sedimentary Basin.

There is likely substantial tight gas potential elsewhere, but we have no numbers yet.”

For example, Hayes said Petrel Robertson just finished a report for the Northwest Territories Geoscience Office—a high-level scoping study of unconventional gas potential in the Northwest Territories.

“Nobody has produced any gas-in-place estimates for unconventional gas to date, but we listed several potential shale gas and tight gas plays that need additional work to understand. So there is a lot of shale gas and tight gas out there that nobody has tried to count yet, in addition to the values tabulated by Petrel Robertson and CSUG,” Hayes said.

Besides establishing the wealth of natural gas in the country, Dawson said the report also illustrates that natural gas can be found from coast to coast and its benefits are just as far reaching.

“The natural gas industry is a significant contributor to the Canadian economy. With natural gas demand increasing in our country and around the world, our abundant supply positions all regions to benefit from responsible natural gas development,” said Dawson.

However, although the CSUG report was positive in terms of natural gas resource potential in Canada, Dawson said challenges remain for the industry in Canada as it strives to remain competitive.

“There is a lot of competition from other sources in North America, most of them being south of the border with some of it coming with liquefied natural gas,” he said.

“In order for western Canada to be competitive, companies are going to have to work very hard to drive down finding and development costs and ramp up and get improvement in terms of not only initial production rates that will allow them to pay off their wells more quickly, but also their ultimate recoverable gas from any given well.”

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16 PROFILER

Thinking outside the box

Calgary design firm’s innovative solutions work to your advantage Advantage Products Inc. helps oil and gas companies increase efficiency, enhance safety and benefit the bottom line, with reliable, cost-effective solutions to everyday problems.

President and CEO, Jim Weber, has been involved in developing innovative solutions for the energy industry since 1986. He established Advantage Products Inc. (API) in November, 1997 together with Engineering Consultant, Lynn Tessier.

Early on, Weber and Tessier decided that API would not only develop new products, it would also take them from proof of concept, right through to manufacturing and marketing.

“We do not produce anything we have not designed, manufactured and marketed ourselves,” Weber says. The API motto, ‘Thinking Outside the Box,’ is a vision the entire API Innovation Team lives by.

Headquartered in Calgary, API has developed a wide range of innovative solutions for the oil and gas industry worldwide.

Here are three of the most well known: TorqStopper™ The TorqStopper™ — API’s first commercial product — prevents rotation of the tubing string in a cased wellbore with progressive cavity pumps.

“To date, we have approximately 30,000 of these units in service all over the world and our failure rate is almost non-existent,” Weber says. “It is the lowest failure rate in the industry by far.”

Robust and simply designed, the TorqStopper has been hugely successful, cornering approximately 85–90 per cent of the market in Canada, 70 per cent in the U.S. and 60–70 per cent in Latin America in just five years.

API also sells the TorqStopper overseas, in Australia, Russia and several former Soviet republics.

SideWinder™ Wellhead API developed the SideWinder™, a side entry wellhead, to allow for remedial work such as introducing coiled tubing, or cable equipment for telemetry, into the well. “The big advantage of this product is that it allows the operator to introduce equipment into the wellbore without shutting the well down or having to pull tubing out of the well,” Weber explains.

TorqDrive™ API’s newest, most exciting development is the TorqDrive™, a progressive cavity pump top drive unit. The TorqDrive™ has seen “incredible technical success,” Weber says. “It is a radically new concept in electric motor design. This motor is a quantum leap in motor design. We believe it will revolutionize the industry.”

The most common type of electric motor is an induction motor, which runs most efficiently at its designed running speed. Although users can vary the induction motor’s speed with a variable frequency drives, they have very limited turndown or speed adjustment capability.

In comparison, the TorqDrive™ is designed to operate at high efficiency and rated torque over the full speed range from 30 - 450 rpm. There are no induction motors in existence that can achieve this kind of speed turndown without having to change belts or gear ratios.

API’s motor is direct drive, no gear, no belts, no sheaves. Every other drive on the market that Weber is aware of, is either

gear-driven or belt-driven and in most cases uses both. Rated at 1,000 foot pounds of torque, API’s motor can achieve much higher breakout torque without difficulty. “The motor is very controllable with pre-set limits — wherever the operator decides to pre-set the limits.”

The TorqDrive™ is proving itself to be an extremely reliable performer, and has achieved 97.4 per cent efficiency, line to polish rod. “No one else has been able to come close to that.”

For example, one of API’s motors has been out on a wellsite since Nov. 17, 2009.

In that field, the operator must typically change the drivehead speed anywhere from five to seven times before the speed is optimized. With all other drive heads, this requires shutting the well down and getting a crew out on site to re-gear the drive head. But with API’s drivehead, the speed has been changed many times since the motor was installed. “It’s a simple matter of changing the speed setting on the control panel to adjust the speed on our drivehead.

The torque and efficiency is maintained throughout all rpms,” Weber says.

In addition, in the event of sudden power loss, which can occur for a variety of reasons, the API TorqDrive has a built in automatic regenerative braking system. Whenever the unit goes into backspin, the motor automatically converts to generator mode and the energy generated is dissipated in braking resistors in the control panel. In the rare event this automatic braking system is disabled for some reason, the motor is capable of spinning backwards at up to 5,000 rpm with no damage and in complete safety, Weber says.

“The TorqDrive™ is inherently safe.”

With six months of trouble-free operation on the first field trial unit, Weber expects the TorqDrive™ will be out on the market by July.

Currently, API has a number of other products under development.

STAY TUNED

Stay tuned.

Contact for more information Jim Weber, President and CEO Advantage Products Inc. T: (403) 264-1647 Toll-free North America-wide: 1 877 255.2002 F: (403) 263-2369 E: jweber@advantageproductsinc.com www.advantageproductsinc.com

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And importantly, there’s no need for a hydraulic or mechanical brake to counteract backspin in case the well trips.

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18 PROFILER

Advancing Reservoir Performance: Helping You Unlock Your Shale Gas Resource Across North America, there is growing recognition that drilling activity is increasingly turning to unconventional shale gas plays, and that new techniques must be applied to extract natural gas from these unconventional reservoirs.

As a corporation, Baker Hughes has made investments and deployed several new technologies in the past five years, says Grant Ferguson, Baker Hughes Canada Representative – Unconventional Gas. “Our Frac-Point™ openhole multistage packer system allows for efficient stimulation of multiple zones in a time effective manner, lowering overall stimulation costs. Similarly our FLeX™ geochemical wireline logging tool provides operators the most robust elemental and mineralogical identification wireline tool available to the industry to assist in analyzing these complex reservoirs.”

Micro-seismic hydraulic fracture monitoring is another of these new technologies. One of the principal costs in extracting natural gas is the hydraulic fracture process. The rock must undergo extensive fracturing to create the permeability required to allow gas to flow into the wellbore. “Micro-seismic methodologies arguably offer industry the best method to determine the efficiency of the fracture stimulation process, as it applies to making contact with the gas resource locked in the rock. It is an independent look at the success and extent of the stimulation,” Ferguson says.

In 2006, Baker Hughes acquired Magnitude through its borehole seismic processing joint venture company, VSFusion, which is 51-percent owned by Baker Hughes and 49-percent by CGGVeritas a global provider of geophysical services and equipment. This allowed Baker Hughes to take Magnitude’s 13+ years of experience in micro-seismic monitoring of more conventional reservoirs, and apply it to the fast-growing hydraulic fracture monitoring business across North America.

Downhole acquisition of data is handled

by Baker Hughes’ long-established wireline division, with VSFusion providing the modeling and processing for the survey. While microseismic has long been applied to monitoring more conventional reservoirs, its application to hydraulic fracture monitoring is relatively new, and undergoing dramatic evolution of software capabilities. “Baker Hughes feels that the combination of our joint venture partners’ capabilities in CGGVeritas, one of

the larger global providers of surface seismic processing, together with the extensive micro-seismic experience acquired with Magnitude, places us at the forefront of software evolution for hydraulic fracture monitoring,” Ferguson says. “The value of the microseismic data is that it provides operators with 3D visualization of where the hydraulic fracture process is impacting the rock in the reservoir. When real-time monitoring is used, the micro-seismic information can be used to prevent fracture growth out of zone.”

Baker Hughes and VSFusion recently completed one of the largest micro-seismic hydraulic fracture monitoring surveys ever undertaken. The survey for an operator in the Horn River Basin in northeastern B.C. deployed Baker Hughes’ geophone strings simultaneously in two observation wells for more than 30 days. The survey recorded micro-seismic events for hydraulic stimulations in 13 wellbores adjacent to the observation wells, in total recording more than 75 separate hydraulic stimulations. The project used a variety of deployment geometries in both the horizontal and near vertical sections of the observation wells to optimize hydraulic fracture imaging in the reservoir.

Operations were conducted 24 hours a day, and VSFusion provided a real-time display of recorded micro-seismic events, both at the wellsite and at the customer’s offices in Calgary and Houston.

Real-time monitoring of micro-seismic events allows operators to immediately optimize the hydraulic stimulation process by modifying the fracture stage design while pumping into the formation. The operator used the real-time data to experiment with how different perforation patterns impacted fracture propagation. The firm also used the data to make real-time changes in the fracture program.

At one point, the data showed an absence of growing micro-seismic activity geometry, alerting the operator to stop pumping proppant and flush the well with water to avoid a potentially costly sanding-off of the fractures.

“The data collected from Baker Hughes’ micro-seismic survey are important to our

success in the Horn River Basin,” says the operating company’s Senior Staff Geophysicist. “The ability to evaluate the effectiveness of our hydraulic fracture program, both real-time and post-project, affords us the opportunity to optimize the spacing of the horizontal wells on future drilling pads, with potential near-term cost savings that may exceed the cost of the micro-seismic data.”

Mike Davis, President of Baker Hughes in Canada, is pleased the micro-seismic survey yielded excellent results. “Our involvement in the program is indicative of our growing reputation in the micro-seismic hydraulic fracture stimulation business,” he says. “And the addition of pressure pumping services will further enhance our ability to partner with operators on critical projects.”

Recording micro-seismic events to monitor rock fracturing in 3D space and time during the stimulation process allows operators to confirm the rock volume and formation geometry being stimulated. As a result, operators can optimize future well placement and completion designs, for cost-effective drainage of unconventional reservoirs.

VSFusion has recently developed and tested new processing software that will extend its capabilities to the processing of surface-recorded micro-seismic events. This will offer industry the opportunity to select a micro-seismic acquisition program that includes a combination of both downhole and surface geophone arrays, to optimize geometric coverage of their fracture stimulations.

With the acquisition of BJ Services, a major provider of hydraulic fracture pumping services this past April, Baker Hughes has broadened its suite of offerings for customers in these unconventional reservoirs. Now, Baker Hughes offers the industry a wide variety of methods to optimize the fracture stimulation process as well as pressure pumping services themselves. The recently approved acquisition brings tremendous synergy to the services offered by Baker Hughes in this fast-growing market segment and the opportunity for operators to take advantage of its full spectrum of offerings and expertise.

For more information, contact: Grant Ferguson Baker Hughes Canada T: (403) 537.3400 F (403) 537.3401 E: grant.ferguson@bakerhughes.com www.bakerhughes.com

Advancing Reservoir Performance

Shale Gas Solutions to Maximize Your Reservoir Performance Baker Hughes has your unconventional play answers When you’re faced with tough, unconventional plays in Canada, look to Baker Hughes for the innovative oilfield technologies you need to understand, explore, develop and produce your assets.

©2010 Baker Hughes Incorporated. All Rights Reserved. 28485

We can help you lower your development costs and improve your performance in shale gas reservoirs with a variety of systems: the AutoTrak™ rotary steerable system and Quantec™ Force PDC bits for precise, smooth wellbores; and the Frac-HOOK™ multilateral system and FracPoint™ open-hole fracture completion system for multistage operations and maximum fracturing efficiency.

We offer complete water management solutions including high-volume water source pumps and frac fluid treatments. And you’ll also find us partnering with CGGVeritas to provide leading-edge solutions for real-time acquisition and processing of microseismic data though the joint venture, VS Fusion™.

And our solutions don’t stop here. We’ll continue to develop new ways to access these abundant gas resources precisely and economically. Contact your Baker Hughes representative today and let us help you develop your unconventional assets in ways that reduce NPT and increase production. www.bakerhughes.com/shale

20 PROFILER

Eagle Drilling Services

Dedicated Employees Build Success Eagle Drilling Services, which specializes in drilling Bakken wells, is one of the most efficient and respected contract drillers in the business.

Founded in 2005 by Derrick Big Eagle and Robert MacCuish, Chairman of the Board, Eagle Drilling is a small drilling company based in southeast Saskatchewan, which now ranks in the Saskatchewan Top 100 Companies. The Carlyle, Saskatchewan– headquartered drilling services provider uses only the newest in drilling technology, and prides itself on the knowledge, experience and dedication of its workers.

“The whole thing — our full success rate — can be put on the shoulders of our people,” says Derrick Big Eagle, President and General Manager. “I’m the first guy to admit I surround myself with good people in order to make myself look good. I think we did a very good job at that, and it shows by our reputation, utilization and low employee turnaround. Our people are the backbone of Eagle Drilling.”

Recently, Eagle Drilling reached a major milestone, achieving more than one million man-hours with no Lost Time Accidents.

“Being able to reach that speaks to the responsibility of our employees — for themselves and for each other, really taking safety to heart, and we’re proud of that,” says Eagle Drilling Office Manager Tina Twietmeyer.

Band Of Brothers Eagle Drilling enjoys low employee turnover: 80 per cent of its employees have been with the company for two years or more. Some employees have worked together for the full five years the company has been operating, while others have worked together for more than 15 years, at Eagle Drilling and at other

firms. So it’s no surprise that crew members are close. They are more than co-workers: they are friends, brothers and cousins.

Workers look out not just for their own safety, but for the safety of each team member.

Safety is of the utmost importance at Eagle Drilling, where it is not just policy, but also an attitude that Eagle Drilling has instilled, from the president down to the newest floor hand. Getting To Zero is a companywide goal, and it’s considered to be everyone’s responsibility. Eagle Drilling would never have achieved the safety milestones it has, if not for its safety-conscious, experienced, reliable staff.

People Are What Makes Eagle Drilling Great Eagle Drilling believes the company is only as strong as the people who work for it.

Eagle Drilling has 160 employees who are an invaluable asset and have grown with the company. They know the equipment and the rigs. Many helped build the rigs from the ground up, and can also repair and maintain them. They are familiar with the areas they work in, since most have lived and worked in southeast Saskatchewan for most of their lives. They are reliable and trustworthy. And that trust between employer and employee, is what makes a company successful.

Eagle Drilling has strong family values, with regard for its employees and their loved ones. The majority of employees live less than two hours away from location. Eagle Drilling believes it is important that workers can return home each night, since this allows them to maintain a healthy home and family life. The company also supports employee health by offering stellar health coverage.

Making Local Investment A Priority Eagle Drilling management has more than 100 years of combined experience working in southeast Saskatchewan’s oil industry.

“We have a great experience level within our management team,” Big Eagle says. “We are all local boys that grew up on the rigs down here, and we have a good idea of how

southeast Saskatchewan works. I think that gives us an advantage over most others.”

Big Eagle, who has worked in the region for his entire life, is keen on helping small towns maintain their vitality, economic wellbeing and way of life. To this end, Eagle Drilling hires as many local workers as possible (currently, 85 per cent of its staff are local) and on average, invests $16 million in annual wages back into the local economy.

The company also uses as many local services as possible, including parts, supplies and maintenance, with an average investment of more than $10 million each year going into southeast Saskatchewan’s economy. In addition, Eagle Drilling manufactures all of its rigs, each at a cost of approximately $7 million, through a company based in southeast Saskatchewan.

All Eagle Drilling rigs are equipped with the latest in drilling technology, for a safe, fast, reliable and cost-efficient drill.

Eagle Drilling employees are committed to doing the best job possible, each and every time. “We would like to take this opportunity to thank the employees for their dedication,” Twietmeyer says.

For more information, contact: Tina Twietmeyer, Office Manager Eagle Drilling Services Ltd. T: (306) 453.2506 F: (306) 453.2508 www.eagledrillingservices.ca

22 PROFILER

Ensign’s ADR™ reduces well costs for resource plays

“We cut costs by providing higher efficiency.

That is a value differentiator,” says Ensign President and Chief Operating Officer, Bob Geddes.

With a global reputation for excellence in providing energy industry services, Calgaryheadquartered Ensign (TSX: ESI) is the largest oilfield services company in Canada. Ensign operates an extensive equipment fleet of more than 300 drilling rigs in 12 countries worldwide, and approximately 120 service rigs in Canada and the U.S. The company works hard to maintain the highest standards for safety and environmental stewardship. And over the years, Ensign has made advancements in drilling and well servicing through the innovative use of technology, carefully listening to customers in order to better understand industry challenges, and then capitalizing on strategic opportunities.

Ensign was one of the first drilling contractors to really understand that rig technology must keep up with advances in drill bit technology, which took a giant leap forward six years ago with the introduction of the Polycrystalline Diamond (PCD) bit. Early on, Ensign began constructing rigs that would maximize the benefits offered by this new bit technology.

“We designed rigs that put an even ‘weight on bit’ distribution — versus most typical rigs in the world with drum brakes, which provide an uneven weight on bit,” Geddes says. The advent of AC drawworks and hydraulic units culminated in Ensign’s Automated Drilling Rig (ADR)™ design, which reduces both drilling time and well costs. Ensign currently operates 60 ADRs worldwide.

Repeatedly, the ADRs have proven themselves to be in a league of their own. In one typical example, Ensign was able to reduce net well costs by 25 per cent by co-ordinating a purpose-built ADR for a resource play for one of the oil and gas majors.

In another example, Ensign recently delivered five ADRs into the Middle East. The first well that was drilled, tied the national record for spud to total depth. The second well beat the record, and Ensign has been setting records there ever since.

In the past 10 years, operators have

Photo: Kurt Brown

Faster drilling times and reduced drilling costs: this is what drives the Drilling Divisions within the Ensign Energy Services Inc. group.

“The customer buys a resource

play thinking he’s going to be there for 10–20 years. Why not construct a rig with the same thought, and build the most efficient machine that will live with the project.

”

incurred the largest cost inflation in the areas of mobilization and completion costs. Over the same period of time, drilling rig costs have only increased by four per cent on a ‘per well’ basis. “The technology that our rigs have brought to the table, is providing real savings to oil and gas producers,” Geddes says.

The people at Ensign pride themselves on being able to work closely with customers to design and build rigs that will fit their needs exactly. Ensign sits down with many of its clients and asks, “What is the perfect rig in your mind?”

To better respond to customer requirements, Ensign operates its own Engineering, Procurement and Construction (EPC) group, which can purpose-build and design rigs using the latest technology. “The key, is that we get very aligned with our customer,” Geddes explains. “The customer buys a resource play thinking he’s going to be there for 10–20 years. Why not construct a rig

with the same thought, and build the most efficient machine that will live with the project.” Using this approach, Ensign’s EPC group has built approximately 50 rigs in the last 10 years, with another six ADRs now under construction with deliveries scheduled through late 2010–2011.

Ensign is also starting to expand its directional drilling business, where the technology is now off-the-shelf and commoditized. Ensign’s vision is to complement its current business with drilling rigs that will go in any direction you want them to go. Seventy per cent of all wells drilled by Ensign rigs now include a directional component. “It makes sense — it becomes part of the process,” Geddes says, noting that directional drilling makes up a large part of what companies now require. Going this route “saves a couple of people on location, it drops their directional drilling costs, and it’s where the business is headed.” Ensign, which operates at least 10 rigs on any given day in the U.S. that offer this service, will be rolling out more of its directional drilling service in Canada through the year - further reducing operating costs for customers.

The Western Canadian Sedimentary Basin (WCSB) is one of the highest cost basins in the world to produce. “So we have to be very much aligned with our customers, and Ensign will continue to push the technology. A lot of new technology comes out of Canada for a reason — the WCSB is one of the toughest basins to produce from.”

This is a very competitive market. And the companies that bring forward cost cutting solutions for their customers, are those that will flourish. This is what Ensign is all about: innovative, cost-effective drilling, that allows operators to cut their net well costs and drill more wells.

For more information, contact: Rick Simonton, VP, Canadian Drilling Sales and Marketing Ensign Energy Services Inc. T: (403) 262.1361 F: (403) 265.7673 www.ensignenergy.com

Global Reach Local Focus

Diverse operations worldwide Commitment to safety and customer service Financial strength and discipline Services available from Ensign include: • Automated Drill Rigs (ADR™) • Production Testing Units • Conventional Drilling Rigs

• Coring Rigs

• Directional Drilling Services • Camp Services • Well Servicing Rigs

• Oilfield Equipment Rentals

• Underbalanced Drilling Units • Manufacturing of Oilfield Production Equipment • Braided and Slickline Wireline Units

ENSIGN ENERGY SERVICES INC. Corporate Head Office 400 - 5th Avenue SW, Suite 1000 Calgary, AB Canada T2P0L6 Tel: (403) 262-1361 info@ensignenergy.com www.ensignenergy.com

“Performance Excellence – Second to None”

24 PROFILER

Focus North: Yukon Yukon offers rich resources and an attractive business climate to those ready to seize the opportunity.

Recent developments in the North’s oil and gas sector has Yukon’s emerging industry poised to flourish, offering investors a chance to seize opportunities today to secure resources greatly anticipated for the future.

Boasting a rich potential for resources, Yukon’s eight onshore oil and gas basins are estimated to hold 17 trillion cubic feet (Tcf) of gas and 800 million barrels of oil. Yukon’s offshore potential in the Beaufort Sea is even more impressive with an estimated 40 Tcf of natural gas and 4,500 million barrels of oil.

Up until now, these resources have remained largely untapped due to their remoteness from market. However, that could all change in the next decade with the construction of both the Alaska Highway Pipeline Project (AHPP) and the Mackenzie Gas Project (MGP).

“With significant activity happening now on northern pipelines it is a great time for the industry to take a closer look at Yukon,” says Yukon’s Energy, Mines and Resources Minister Patrick Rouble. “Unlocking the energy potential of the North will mean good returns for our investors and energy security for the continent.”

This summer will see Open Seasons for both TransCanada and Exxon Mobil’s Alaska Pipeline Project and BP/ConocoPhillips’ Denali – the Alaska Gas Pipeline. Both proposals include the construction of a pipeline from Prudhoe Bay, Alaska to Alberta, of which 760 km, or 30% of the route, would be in Yukon following the Alaska Highway.

A pipeline along the Alaska Highway would primarily move southern Yukon gas to market, but it does have the potential to act as a conduit for all Yukon gas. North America’s oil and gas industry as a whole stands to benefit from this massive project and Yukon continues to work to ensure it is ready for when the pipeline comes.

In the Northwest Territories, Yukon’s neighbour to the east, Imperial Oil is leading a consortium of companies in their proposal for the Mackenzie Gas Project. If completed, the project has the potential to assist in opening Yukon’s six northern basins, with an estimated 12.7 Tcf of natural gas.

In December 2009, the Joint Review Panel

for the Mackenzie Gas Project (JRP) released its long-awaited report to the National Energy Board (NEB) concluding that the project will make positive contributions to Canada’s North.

Following the report’s release, the NEB wrapped up its hearing this past April. In concluding the hearing, NEB panel chairman Kenneth Vollman said the board is expecting to release its final decision in September of this year.

“Yukon actively participated in the JRP and NEB hearings, an involvement that made sure Yukon’s interests were firmly on the table,” says Rouble. “Interests that hold true for the Alaska Highway pipeline as well.”

These interests include a clear and efficient Canadian regulatory process with First Nations support; connecting Yukon gas to market; Yukon access to energy from pipelines; fiscal and social benefits to Yukon; environmental stewardship; and incorporating First Nations, municipal and community interests.

Yukon believes the market will support the development of both northern pipelines said Rouble and his government endorses both projects, seeing them as pivotal to accessing northern gas and driving future economic development in the North.

Bolstering Yukon’s emerging industry is a regulatory framework that offers certainty, stability, transparency and simplicity. Since 1998, when the Yukon government took over oil and gas rights management from the federal government, Yukon has been focusing on developing a competitive oil and gas regime under Yukon’s Oil and Gas Act. This regime is strengthened by the ongoing work with Yukon First Nations to provide the oil and gas industry with a clear and consistent regulatory process throughout Yukon.

Building on the certainty provided by 11 First Nations with settled land claims, the Yukon government is working with Yukon First Nations to develop a solid foundation to encourage resource development and ensure that Yukon is pipeline-ready.

Industry has embraced Yukon’s regulatory regime. This is reflected in the attention being given to Yukon’s disposition process which is held twice a year. With input from First Nations and industry, Yukon updated its oil and gas rights disposition process in 2007 to make it more efficient and effective. This revision spurred significant industry interest — and that interest continues today.

The Yukon government is currently concluding its spring 2010 call for bids,

having received a request for posting for one location in north Yukon in the Eagle Plain basin. This parcel is of great interest to industry, and is the second time since 1998 that it has been nominated for posting. This fall’s Request for Posting is accepting requests until July 14, 2010. Dates for future disposition deadlines are available through the Yukon government’s website, listed below.

Offshore oil and gas development is also receiving an optimistic outlook, with prospective pipeline development expected to further spur the renewed interest over the last few years in the Beaufort Sea. From 2007 to 2009, $2.5 billion was bid for offshore rights in the Beaufort Sea, largely

by BP Exploration, Imperial Oil/Exxon Mobil and ConocoPhillips.

To better manage this renewed interest, in 2008, the Yukon and Canadian governments signed a Memorandum of Understanding which will provide the opportunity for Yukon to be actively involved in many aspects of Beaufort Sea activity, including input into issues such as benefits plans and future call for nominations for exploration rights.

In addition, Yukon participates in a number of Beaufort Sea initiatives, working collaboratively with federal regulators, the Northwest Territories, the Inuvialuit and industry, to lay the foundation for future exploration and development of offshore oil and gas.

With all the positive movement and work happening, Yukon offers tremendous opportunity for the oil and gas industry. Yukon has an abundance of oil and gas resources and a stable regime bolstered by First Nations partnerships. Yukon supports northern pipeline development and continues to work diligently to be ready should construction begin in the forthcoming years. Those within the oil and gas sector looking to take advantage of investing in northern resources should take a close look at Yukon says Minister Rouble.

“Yukon’s oil and gas future looks promising,” Rouble said. “It may be time for you to seize the opportunity to be a part of it.”

For more information, contact: Brian Love, Director, Oil and Gas Resources T: (867) 667-3427 or call toll-free 1-800-661-0408 ext. 3427 E-mail: oilandgas@gov.yk.ca www.yukonoilandgas.com

YUKON OIL & GAS

PROFILER 25

Seize the Opportunity!

Beaufort Sea

Yukon Sedimentary Basins roads

World Class Potential

World Class Opportunity

Yukon has eight sedimentary basins rich in potential.

Natural gas potential is estimated at 17 trillion cubic feet (Tcf) and oil potential is estimated at 800 million barrels. In the Beaufort Sea offshore, natural gas potential is 40 Tcf and oil potential is 4,500 million barrels. Onshore, these resources remain virtually untapped; northern pipeline development would change that.

The Mackenzie Gas Project would bring north Yukon gas to market. The Alaska Highway Pipeline Project would provide market access to gas resources from southern Yukon. Largely unexplored and rich in potential, it’s time you considered the Yukon. Take advantage of our semi-annual disposition of oil and gas rights.

Energy, Mines and Resources

Website: yukonoilandgas.com > Email: oilandgas@gov.yk.ca

28 PROFILER

IHS Energy Information, Refined.

Most companies about to spend a million dollars on a new piece of equipment will tell you, they can’t afford not to have the latest information. That’s where IHS comes in. At IHS, we understand that every decision depends on the best foundational information available – it is the core of our business. We’ve been serving the energy industry for more than 75 years, and bring unrivaled information expertise to the areas of E&P data, global economics, and trends, security, environment and product lifecycle.

These are pivotal times in the energy industry. Decision makers face complex issues that cross borders, continents and political divides. Today’s energy companies are not only affected by the global economic downturn, but by new and emerging regulations. Companies are struggling to reduce costs and maintain shareholder value. Now more than ever, decision makers need a clear and complete picture before deciding their course. At IHS, we can help by giving the perspective needed to make those sound decisions.

Quality Information Get more than raw data. Get refined information. IHS continues to set higher benchmarks and quality metrics in terms of data correctness, currency, completeness and consistency. The kind of information we provide surpasses what you can find by simply searching online or through public databases. Our team of industry specialists understands your business in both a local and global context, and provides the information and insights you need to build and refine your strategy in a comprehensive, consolidated way.

To learn more, please download the IHS Information Quality whitepaper at www.ihs.com/wpcf Geological Analysis To drill or not to drill? IHS has the information to help companies develop their upstream strategy. We understand that geology is the cornerstone of all E&P programs — and we can help companies determine if their prospect or play has hydrocarbon potential, and how much. Powerful applications including IHS AccuMap®, PETRA® and LOGarc™ — which, combined with our global Critical Information, can help determine new opportunities, and cost effectively accelerate the data-to-decision cycle.

Environment Environmental and sustainability issues are an increasingly important business concern.

IHS recognizes the importance of environmental and sustainability issues to your business, and offers a suite of solutions to manage your EHS and sustainability information needs. We help you inventory your emissions, develop your carbon strategy, and implement and manage those projects in an integrated way across your organization. We also have the tools and services to help you manage chemical and water use.

Inventory Management Most of the world’s largest companies look to IHS before writing their next multi-million dollar check. In fact, we believe that any company that has a major asset decision to make – $50 million and above – needs our insight to make that decision. When managing large inventories or building new products, IHS has the solutions to help you manage everything from sourcing and logistics, to supply chain and materials optimization. IHS also helps you address sustainable product development and global trade compliance issues.

Industry Outlook Solid growth requires more than reserves replacement: producers need the right E&P information within the context of global economic trends, influences, new policies and regulations. IHS provides the critical information needed to anticipate changes in the energy industry by offering economic and financial forecasting and new strategies alternatives through industry thought leaders IHS Global Insight, IHS CERA, IHS Herold and IHS Jane’s.

Bringing It All Together The breadth and depth of our information offering comes together with our latest IHS CERA Multi-client Study. The Cream of the Crop: Performance Analytics for North American Gas applies comprehensive, detailed production and well histories to measure performance and answer key commercial questions for major established and emerging North American gas resource plays. North American energy is undergoing a major metamorphosis concerning type, location and cost of supply. Natural gas shows strong signs of being the fuel of the future – it is more efficient and more climate friendly than other fossil fuels – and unconventional gas now makes up 50 percent of the new gas put on-line in the last three years, with production outpacing demand. IHS CERA’s collaborative research process brings together industry, policymakers, consumers, environmental and other non-governmental organizations to explore North America’s established and emerging unconventional gas plays.

No matter what your business decisions, from E&P, to environment, security or product life cycle, IHS has the information your company needs to meet today’s complex challenges.

Join us June 8th, 4:30 p.m. – 6:30 p.m. at the IHS-sponsored Cocktail Reception to meet key IHS representatives and discuss industry hot topics. You’ll also have the opportunity to meet Jackie Forrest, IHS CERA Director of Downstream & Heavy Oil. Ms. Forrest will be speaking on The Role of Oil Sands in U.S. Energy Supply at the Global Petroleum Show’s Markets, Economics & Risk Technical Program session, June 9th.

For more information, contact: IHS T: (403) 770.4646 F: (403) 770.4647 E: sales.cdn@ihs.com www.ihs.com

The difference between raw data and refined information?

Focus, quality and value. We don’t build our reputation on volumes—instead, we earn it on the quality of the information we extract from that data. For more than 75 years, IHS has processed and analyzed vast amounts of raw data, concentrating it into the in-depth, actionable information that is used today to advance energy-critical business decisions.

Energy information, refined.

ihs.com/refined-information/np

30 PROFILER

KUDU Industries Inc. KUDU Industries Inc. is a leading manufacturer of complete Progressing Cavity Pump (PCP) solutions for the oil and gas industry worldwide.

Founded in 1989, from day one KUDU has been dedicated to quality, performance and technical excellence. The Calgary-headquartered company provides the perfect fit for any environment, with PCP systems engineered to handle everything from heavy, medium and light oil, to coal bed methane and dewatering applications. KUDU’s more than 200 employees provide a global distribution network for clients, with offices in Canada, the U.S., Russia, Romania, Kazakhstan, Oman and Australia. KUDU has sold equipment into 32 countries worldwide, where its application experience has ensured the success of progressing cavity pumps.

KUDU does everything from research and development, to manufacturing, distribution, sales and service. Innovation is a key driver for the vertically integrated firm, primarily through collaborations with its customers to solve their production challenges. This has resulted in unique solutions, with KUDU holding 20 patents in using Progressing Cavity Pumps in the artificial lift field, and another five patents pending.

KUDU is the industry leader in developing elastomers for use in aggressive conditions and elevated temperatures. It is committed to supplying the best in PCP systems.

KUDU’s PCP solutions are supported and serviced by industry specialists, and incorporate unique designs for a wide range of well conditions. Driveheads are available in various combinations of torque, speed, hydraulic and electric options.

A range of elastomers and PCP solutions are available for the following applications: • Heavy oil • Medium oil • Light oil • Dewatering gas wells • Coal bed methane • High water cuts • Highly corrosive wells • Thermal applications • Steam Assisted Gravity Drainage (SAGD) • Cyclic Steam Stimulation (CSS) • Horizontal, slant & directional wells.

KUDU, which makes it a priority to develop long term relationships with its customers and suppliers, has just finished celebrating its 20th year in business. Today, the company remains focused on PCP systems and on enhancing PCP performance to provide the lowest overall operating cost possible, says KUDU CEO, Ray Mills. The company’s current areas of focus are progressing cavity pumps for thermal and light oil applications along with well optimization. KUDU is testing newer versions of high temperature pumps for SAGD operators, and seeing run life of up to two years for applications up to 350˚ C. KUDU’s efforts in light oil have seen average pump run lives of two to three years, resulting in lower operating costs for producers and extended well life.

KUDU has collaborated with Lufkin Industries to apply Lufkin’s SAMPOC product to progressing cavity pump systems. KUDU has developed an automation product line that allows operators to further optimize production and increase pump run life, with technology payout in a matter of weeks.

“Even in wells that were considered optimized by customers, the SAMPOC has proven its worth by extracting additional production from the same wells, while at the same time protecting equipment from pump off,” Mills says.

Ultimately, any product’s success depends on field service. KUDU’s 12 locations throughout Alberta and Saskatchewan ensure prompt service and a thorough understanding of local field conditions. In Alberta, KUDU operates locations in Bonnyville, Brooks, Elk Point, Lloydminster, Peace River, Sedgewick, Slave Lake, Taber and Wabasca; and in Saskatchewan, in Estevan, Kindersley, Macklin and Swift Current.

KUDU gives back in a variety of ways to the communities where it operates. For example, in each of its field locations the company offers annual scholarships to the two top achieving high school science students, male and female. In 2007, KUDU Industries donated $150,000 to the ‘Our Students, Our Community, Our Business’ campaign at Lakeland College in Lloydminster. The funds were used to help build the college’s Bill Kondro Wing.

An Award-Winning Company KUDU is a world-class company that continues to receive numerous awards. It has been honored with the Innovation Insights Award for Manufacturing Practices

from the National Research Council of Canada. KUDU was recognized as one of Canada’s Top 50 Best Managed Private Companies. It won the Calgary Manufacturing Industry’s 2008 Best Employer award for medium-sized manufacturers, and the Best Manufacturer - Oil & Gas award at the first annual Alberta Export Awards in 2009, hosted by the Alberta division of Canadian Manufacturers and Exporters.

KUDU is ISO 9001 certified.

Going forward, KUDU plans to continue developing and delivering quality products to customers, improving service, and innovating on manufacturing. “I see us continuing to grow this technology and innovation not just with our products, but also with service and process improvements,” Mills says.

KUDU’s focus is long term, and remains centered on the Canadian oil industry. “We are always looking to do the best job possible, to ensure a long term relationship with our customers.”

For more information, contact: KUDU Industries Inc. T: (403) 279-5838 Toll-free: 1 800 642.5519 F: (403) 263-7158 www.kudupump.com

The PCP Pro THE RIGHT TOOL FOR THE JOB That is why KUDU offers the most innovative Progressing Cavity Pump options in the artificial lift industry. KUDU’s revolutionary Tough CoatTM rotors offer superior resistance to corrosion and abrasion compared to standard chrome. Our complete thermal package is capable of withstanding temperatures up to 3600C, perfect for SAGD and CSS. Not only does KUDU pump it up and take the heat, but we ensure you get the most from your well, everytime.

With over 20 patents using Progressing Cavity Pumps in the artificial lift field, KUDU continually strives to reinvent the status quo. With locations around the world, we’re just around the corner, offering the best service standard in the industry.

Come check out KUDU’s new innovations and visit us at the Global Petroleum Show June 8th-10th. We are located in the Round Up Centre, Hall B, Booth 1532. www.kudupump.com

32 PROFILER

Lead-ing The Way In Innovation

This July, Lea-Der™ Coatings will move to its new custom-designed facility in Spruce Grove. The move introduces Swift Environmental Equipment to Lea-Der™ Coating’s range of environment-friendly products, and the expansion of Lea-Der’s™ worldwide distribution network into Asia. Lea-Der™ Coatings continues to research the latest technologies to develop new and existing products, ensuring that customers have the best in safety equipment for their personnel, as well as for environmental protection.

This new facility will allow Lea-Der™ to continue delivering the high standard of service and trusted product lines that our customers expect.

A recent customer survey on the range of safety products available on the market, established Lea-Der™ Coatings’ position as

Local company offers ever-evolving range of environmentally friendly safety products

Lea-Der™ Traction Matting is an integral part of a range of products, each with individual function, that blend to contain, control, direct, filter, collect, recycle and store the fluids used in drilling procedures. The grooved grid in the traction surface of the rig floor matting directs fluids to The Stealth fluid collection system.

The Stealth System’s engineered design combines maximum strength with ultra-light weight. Designed for use on service rigs, drilling rigs and off-shore drilling platforms, this multi-functional, custom-manufactured product collects drilling fluids/solids for separation and

Pipe Arm Blocks, Bumper Blocks, the new cable trays and more. Custom moulding is another of Lea-Der’s™ specialities.

Safeguard®Technology designs, develops and manufactures quality safety products aimed at maximizing safe working conditions in working and walking areas, by preventing slips and falls. Safeguard®Technology Hi-Traction Safety Covers are a custom-made,

“We always work closely with drilling contractors, listening to their needs, because personnel, equipment and environmental safety will always be of the utmost importance.

A highly technical industry like the oil and gas industry is continually evolving, and we’re always researching and developing our product base to service their ever-changing needs,”

says Lea-Der™ Coatings President, Darrell Demers. - June, 2008

leaders for quality, value, delivery time and overall high standard of service provided. Lea-Der™ continues to work closely with industries to ensure we bring them the best products available in the marketplace.

Lea-Der™ Traction Matting, a tough, durable custommade industrial polyurethane rotary table and rig floor matting, has provided traction surfaces on rig floors for many years. Several years ago Lea-Der™ introduced the colour changes in matting that are now an industry standard. The high visual impact of colour in Lea-Der’s™ matting clearly identifies danger zones in work areas. With the recent addition of heat to the options available, Lea-Der’s™ custom-designed matting continues to meet the challenges of today’s drilling industry.

containment, while providing employees with a cleaner, dryer and ultimately safer workplace.

The carbon fibre mudcan completes this control system. Lightweight and with multiple seal sizes, this unit can easily be operated by one person.

The introduction of Swift Environmental Equipment complements Lea-Der’s™ fluid control product line.

Swift Environmental Vacuum Systems ensure a rapid, contained clean-up, anywhere you need it. The Rig Floor Cleaning Wand, designed for industrial and mat clean-up, means that keeping work areas clean is an easy task. The range of Vacuum Systems ensures there is a unit to fill your clean-up requirements safely, protecting personnel and the environment from fluid spills and any mess.

Lea-Der™ Coatings’s custom moulding for drilling safely manufactures BOP wear rings, Kelly Bushing savers,

retro-fit product with a wide range of applications. Safeguard®Technology Hi-Traction Safety Covers are made in various traction grits and can be installed to several types of substrate. The easilyinstalled covers include step and ladder rung covers, walkway covers, and pipe and cable covers. Safeguard® products are used extensively by manufacturing and industrial facilities worldwide.

The oil and gas industry can rely on Lea-Der™ Coatings to introduce new products as they become available.

For more information, contact: Darrell Demers, President, Lea-Der™ Coatings T: (780) 962.5060 F: (780) 962.0501 E: darrell.demers@lea-der.com www.lea-der.com

Urethane Spray Foam

Step Traction Solutions

NOW AVAILABLE HEATED MATS FLUID CONTROL TRACTION MATS

Rig Cleaning Solutions

Rig Vac Rig Cleaning System Drilling Fluid Direction, Filtration & Storage Systems

Custom Urethane Moulding Protect-All Windicator Mobile Polyurethane Spray Foam Unit

PH: (780) 962-5060 FAX: (780) 962-0501

90 Oswald Drive, Box 4086 Spruce Grove, AB T7X 3B3

www.lea-der.com

34 PROFILER

Nexxa Industries Ltd. Cutting Edge Quality: CNC Machining – Turning, Milling and Waterjetting Nexxa Industries Ltd. is a full-service, ISO 9001-certified CNC machine shop specializing in turning, milling and waterjet machining. A province-wide supplier based in Calgary, Nexxa specializes in CNC (Computer Numeric Control) custom machining, production machining and proto-typing. Its highly experienced work team is dedicated to providing quality, high precision products, delivered on time and at a fair price using state-of-the-art CNC machines. including medical engineering, downhole servicing and combustion safety.

In addition to taking care of its customers, Nexxa is dedicated to giving back to the community. For example, last year staff members volunteered their services to help the University of Calgary’s Engineering Formula SAE race car team. Nexxa provided a significant amount of machining for the

Nexxa’s expertise is in austenitic stainless and alloy steels, along with precipitation-hardening alloys, aluminum, brass and hard plastics.

The company manufactures a wide range of products from small to large, with an ability to turn pieces as large as 28 inches in diameter.

Established in 2000, Nexxa’s goal from day one has been to deliver the very best quality machined products to its customers. The current owners, who came onboard in August 2006, have done their utmost to maintain these ideals, working hard to build on the company’s already strong foundation.

Since taking over, they have invested considerable resources into personnel and new equipment, in order to position Nexxa to take on the future. One of the most significant additions was ISO 9001:2008 certification which attracts customers that are serious about quality manufactured parts. They also purchased a CNC waterjet, a highly versatile piece of specialized equipment capable of slicing into metal or other materials using a jet of water at high velocity and pressure, ideally suited for jobs requiring maximum material yield with minimal waste.

A precision machining workhorse, the waterjet offers both flexibility and rapid turnaround, and far more versatility than a laser. A laser can do equally fine work, but cannot cut as wide a range of materials. The abrasive waterjet can provide complex cutting of materials ranging from steel, aluminum and titanium, to carbon fibre, ceramic, composites, plastic, tile, glass, granite and marble. This state-of-the-art technology, not usually found in competitor CNC machine shops, gives

smooth, precise edges with no stresses or heat-affected zones.

Nexxa’s turning and milling centres allow the company to turn out equally precise work.

When customers use Nexxa for their manufacturing needs, they will find a company that produces high-precision parts, with close tolerances that are highly consistent from part to part, and repeatability that is programmed in, thanks to CNC. “We program the machine to make these parts, so the repeatability is virtually there all of the time,” says Nexxa Director of Marketing & Sales, Brian Brooker.

“Pieces that are supposed to fit together after the machining is complete fit together the first time, every time.” Nexxa can also do reverse engineering: it can program its machines to duplicate exactly a piece in hand.

Nexxa’s highly experienced, knowledgeable employees are another key reason for the company’s success. The Company hires the very best and is dedicated to quality. “We have a very good working environment. We try to inspire people by treating them right, and they pay us back time and time again with quality work and dedication,” Brooker says.

“It’s always a team concept — this is what we try to encourage. It’s almost like family.”

Over the years, Nexxa has supported the oil and gas industry by doing small batch production runs of parts for oil and gas service companies, as well as prototyping of downhole tools. Currently, Nexxa’s largest customers are focused on gas flow conditioning and gas measurement. The company also machines parts for a number of other fields,

Formula SAE race car, an open wheel Formula 1 style car that was designed, built, tested and raced by undergraduate students attending the Schulich School of Engineering.

It’s no surprise that many people think Nexxa is the best machine shop that they deal with. “Once a client comes in the door and sees the kind of quality we have, they will come back.” Brooker says. “A customer is more than an account; it is a relationship. At Nexxa, we build relationships.”

As word gets out, more and more people are turning to Nexxa as their machine shop of choice. As one of Alberta’s most versatile CNC machine shops, Nexxa is dedicated to providing the highest quality, most cost-effective solution to your machining needs.

The Nexxa team is convinced that once a new customer gives Nexxa a try, they’ll be sure to return, thanks to its high quality, versatility, and attentiveness to customers.

“Come and try us out,” Brooker says.

For more information, contact: Brian Brooker: Director, Marketing & Sales Nexxa Industries Ltd. T: (403) 980-9870 C: (403) 651-6614 F: (403) 720-1995 E: brianb@nexxaindustries.com www.nexxaindustries.com

Let Us Lend a Hand ManUfactUring Your

cncMachining Project

Nexxa Industries Ltd is a full service, ISO 9001 certified CNC machine shop specializing in turning, milling and waterjetting.

We manufacture machined products for the discriminating client from steel, aluminum, brass, Delrin and many more types of materials. Our capabilities range from the very smallest pin or screw to much larger pieces up to 28” in diameter.

Our waterjet machining centre, which is not usually found in conventional machine shop settings, sets us apart from our competition.

• High Precision • Close Tolerances • Quality • Affordability • Customer Satisfaction

See our display at the

2010 global Petroleum show June 8, 9 & 10 - Booth #5221

Lower floor, Big four Building, stampede Park

for more information, contact: Brian Brooker: Director, Marketing & Sales Nexxa Industries Ltd. T: (403) 980-9870 C: (403) 651-6614 F: (403) 720-1995 E: brianb@nexxaindustries.com or visit www.nexxaindustries.com

36 PROFILER Rainy season in Chad

Chad drilling location

Kan Tan semi-submersible off Trinidad-Tobago

snow drifts in southern Alberta

Chad project

Project Management and Production Optimization Add Value to the Bottom Line

Pajak Provides Innovative, Cost-Effective Solutions Calgary-based Pajak Engineering provides oilfield supervision, project management and production asset management across North America and around the globe. Now in its 45th year of operation, Pajak offers hands-on, full-cycle service, helping companies achieve their drilling, project management, supervisory and production goals.

“Pajak Engineering Ltd. provides the highest quality services and personnel to assist the operator in successfully achieving their required objectives. The company is committed to safe field operations to realize successful job execution and results,” says President and CEO, Mickey Sutherland.

Pajak works in all areas and in all geologies, providing the appropriate engineering wellbore architecture, drilling practices, completions and production support required to help the client achieve success.

Project management throughout Western Canada makes up a large part of the company’s business, with a wide range of services including well licensing, engineering, wellbore architecture, construction, drilling, completions and production. Pajak has provided project management to companies working throughout the Western Canadian Sedimentary Basin. In the last decade, Pajak’s project management group has drilled more than 3,000 wells in Western Canada. Pajak’s relationships with service providers and our understanding of clients’ needs have provided multiples of return on their investments and reliable production assets.

Pajak is now looking to expand these services onto an international stage, says Pajak Engineering Business Development Manager, George Myette.

“In this last year, we have adapted our business plan for a global market. We are still focused on Western Canada, but we also see a lot of potential to expand in the Middle East and North Africa. The areas that we are particularly focused on right now are Kurdistan, the United Arab Emirates and Qatar, with southern Iraq to come.” Pajak recently opened an office in Abu Dhabi, which it will support with workers from Calgary. In addition, Pajak is focusing its efforts in the U.S., in Colorado, Texas and Louisiana, where it is actively supplying technical and supervisory personnel.

The second component of Pajak’s business, is production asset management

and production engineering, including production engineering solutions for workover, stimulation, lift design and optimization.

On the consulting side, Pajak works throughout the globe, in locations ranging from Africa to the Middle East, and from Kurdistan and China, to Europe. The company places approximately 30 per cent of its technical personnel outside of Canada. “Canadian talent is easy to export,” Myette says.

The third, equally important component of what Pajak does, is field supervision and service. Pajak recruits and provides highly experienced wellsite supervisors for drilling completions and well interventions, and works continuously to improve well site supervisory competency.

Common to all three service offerings, is Pajak’s commitment to HS&E. Pajak’s involvement with industry and our clients have produced best practices, competency assessments and extensive HS&E programs committed to safe operations. Recently, the company added two new positions at its Calgary head office: one in HS&E co-ordination and development, and the second in the area of human resources and compliance.

Pajak believes good communication is paramount to the success of any project.

Communications with the client, with government agencies, landowners, communities, First Nations and all other stakeholders is key to a safe and successful operation.

Recent projects include the Ramshorn Project in the Horn River area of northeastern B.C., where Pajak managed the complete project and remote location heli-portable winter drilling project, in conjunction with Nabors Drilling. Pajak has handled project management in the High Arctic in Norman Wells, NWT for Grey Wolf Exploration, as well as for Petro-Canada. Pajak has also successfully completed multilateral directional and long reach wells in the Rocky Mountain Foothills. “Doing projects in the Northwest Territories and elsewhere puts Pajak on a good footing to provide services in similarly

remote areas internationally,” Myette says.

In addition to engineering, Pajak provides cost accounting, handles short and long range planning, assists in reservoir management, and helps customers realize their business plans.

Pajak offers its customers significant opportunities to optimize their production and increase revenues. Today’s challenging business environment provides us with the opportunity to optimize existing assets. Good production practices reduce downtime, and applied engineering principles all lend themselves to improved revenue and reduced expenses. Pajak’s production asset management group wants to provide new life out of suspended or marginal wells, and will provide field-proven engineered solutions for production impairment, generating more revenue for the client.

Thanks to its strong relationships, Pajak is benefiting from the recent economic upturn.

“Like everybody else, we certainly felt the pressure after 2008 and through much of 2009 domestically and internationally in terms of downward pressure on activity, but we saw the cycle turn in the fall of 2009 with increased activity levels, both in Western Canada and internationally,” Myette says.

From project management to drilling completion and production optimization domestically and abroad, Pajak helps companies exploit their existing assets to improve real revenue to be redeployed in development planning.

You can count on Pajak’s experience, principles and business ethics. Pajak is a qualified service provider utilizing innovative, cost-effective solutions, proven technology and professional supervision, with multiple decades of experience behind us.

For more information, contact: George Myette, Pajak Engineering Manager, Business Development T: (403) 264.1197 E: g.myette@pajakeng.com www.pajakeng.com

PARK DEROCHIE One Call – One Contractor

Specializing in all types of blasting & coatings, fireproofing, mechanical insulation and scaffolding with over fifty years of experience, Park Derochie continues to lead the way as one of Canada’s premier industrial contractors.

SERVICES: • Abrasive blasting • UHP water jetting • Industrial & commercial painting • Tank linings • Pipe coating • Underground pipe • Metalizing • Lead & asbestos abatement • Polyurea & polyurethane • Corrosion under insulation (CUI) • Secondary containment • All types of fireproofing • Process pipe & equipment insulation • Urethane foam insulation • Scaffolding • Maintenance services • NACE Inspection & Consulting

Experience and diversity allow us the exceptional ability to work in partnership with our clients to provide innovative, cost-saving solutions via multi-craft services with a single project management concept, tailored to meet their unique needs.

Our long term, knowledgeable staff and qualified tradesmen are dedicated to meeting or exceeding project requirements while providing our customers with integrity, exemplary safety standards and exceptional quality.

Pride and professionalism have enabled us to maintain an excellent reputation for client satisfaction.

MARKETS: • Hydro • Mining • Petrochemical • Oil & Gas Industry • Pulp & paper • Process plants • Potash & coal mines • Power plants • Bridge structures • Railcars • Offshore drilling platforms QUALITY & SAFETY: SSPC QP 1, QP 3 & QP 6 Certified Gold Seal Certified (Canadian Construction Association) NACE inspectors & technologists on staff Award-winning industry leaders in safety

For your Blasting, Coatings, Fireproofing, Mechanical Insulation and Scaffolding Services edmonton (780) 478-4688

Fort McMurray Regina (780) 791-2205

(306) 546-0555

www.ParkDerochie.com

PROFILER 39

Park Derochie

Protecting Your Investments Since 1956 For more than 50 years, Park Derochie Coatings has been providing innovative, cost-saving solutions to meet clients’ unique needs.

Founded in 1956 by Merle Derochie and Jim Park as a commercial painting firm, the company soon turned to providing industrial painting and other services. Under the leadership of Merle Derochie, who retired in 2009, Park Derochie has become the largest tank coating contractor in Canada and one of the country’s premiere industrial contractors.

Headquartered in Edmonton, with locations in Fort McMurray and Regina, Park Derochie specializes in coatings, as well as abrasive blasting, fireproofing, mechanical insulation, spray foam insulation, scaffolding services, metalizing and more. In addition, Park Derochie has returned to doing large scale commercial painting and recently landed a multi-million dollar project for the Edmonton Remand Centre. The company is also working on several other major projects scheduled for completion this year.

“We are much more diversified than our competitors because we offer numerous services in addition to coatings,” says Park Derochie President and CEO, Jeff Granberg.

As a one-stop shop Park Derochie can, in many cases, provide turnkey services to suit the client’s exact needs and will provide one project manager, resulting in a well coordinated project, simplified documentation and cost savings to the client. Park Derochie’s qualified tradesmen are dedicated to

meeting or exceeding project requirements with exemplary safety standards and exceptional quality.

Park Derochie is the most capable winter works coatings contractor in Canada, with an ability to apply coatings year-round. In a recent project — the Enbridge Hardisty Merchant Tank Coatings project — Park Derochie was able to work when the temperature dropped to -30 C. The use of 4 million BTU heaters allowed them to bring both the ambient and substrate temperatures within the specified range of -18 C. In fact, they were able to bring the substrate temperature to approximately 0 degrees. This project was the largest tank coating contract in Canada to date with 19 new tanks as large as 250 feet in diameter by 71 feet high. In total, the new tanks contain 7.5 million barrels of oil — equivalent in volume to 48,000 Olympic-sized swimming pools.

Park Derochie has developed a strong reputation for safety with the highest rated safety program for coatings contractors.

“Safety continues to be a top priority and we pride ourselves on having just received a rebate cheque of over $100,000 from the WCB,” Granberg says. “Our WCB rate is over 90% lower than the industry standard. To consistently maintain that standard we rely on the dedication of our HSE Department, management commitment, experienced supervisors and a dedicated workforce.”

Park Derochie is the only contractor in North America to hold the combination of SSPC QP 1(Field), 3 (Shop) and 6 (Metalizing) certifications. SSPC is a nationally recognized program that evaluates the practices of contractors in key areas of business.

These standards assess the level of service and quality and companies must be audited each year.

Park Derochie was recently recognized by the Journal of Protective Coatings and Linings (JPCL) as one of the Top 10 Contractors; ranked No. 4 in North America and No.1 in Canada, Park Derochie is committed to meeting the ever-changing needs of the end user. To this end, the company employs a

full-time IT staff of four and strives to lead the industry in all levels of reporting and documentation by devoting considerable time and resources to developing unique and sophisticated systems for labour, equipment, and material tracking and daily costing as well as project management and quality control.

Park Derochie is always looking ahead.

The four main challenges it currently faces are an increase in competition from the non-union sector, competition from abroad, an aging workforce and increased client demand for higher productivity and lower costs. To address these challenges Park Derochie, a unionized contractor, is working more closely not only with union officials but also with the workforce. The company is spending more time training staff and supervision and seeking to improve employee retention in other ways, such as by providing a 1,500 square foot lunch room where office staff and on-site shop workers are provided with homemade soups, stews or chili and other delectables prepared by an on-site cook. In response to an aging workforce, a problem faced by the construction industry as a whole, Park Derochie is hiring trainees from numerous trades, providing mentoring and has put in place a Labour Market Opinion (LMO) to allow it to bring in foreign workers. To help meet increased client demands, the company is investing in new technology, both equipment and coatings.

Looking forward, Granberg is optimistic.

“We feel that 2010 and probably a good portion of 2011 will be slower than previous years but because of our diversification we will be able to weather the storm,” he says.

“From 2011 onwards we are optimistic things will start ramping up and we are building toward that. We are diversifying, hiring key people and spending more time on training, so we’ll be well prepared for the future.”

For more information, contact: Park Derochie T: (780) 478.4688 F: (780) 475.9832 E: info@parkderochie.com www.ParkDerochie.com

40 PROFILER

MaxPERF Drilling Tool

Superior Reservoir Contact, Unsurpassed Value

Penetrators Canada Inc. develops completion and stimulation systems that provide a more efficient method of establishing communication between the wellbore and target zone, in both production and injection wells.

MaxPERF Drilling Tool technology creates one-inch (26 mm) holes in the casing and 0.70 inch (17 mm) diameter tunnels in the formation, and is non-damaging to both the casing and cement sheath. The tool can be used in openhole or cased wells — vertical, directional and horizontal.

MaxPERF is designed to produce clean penetrations radially from a wellbore into reservoir rock, up to 72 inches deep. The technology provides a unique opportunity to expose new pay in a clean, minimally damaging manner using light and compatible completion fluids.

Recently, significant new investment in Penetrators Canada Inc. has helped to expand the company and introduce more clients to the benefits of the MaxPERF drilling tool technology, both locally and on a global basis. The new investment has gone toward building new surface equipment, such as a pump truck unit and a pump/skid unit for remote and overseas work. It has also financed several new downhole tool assemblies, built to handle a very busy schedule in western Canada, as well as to serve new overseas clients. The injection of new capital has also helped to expand the company’s personnel, with a total of five new employees hired in the past year: four people in operations and one in marketing.

The new investment is facilitating the company’s marketing efforts to promote the MaxPERF technology globally. In the last year, MaxPERF has been used by Aegean Oil

and Gas for a project offshore in Greece, and at the time of this publication, MaxPERF and a four-man crew are working in central Africa for ENI-AGIP of Italy. Current negotiations are ongoing with Saudi Aramco and Petroleum Development Oman for applications in their respective countries.

MaxPERF Applications Activity levels in Canada have greatly increased compared to 2009 numbers, and the focus is mainly on oil production and related facility wells (injectors and disposal wells). MaxPERF Drilling Tool technology is quite active working in existing oil wells, where new communication flow paths aid in the effort for enhanced oil recovery. Instead of the large capital expenditure of drilling new wells, some producers are playing ‘small ball’ with lower capital investment in existing assets that already have infrastructure in place, such as the Dina formation in east central Alberta, the Glauconite formation in southern Alberta, and some Dolomite formations in southeast Saskatchewan, as just a few examples. In addition, MaxPERF technology is helping to improve injection profiles in disposal and injection wells in these and other areas. It is helping producers dispose of more water or maintain good formation pressure levels, while trying to skim more oil from mature fields. MaxPERF is also being

used for completion of new oil wells for frac initiation. A good example of this, is the Viking formation in the Kindersley area of western Saskatchewan. MaxPERF is proving to be a cost-effective method for precise placement of casing ports and quality communication flow paths for initiating fracture treatments from monobore horizontal wells.

Celebrating a 20-Year Anniversary in 2010 Incorporated in Alberta in 1990, Penetrators Canada Inc. is 20 years old this year. As is the case with many small private ventures, Penetrators Canada Inc. began modestly, and today, has grown five-fold. Development of the MaxPERF Drilling Tool technology has taken many years, and three major tool development changes have occurred. Based in Red Deer, Penetrators Canada Inc. provides the MaxPERF service, it engineers and manufactures most of the tool technology, and maintains a sales force in Calgary. “We are very proud of our people, their tenacity and of our history, and we are equally excited about our future. The new investment in MaxPERF is helping to introduce the technology to the global oil and gas marketplace, while maintaining our strong presence here in western Canada,” says Penetrators Canada President, Dwayne West.

“Thank you to all of our clients, present and future.”

For more information, contact: Dwayne West, President Penetrators Canada Inc. E: dwest@maxperf.ca Tien Dang, Sales and Marketing E: tdang@maxperf.ca www.maxperf.ca

Superior Reservoir Contact, Unsurpassed Value

SUPERIOR RESERVOIR CONTACT Proud of our history... excited about our future!

Thank you to our many valued customers.

UNSURPASSED VALUE

42 PROFILER

Penta Completions Supply and Services Ltd.

Rod Pumping Optimization Specialists Penta Completions Supply and Services Ltd. is the only Canadian oilfield company that specializes solely in the design, sale and service of sucker rods and related equipment. The Edmonton-based firm, founded in 1987, originally focused on fibreglass sucker rods which had just recently been introduced into the oilfield. As directional and horizontal drilling increased the technical complexity of well design, Penta Completions expanded into a complete rod pumping optimization and services organization.

“We’ve earned a national reputation for helping producers design and install anything from a conventional pumpjack configuration to a specialty rod string,” says Tom Dennehy, president and co-founder of the Edmontonheadquartered company. “The quality of our people is the key to our success.”

Penta, with 22 employees, has offices in Calgary and Estevan as well as Edmonton.

Although its CEO sees an expanding role for fibreglass in the maturing oilfields of the Western Canadian Sedimentary Basin, the company sells a full line of steel sucker rods to complement the fibreglass rods and recommends the best rod pumping system for each specific application.

“If steel rods are used, about 60 per cent of pumping capacity is normally required to lift the rod string. The same pumping configuration can typically lift 30 – 50 per cent more fluid with a well designed fibreglass rod system,” Dennehy explains. The weight of the fibreglass — 70 per cent lighter per unit of strength than steel of the same diameter — is a critical factor but this material also offers two other important advantages: elasticity and corrosion resistance.

When pumping with fibreglass rod systems, the elasticity can generate a longer down hole pump stroke with respect to the surface stroke.

As a result the gear box can be smaller and surface length shorter.

Fiberglass is a corrosion-resistant material not affected by normally occurring natural elements or oilfield treating chemicals found in an oil well. “More than 50 per cent of all sucker rod failures are due to corrosion,” the Penta Completions president notes.

Pricing factors have made fibreglass sucker rods more attractive in recent years as five years ago, this product cost two to three times more than steel. Since then, world steel prices have more than doubled while fibreglass cost is up by only 20 per cent.

“Today the pricing differential has all but disappeared,” Dennehy reports.

The president says the company’s success depends on well-informed customers. “A typical petroleum engineering or technology curriculum devotes less than two days to learning about production rod strings.” Since 1992, his company has offered three-day rod pumping seminars, and the course is now more popular than ever.

Across Western Canada, the past few years have seen a significant increase in the number of directional or horizontal wells being drilled. And for Penta, at least 80% of its work now involves directional wellbores, whereas eight years ago they only represented 30%.

Penta has been involved in design work on directional wellbore for more than 15 years, and in that time learned a great deal about guide placement and overall rod string design, in particular in Manitoba and southeast Saskatchewan, as well as in several areas in Alberta. The Pembina field in the Drayton Valley area is a good example of the recent upsurge in horizontal drilling. “We have done more work in that area in the last six months than in the last 10 years, because until six months ago that was a field that wasn’t doing

anything new,” says Bob Wanner, who heads Penta’s Calgary sales office. “Advancements in drilling technology and completion technology have revitalized it into a very active oilfield, again, primarily in horizontal wellbores.

I think that’s really the wave of the future.”

With horizontal drilling, “a lot of oilfields deemed as being in the last stages of their life have come alive again.”

Throughout the years, Penta’s focus has always been on Western Canada. But thanks to its sterling reputation and connections, the Alberta firm is now working with a Dublin-based company on an onshore oil well project in the U.K. Penta’s role will be to supply equipment and design work for the project, which will start up in the next few months.

Penta provides analysis and optimization recommendations from fluid level and dynamometer testing, along with a full line of steel and fibreglass sucker rods, sinker bars and related accessories. Its services also include optimization through sales, installation and servicing of web-based monitoring equipment using pump-off control and Variable Frequency Drives (VFD) to assure that optimal performance and life cycles will be realized in rod pumped oil wells.

“In a mature basin like our own, controlling cost is the most important factor in profitability,” Dennehy says. “Properly designed rod systems can reduce capital cost, improve production volumes and enhance operational reliability. It’s an option that should be carefully evaluated by every conventional oil producer.”

For more information, contact: Penta Completions T: (780) 436-6644 E: sales@pentarods.com www.pentarods.com

complete rod pumping supply, design, optimization and services

diagnostic and optimization - Full Dynamometer and Fluid Level Services - Complete analysis of dynamometer data including Pump intake Pressure and IPR calculation - PENTA’s dynamometer report includes the recommendations and predictives needed to optimize your well based on the data collected and analyzed.

supply upco Steel Sucker Rods

- API Gr C, K, D - Special Service High Strength

design - PENTA’s optimized vertical well designs can reduce gearbox torque, power consumption and failture frequency

FibeRRod Fiberglass Sucker Rods - PENTA’s fiberglass rod design for - Full Range of Sizes to Match Your Application

upco Sinker bars

- API Gr 1 and 2 Available in a Full Range of Sizes

LuFKiN AuToMATioN “SAM”

optimum rod pump systems and high volume, deep and corrosive wells - PENTA’s deviated and horizontal designs to get the pump as close to TVD as possible without sacrificing run lives including guiding requirements

- Full Controller Sales, Service & Training

A.c.T. 1 pneumatic clutch - Allows for Automation of Gas Drive Applications

Yaskawa VFd w/integrated SAM - Variable Speed Drive with the Functionality of the SAM Controller

estevan 58 Devonian Street Phone: (306) 634-7399 Fax: (306) 634-6989

edmonton 9543-56th Avenue Phone: (780) 436-6644 Fax: (780) 436-4565

email: sales@pentarods.com

calgary #610, 910-7th Avenue SW Phone: (403) 262-1688 Fax: (403) 234-0108

Web: www.pentarods.com

44 PROFILER

RadCan Increases Reservoir Recovery RadCan offers horizontal radial drilling to enhance production in oil and gas wells at very reasonable costs RadCan offers a unique proprietary technology for placing multiple horizontal lateral sections for production enhancement in vertical wells.

This extends the drainage radius by creating permeability channels into the reservoir.

Customers have seen significant production enhancement as a result.

“What this allows us to do, is get beyond the near to wellbore damage and improve production from tight reservoirs,” explains RadCan President, David Robinson. “It allows us to create greater connectivity of the fractures in the reservoir. Often within those fractures is held oil or gas. Through our laterals, it can then flow into the wellbore.”

Radial jetting quickly rehabilitates and optimizes oil and gas wells using modified coiled tubing technology, perforating 50-mm diameter lateral holes using high pressure fluid.

RadCan’s radial drilling perforation averages up to 100 metres, versus conventional perforation which averages just 51- 153 cm. Lateral bores can be jetted at single or multiple levels.

Well Original Drain Radius

Laterals Oil Field

The technology was introduced commercially in 2001 by company chairman, Henk Jelsma, a geologist and drilling engineer.

Since that time, RadCan and its affiliates have completed over 600 wells worldwide, including 60 in Canada. On average, customers have seen a 186 per cent increase in production, typically doubling their recoverable reserves.

Seventy-five per cent of the wells completed worldwide using RadCan’s technology have been in carbonates, while 25 per cent have been in sandstones, shales, and coals.

Wells in the Cardium, as just one example, have on average seen a 100 per cent increase in production. RadCan has also applied the technology to a large number of wells in heavy oil, with excellent results. One customer saw an increase in incremental oil production of up to 800 per cent for a single well. Not only are they seeing production increase, they believe their recoverable reserves will also increase, creating greater value to shareholders.

What appears to happen in heavy oil, Robinson explains, is that RadCan’s laterals propagate wormholes, in which cavities

created in the sand are filled in by oil. “We are seeing tremendous production increases in heavy oil wells because of that.”

RadCan’s radial drilling technology is “a very quick, inexpensive way to re-complete or do a workover of an existing vertical well. It can be used as a replacement for perforations and as a replacement for expensive fracs.

Above: Compared to conventional perforations, increased reach into the reservoir is 100 metres versus 1–2 metres. Left: Jetted laterals increase drainage radius of the reservoir. Right: Jetted core sample of glauconitic sandstone

This is much more precise than doing a frac, because we know what direction we’re going in and go much further into the reservoir than a typical frac or perforation.”

At the same time, RadCan’s technology is much less expensive than other, more conventional systems, Robinson says.

A typical radial drilling job involves placing up to six 100-metre laterals per level into a vertical well, and takes two to four days to complete. Cost to the customer: $50,000 – $75,000. Compare that to fracing, which costs anywhere from $200,000 – $250,000 or more.

According to Robinson, although there are other competing technologies on the market, they do not have the same lateral reach that RadCan’s technology does, and no one else can match RadCan’s track record.

A wide range of customers have used RadCan’s technology, from junior oil and as firms to major companies. Recent customers include Rock Energy. “We work closely with customers to analyze wells and make sure it’s the appropriate application to do this service,” Robinson says. Customers may contact RadCan to review possible well candidates, and for assistance in lateral placement and jetting design.

RadCan and its affiliates operate in the U.S.; Latin America, including Columbia, Brazil and Mexico; Russia, Egypt, Pakistan, Australia, and Indonesia. And the company is planning to move into other areas internationally as well.

In addition to working in tight formations such as the Cardium as well as in unconsolidated sands for heavy oil applications around the Lloydminster area, the technology also has applications for steam injection in the oilsands. RadCan is currently discussing this with a number of potential customers.

Currently, RadCan’s technology only works in vertical wells (up to a maximum 30 degree deviation) but the company is now developing tools that will achieve the same goal in horizontal wells.

RadCan, which began operating in Canada in 2006, has seen a huge increase in business, as more companies become familiar with its technology. Robinson sees four key growth areas for RadCan going forward: heavy oil and the Cardium, where the company is already operating; southeastern Saskatchewan’s Bakken formation; and in situ production in the oilsands. Beyond that, Robinson says, another potential growth area would be to use the radial drilling system to assist in C02 sequestration, injection and disposal wells.

On the investment side, RadCan is planning to go public in 2011, with an IPO on the Toronto Stock Exchange.

For more information, please contact: Mike Siroishka or Ryan Smith RadCan Energy Services 240, 340 – 12 Ave. S.W., Calgary, AB T2R 1L5 T: (403) 266.1705 F: (403) 266.1709 E: infogps@radcan.com www.radcan.com

cost-effective Production Enhancement through radial jetting 45 PROFILER

Š 2010 RadCan Energy Services Inc. 10-06-01

100 metres

Bakken, Cardium & Conventional Wells

Enhance production by improving permeability & exposure of reservoir to the wellbore.

Increase directional effectiveness of the fracing process, or replace perforating and fracing expenses with affordable multi-leg jetted horizontals

What is Horizontal Radial Jetting?

Horizontal Radial jetting is a fast method to rehabilitate and optimize wells using modified coiled tubing technology.

50mm-diameter lateral holes are jetted using high pressure fluid, up to 100m horizontally from the wellbore.

Proven to enhance pool recovery rates, increase production several fold in more than 600 wells world-wide.

Phone: (403) 266-1705 Email: infogps@radcan.com www.radcan.com

Heavy Oil

Increase production by propagating worm holes

Oilsands & In Situ

Unconsolidated Sand

Cost-effective injection alternative

Glauconitic Sandstone

Dolomitic Limestone

Dissected core samples showing effects of RadCan’s radial jetting technology

46 PROFILER

Stewart & Stevenson

A Century of Innovation Since 1902, innovation has been at the heart of Stewart & Stevenson’s growth as a global leader in the industries it serves. Stewart & Stevenson (S&S) prides itself on providing innovative technologies for the oil and gas industry in Canada and worldwide, with a network of more than 53 strategic locations across the globe.

Stewart & Stevenson supplies equipment for the mobile oilfield equipment industry with a turnkey product line, right from drilling the first well, to completions and production. Its equipment meets the most rigorous industry standards established by the American Petroleum Institute and International Standards Association.

Stewart & Stevenson Canada’s diverse product line features customer-specified equipment for the oilfield industry; stimulation systems, well workover, and drilling rigs, control systems, coiled tubing rigs, cementing and pumping systems, nitrogen and industrial gas systems, and power generation systems. Designed with the latest engineering technology and built on lean manufacturing flow lines, Stewart & Stevenson’s manufactured systems for the oilfield feature the highest quality equipment and processes. In addition to complete in-house design, engineering, manufacturing and final testing, the company provides maintenance programs and commissioning for global markets as well as 24/7/365 technical, OEM after-market parts and service support.

“In well servicing and drilling equipment, Stewart & Stevenson’s innovations have become the industry standard, solidifying our proven track record both domestically and internationally. We back that up with worldclass service support after the sale,” says Stewart & Stevenson Canada’s After Market Account Manager, Jeff Salkeld.

Most recently, S&S has been developing equipment for emerging markets in well stimulation in order to support large multi-zone gas fracs in shale reservoir plays. To support this emerging market, S&S is developing lower

cost equipment for its customers, including next generation capacity mobile pumping equipment up to 3,000 horsepower with a minimal footprint; blender units with capacities in excess of 150 barrels per minute; and a new generation control system to improve safety and minimize costs for operators.

These three initiatives support the emerging markets of these massive frac projects,” says Stewart & Stevenson Canada’s Director of Sales, Rob Wawrzynowski, P.Eng. “Furthermore, to support these multi-zone fracs, S&S’s masted and coiled tubing units now go to greater depths than ever before, surpassing the 6,000-metre mark. These initiatives allow our clients to go deeper and at a higher capacity than they ever have before.”

“We have always been a leader. Our proven track record, coupled with continued focus on innovation, will help us to continue leading the market in these technologies,” says Stewart & Stevenson Canada’s Senior Account Manager, Blair Oler, CET. Examples of S&S innovations include its compact, durable low-maintenance drawworks, which have become the industry standard; lightweight mobile rigs; and freestanding packages for doubles. All of these technologies improve safety and increase profit for S&S clients and operators.

S&S’s well servicing rigs have the highest hook load to road weight ratio in the industry, making them road legal through all four seasons in Canada. “These units can be used 365 days a year without permitting,

increasing the profitability of this equipment for our clients,” Wawrzynowski says.

S&S’s mobile double rig freestanding package is robust, proven, and the industry standard. It offers the highest hookload combined with the smallest operating footprint in its category. “We have the premiere flagship freestanding package,” Salkeld says. “We have clients asking S&S to configure their existing equipment, to S&S specifications. It’s rock solid engineering.”

With a 100-year tradition of business excellence, Stewart & Stevenson is now building for their second century of innovation and quality. For future markets, S&S is developing well stimulation, workover and drilling technology to assist operating companies in further reducing their carbon footprint. This includes purpose-built equipment that can be powered through alternative power sources.

“Stewart & Stevenson continually strives to create innovative, economical solutions that make the recovery process safer and more efficient.” It is this adaptability and ingenuity that have made us successful for over a century,” says Stewart & Stevenson Canada’s Marketing & Communications Manager, Sandra Shaw.

The company continues to push the envelope and is poised to continue the trend of innovation in the design, manufacturing and after-market support for well servicing, stimulation, intervention, drilling and completions equipment for customers across the globe.

For more information, contact: Sandra Shaw, Marketing Manager Stewart & Stevenson Canada Inc. T: (403) 215.5300 | F: (403) 720.0844 Toll-free: 1.800.661.6172 E: s.shaw@ssss.com www.stewartandstevenson.com

Stewart & Stevenson Canada

WORLD LEADER

Innovative Oilfield Solutions

Stewart & Stevenson is a world leader in the design and fabrication of a wide array of specialized equipment for the oil and gas industry. Among the many energy-related products we offer is a diverse line of well servicing, stimulation, intervention, drilling and completions equipment designed and manufactured to suit virtually any climate or operating condition.

TOTAL SOLUTIONS • Workover, Well Servicing Systems • Drilling Rig Systems • Stimulation Systems • Coiled Tubing Equipment • Onshore and Offshore • Nitrogen and Industrial Gas Systems • Cementing and Pumping Systems • Power Generation Packages • Aftermarket Parts and Service

TRADITION OF SERVICE From 53 locations worldwide, talented, dedicated Stewart & Stevenson service teams fulfill our century-plus tradition of providing complete aftermarket support. Quality OEM products combined with quality aftermarket support have made Stewart & Stevenson a trusted name in the global oil and gas industry.

Calgary

3111 Shepard Place S.E. Calgary, Alberta T2C 4P1 +1 403-215-5300

Head Office–Houston 1000 Louisiana, Suite 5900 Houston, Texas 77002 +1 713-751-2649

www.stewartandstevenson.com

Come Visit Us at GPS! Booth #3751

Growing Education Open Learning makes education and career advancement an accessible reality for all.

The recent downturn in the global economy has led workers who have been made redundant and job-seekers facing a wave of unemployment, to scramble to education to retrain and improve their marketability in an increasingly competitive job market.

One area that has been experiencing real growth in the current economic climate is online education. Self-improvement is on the minds of many individuals looking to upgrade and enhance their personal situation in response to the recession and online and distance education is perfectly positioned to meet this demand.

Online and distance education successfully addresses the issues of the educated, urban adult learner looking to advance their education and career options. Distance and open learning provides students access to post-secondary studies with minimal admission requirements and flexibility regarding when and where they learn.

In Canada, Thompson Rivers University, Open Learning (TRU-OL) is one of the leading distance education providers, offering a viable option for learners looking to engage in or return to, post-secondary studies, despite their current life and work situation or their ultimate educational goal.

Through its open approach to learning, TRU-OL strives to make post-secondary education readily available and convenient to the learner. TRU-OL recognizes that many learners are entering into post-secondary education with a plethora of

www.truopen.ca

past credit or life and work-related learning and experience, which can translate into knowledge relevant to their post-secondary education.

Prior Learning Assessment and Recognition (PLAR) can help award credit for learning achieved through work and life experience.

PLAR provides adult learners with the opportunity to have the knowledge and skills which they have gained through work and life experience, assessed and recognized in the form of academic credit and/or occupational or professional certification. It has the potential to save individuals time and money as they work to raise their educational level.

The choice is yours Offering over 400 individual courses and more than 53 programs available for completion by distance and online learning, students have access to a variety of programs.

One distinctive program offered through Open Learning relates to one of the fastest growing areas of opportunity in today’s economy Trades and Technology. While some institutions offer applied degrees for Trades people, none offer anything like TRU-OL’s comprehensive and fully-accredited Bachelor of Trades, Trades and Technology Leadership (BTTL) program.

This program provides trades persons and technologists with the knowledge and skills required to expand their employment opportunities. The accredited program builds on knowledge which individuals have gained through their trades and/or technology

qualifications, integrating previous practical, hands-on experience with leadership and management studies.

Another program which provides students with a gateway into the leadership and management vocational market is TRU-OL’s Bachelor of Commerce program. The degree offers a practical management education and helps students effectively function in both complex private organizations as well as the public sector.

Students can choose between eight academic concentrations including General Management, Leadership and Technology Management, and enhance their career or begin a new one.

Students who complete a program through Open Learning will receive a Thompson Rivers University (TRU) credential that is fully recognized by the Association of Universities and Colleges of Canada, of which TRU is a member.

Choose Open Learning Get the education you want today

The flexible approach to education offered through Thompson Rivers University, Open Learning means you can register anytime throughout the year and study at a pace and place that suits your hectic lifestyle. Whether you require a course for professional development or want to pursue an entire degree and a new career, Open Learning takes your lifestyle and commitments into account and helps remove the barriers blocking your success.

What does Open Learning mean?

Credibility TRU is a fully accredited, degree-granting institution. The Open Learning Division is one of Canada’s largest online and distance education providers, offering over 400 courses and 53 certificate, diploma, degree and post-baccalaureate programs.

Accessibility Admission to a course or program is available continuously throughout the year and is not based on past academic achievement.

Flexibility TRU-OL’s distance mode of delivery allows students to study where they want, at a pace that suits their lifestyles.

Choice Transfer previously earned credits towards a degree and get credits for knowledge gained through prior work experience so it takes less time and money to complete a credential.

For a complete list of Open Learning courses and programs please visit our website.

www.truopen.ca

1.888.661.6736

50 PROFILER

Volant Products Inc.

Rapid Technology Deployment Volant Products Inc. and the Volant Group of companies develop bright ideas into high-value commercial products and services.

The Edmonton-headquartered firm develops and markets technology-based tools and products that increase safety, reliability and performance. Volant specializes in optimized rapid prototyping, high quality design, exacting quality assurance, and efficient commercial production. The company prides itself on a proven track record for rapid commercialization of its engineered solutions, most of which are based on patented technologies.

Volant Products Inc. was founded in 2001 as a small machine shop manufacturing products designed and developed by Noetic Engineering. Beginning with the Multi Lobe Torque Ring, developed initially for use in casing drilling, many other products have followed. Building on Noetic’s product

engineering, Volant quickly emerged as a highly efficient vehicle for rapid technology deployment, and today has a staff of more than 60 employees. The company has built a reputation for innovation, service, responsiveness and fair pricing. Delivering value to customers has been fundamental to its success.

In 2008, Volant undertook a corporate restructuring so it could better serve its customers. “We were growing rapidly in three different directions. Trying to stay on top of that with a single management group was becoming increasingly difficult,” says Volant Products Marketing and Sales Manager, Earl Secord. Three new operating units are described below.

Volant Products 2008 Inc. is responsible for all machining and manufacturing activities, including MLT Rings™, HydroFORM™ centralizers, proprietary top drive casing running tools, and several other products designed and developed specifically for the oil and gas industry. Volant’s machine shop has three main functions: producing a steady flow of tubular consumable goods; manufacturing components for several proprietary tools used in drilling and completions; and, rapid prototyping of new products for the Volant Group and for a select group of customers.

Volant Oil Tools Inc. manages manufacturing processes, Quality Assurance, assembly, testing and commissioning of the CRTi line of casing running tools. These high-value, all-mechanical tools were first introduced to the market in 2008. Volant targeted drilling and service companies who wanted to quickly implement a paradigm change and adopt top drive casing running technology in their operations.

“Unlike Volant’s compact, robust, mechanically-operated tool, competing systems are significantly larger, inherently more complex, and rely upon hydraulic actuation,” Secord says. Since introducing the CRTi to the market, Volant’s novel technology has gained widespread acceptance. Simplicity of design and driller-friendly mechanical operation make these tools unique. There are no hydraulic connections to fail or leak, and the tools are fully compatible with any top drive on the market. Compact design enables tool use on smaller, lighter rigs as well as on larger rigs.

“Total control stays in the driller’s hands, with no reliance on communication between the

driller and a separate operator, as is required with other casing running systems out there.”

Volant Tubular Services Inc. provides wellsite casing running services throughout Western Canada using CRTi casing running tools. Experienced field personnel also provide training services to casing running tool customers, delivering the latest information on tool operation and maintenance practices, domestically and internationally.

In the two years since its introduction, Volant’s CRTi tool has quickly become the first choice for many operators and drilling crews, significantly impacting the top drive casing running service industry.Tool simplicity and reliability have enabled Volant to become a well-known name in a very short time.

Customers can choose between having a field technician accompany the tool to location, or alternatively, on continuous projects, the drill crew can receive training so the tool can be run without a technician present. The result can be significant savings.

During early deployment, Volant targeted automated drilling rigs, typically larger singles equipped with mechanically assisted pipe handling systems. Over the past year, Volant’s offering has been expanded to engage the double and triple rig market as well. “Industry reaction has been extremely positive,” Secord says. “The efficiencies gained in tool rig-in and rig-out, and the tool’s simplicity of operation means it is unmatched.”

For more information, contact: Volant Products Inc. T: (780) 490.5185 www.volantproducts.ca

PROFILER 51

Innovative ParaSolve is an oilfield optimization service company specializing in the removal of all forms of hydrocarbon build-up.

With more than 25 years of experience servicing Western Canada’s oil and gas sector, the Calgary-based company is a pioneer in developing specialty treatments for the removal of paraffin, bitumen, and asphaltenes. ParaSolve’s proprietary solvent helps break down these heavy organic components, which are the primary cause of flow restrictions or blockages during pumping.

The company’s plant-based blend—which can be used wherever paraffin build-up occurs, including downhole, flowlines—is safe, effective, and 100% green. “We pride ourselves on the fact our product is a 100% biodegradable, non-toxic, non-carcinogenic, plant-based product,” says Tyler Gobin, Vice President of Sales. “It is environmentally friendly, and it works so much better than the chemical-based products that industry has used in the past. Our product has a high solvency and the ability to hold the dissolved wax or hydrocarbons in a permanent, oil-soluble state even at very low temperatures—and that’s a feature most competitive chemicals can’t provide.”

ParaSolve’s service benefits include:

• Incremental production increases; • Lower lifting costs and decreased risk of parted rods; • Elimination of costly hot oiling, wirelining, knifing, • • • •

chemical and batching treatments; Fewer pigging programs; Reduced service rig frequency and costs; In-house paraffin analysis; Application on all process equipment, including flowlines.

The company has expanded its services to include stimulation, acidizing, and soak and squeeze programs. Removing restrictions that lead to greater well inflow enhances production.

In addition to its stimulation optimization service, ParaSolve also offers a cost-effective, monthly, non-intrusive maintenance program to reduce paraffin and asphaltene deposits in pumps, tubing, rods, and flowlines that could inhibit oil and gas recovery. ParaSolve applies a heated batch treatment to keep wells flowing at their maximum, which reduces lifting costs, while at the same time increasing the longevity of well components. After the initial well treatment, the company works with producers to establish a regular service schedule to optimize future production.

Bio-solutions Optimize Production Well Servicing and Solutions for Oil and Gas Optimization … Naturally

Over the years, ParaSolve has helped to improve well performance for many producers across Western Canada, with full payback in as little as one to three weeks. Exponential increases in oil and gas production are standard, with typical results varying from a 100 per cent to 800 per cent increase in daily oil and gas production. “People are seeing extraordinary results,” Gobin adds. “Increased production, longevity of the oilwell, and lower lifting costs are some of the advantages to using our service.”

01-14 Stimulation 80

For these reasons and many more, it’s no surprise that ParaSolve is seeing impressive growth. The company experienced a ten-fold spike in servicing activity in the past year.

ParaSolve now runs four trucks out of field locations in Redvers, Saskatchewan, as well as Calgary, Red Earth and Grande Prairie, Alberta, with plans to establish another location in Drayton Valley in the next quarter.

“We pride ourselves on working with engineers and operators to resolve their paraffin-related issues with our bio-based products,” says Gobin. “Call ParaSolve today to find out how we can help you find a solution.”

Oil Production (bbls/day)

70

60

Tyler Gobin Vice President, Sales ParaSolve Bay 2, 2320 35 Ave NE Calgary, AB T2E 6S9 Tel: (403) 873-9266 Toll Free: (866) 480-9266 Cell: (403) 828-3534

Oil Production 50

40

30

20

10

0 01/01/10 -10

01/21/10

02/10/10

03/02/10

03/22/10

Date (mm/dd/yy)

04/11/10

05/01/10

05/21/10

Web: www.parasolve.ca

Aker Well Service

The Wireline Tractor Provider “Cost efficient conveyance in highly deviated wells� visit us at booth #1110 Suite 300, 6835 Railway Street SE Calgary AB T2H-2N6 (403) 640-4230