Pipeline News January 2011

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PIPELINE NEWS Saskatchewan’s Petroleum Monthly

January 2011

Canada Post Publication No. 40069240

FREE

Volume 3 Issue 8

Finance & Admin.

Drilling Surges in Saskatchewan

Oil Chat with Trent Yanko

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Photo by Brian Zinchuk

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PIPELINE NEWS January 2011

News

Notes

Western Plains cases Landrose well Western Plains Petroleum Ltd. said on Dec. 13 it had drilled and cased the ďŹ rst well of its previously announced three well drilling program in the Landrose area of west-central Saskatchewan. The new heavy oil well is located on lands the company acquired, with an industry partner, in late November. Production from the new drill was expected to commence in the next few days. The drilling rig was released from the well site and was expected to spud the ďŹ nal two wells of the drilling program on a nearby section in the Landrose area where the company already has three producing heavy oil wells. The ďŹ nal two wells, both in-ďŹ ll drills targeting the McLaren formation, were expected to be drilled and completed in the following next two weeks. Western Plains is the operator and holds a 50 per cent working interest in these three wells.

Tuscany cases Evesham Dina wells Tuscany Energy Ltd. said it has cased two more horizontal Dina oil wells at 92/16-16-3927 W3M and 93/16-16-39-27 W3M, located in the Evesham ďŹ eld, Saskatchewan. Tuscany is the operator and has a 60 per cent working interest. Both wells, which were drilled on 50 metre spacing, encountered porous sand and had good oil shows throughout the horizontal sections. The company said it planned to have the two wells on production within 10 days. Tuscany now has ďŹ ve horizontal wells in the Evesham Dina oil pool with an adjacent water disposal well. The company anticipates a continuous development program through 2011. Tuscany’s focus is on Dina oil projects at Evesham, where it will drill up to 10 horizontal wells. It was also reactivating four shut Dina horizontal wells at Macklin in the fourth quarter. “Our focus is deďŹ nitely on Saskatchewan,â€? said Tony Teare, chief ďŹ nancial oďŹƒcer. “We like the regime in Saskatchewan and we like the way the Saskatchewan government has treated the industry slightly better than Alberta of recent.â€? Briefs courtesy Nickle’s Daily Oil Bulletin

Swift Current tops December land sale „ By Geo Lee Pipeline News Regina – Call it the Santa Claus land sale. The best ever December sale of Crown petroleum and natural gas rights in Saskatchewan delivered $56.6 million in revenue for the province. The early Christmas gift brought year-end land sales revenue to $463 million compared to just $118 collected in all of 2009, making 2010 the second best year on record for land sales revenue. Surprisingly, the Swift Current area, with heightened interest in the Lower Shaunavon play, received the most bids with sales of $25.2 million. The Weyburn-Estevan area that normally leads the lands sales rush fell to second place this time at $17.8 million, followed by the Lloydminster area at $7.5 million and the Kindersley-Kerrobert area at $6.1 million. “We're very pleased with the way our industry has bounced back this year after a challenging 2009 for the industry worldwide," said Energy and Resources Minister Bill Boyd. “We're seeing increased investment and drilling, which translate into additional spin-o economic activity and beneďŹ ts for the people of Saskatchewan. “Our December sale is traditionally a slower sale, but this one garnered nearly $10 million more in revenue than the previous benchmarks for December. That bodes well for future activity by the industry in 2011 and beyond.â€? In fact, the Petroleum Services Association of Canada expects Saskatchewan to lead the west in 2011 with a 16 per cent increase in the drilling rates to 3,050 wells which could lead to even stronger land sales. The highest price for a single parcel in the December sale was $6.5 million, paid by Charter Land Services Inc. for a 1,036-hectare

lease near Shaunavon. The highest price on a perhectare basis was $35,211. Scott Land & Lease Ltd. bid $4.7 million for a 133-hectare lease parcel near Stoughton. The next sale of Crown petroleum and natural gas dispositions will be held on Feb. 7. Swift Current area (dollars rounded up) The total bonus received in the area was $25.2 million, an average of $1,673/hectare. This compares to $1.7 million, an average of $582/hectare at the last sale. The top purchaser of acreage in this area was Charter Land Services Inc. who spent $8 million to acquire two lease parcels. The top price paid for a single lease in this area was $6.5 million paid by Charter Land Services Inc. for a 1,036 hectare parcel situated three kilometers east of the Eastend Shaunavon (Oil) Pool, 22-km south of the town of Shaunavon. The highest dollar per hectare in this area was received from Standard Land Company Inc. who paid $23,560/hectare for a 32.37 hectare parcel located within the Whitemud Shaunavon (Oil) Pool, 15 km southeast of Eastend. Weyburn-Estevan area The total bonus received in the area was $17.9 million, an average of $1,605/hectare. This compares to $25.5 million, an average of $665/hectare at the last sale. The top purchaser of acreage in this area was Scott Land & Lease Ltd. who spent $5.9 million to acquire seven lease parcels. The top price paid for a single lease in this area was $4.7 million by Scott Land & Lease Ltd. for a 132.82 hectare parcel situated within the ViewďŹ eld Bakken Sand Pool, 13 km south of Stoughton. This is the highest dollar per hectare at $35,212/hectare. Lloydminster area The total bonus received in the

area was $7.5 million, an average of $691/hectare. This compares to $2.5 million, an average of $1,165/hectare at the last sale. The top purchaser of acreage in this area was Prairie Land & Investments Services Ltd. who spent $1.4 million to acquire three lease parcels. The top price paid for a single lease in this area was $1.1 million paid by Prairie Land & Investment Services Ltd. for a 259 hectare parcel situated adjacent to the Salt Lake Lloydminster Sand (Oil) Pool, 13 km northeast of Denzil. The highest dollar per hectare in this area was received from Canadian Coastal Resources Ltd. that paid $12,353/hectare for a 16.19 hectare parcel located two kilometres southwest of the Epping South Sparky Sand (Oil) Pool, 36 km south of Lloydminster. Kindersley-Kerrobert area The total bonus received in the area was $6.1 million, an average of $227/hectare. This compares to $4.9 million, an average of $164/hectare at the last sale. Top purchaser of acreage in this area was Canadian Coastal Resources Ltd. who spent $1.8 million to acquire four lease parcels and one licence. The top price paid for a single lease in this area was $577,081 by Prairie Land & Investment Services Ltd. for a 129.50 hectare parcel situated within the Dodsland North Viking Gas Pool, 12 km southeast of the village of Dodsland. This is the highest dollar per hectare in this area at $4,456/hectare. The top price paid for a single licence in this area was $998,362 paid by Canadian Coastal Resources Ltd. for a 4,402.98 hectare block situated 18 km southeast of the Ear Lake Waseca Sand (Oil) Pool, 25 km northeast of Kerrobert.

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PIPELINE NEWS January 2011

Drilling activity surges with freeze-up “It’s exciting times. I love it. I’ve been waiting forever for Saskatchewan to blow the doors off.� - Don Rae, Crusader Drilling Corp.

News

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Notes

Anterra plans Bakken drilling In the ďŹ rst quarter, Anterra Energy Inc. completed the acquisition of 12 sections of land in Saskatchewan which are prospective for Bakken oil, bringing its total Bakken land holding to 17 sections. The company plans a 3-D seismic program over the Bakken lands in Saskatchewan and is seeking a partner to participate in this program, which is being delayed until 2011 due to the environmental assessment. The ďŹ rst well is now scheduled to spud in late 2011, depending on the outcome of the seismic program. Anterra believes it has an inventory of more than 20 Cardium development drilling locations in Alberta and 50 potential locations in Saskatchewan contingent on results of the 3-D seismic and initial drilling.

Palliser to double spending „ By Brian Zinchuk Pipeline News Estevan – With a wet summer and fall behind them, drillers in Saskatchewan saw a surge in activity once freeze-up ďŹ nally took hold. According to Nickle’s Rig Locator (www. riglocator.ca), by Nov. 29, there were 96 active drilling rigs in Saskatchewan. That was the highest level seen in all of 2010 up to that point, and indeed, the highest level since early November, 2008. Drilling activity had come close to that number three times in 2010, just priority to spring break up, in mid-July and mid-October. Three operators accounted for a total of onethird of the active drilling eet on Nov. 29. The biggest operators as of that date were Husky Oil Operations with 11 rigs, Crescent Point Energy with 10 rigs, and PetroBakken Energy Ltd.

with nine. However, when you add PetroBakken’s parent company, Petrobank Energy and Resources Ltd.’s two rigs, that put them in a tie with Husky at 11. By Dec. 4, the total active rig count climbed to 101, before slacking o 10 rigs in the following days. It rebounded again to 101 by Dec. 13. Historically, drilling rig activity in Saskatchewan drops o throughout December towards the Christmas holidays, and then picks up in the New Year. Yorkton-based Crusader Drilling Corp. president and CEO Don Rae said, “It’s good times for the drilling industry and Saskatchewan. It proves the Bakken play is viable.â€? “We’re going to increase our rig eet,â€? he said. ɸ Page A7

Saskatchewan’s drilling rigs have been running hard since freeze-up. This rig could be found in the Cenovus Àeld, west of Midale. Photo by Brian Zinchuk

Focused on heavy oil from the greater Lloydminster area of Alberta and Saskatchewan, Palliser Oil and Gas Corporation aims to roughly double its spending next year, to $23 million based on an $80 WTI price from an estimated $13 million this year and $8 million in 2009. The company is adding production at about $16,000 per owing bbl and $14 per-bbl ďŹ nding costs, Kevin Gibson, president and chief executive oďŹƒcer, told the SEPAC symposium. Palliser forecasts average yearly production of between 1,550 to 1,700 BOE per day with a 97 per cent crude oil weighting, and it expects 2011 exit production of between 1,900 and 2,100 BOE per day. The company has 17 locations surveyed for a quick start to its 2011 drilling program, having more than doubled its prospect inventory to 112 locations since February, said Gibson. “Most of these new locations are at Edam and that's where we're having our best results.â€? Briefs courtesy Nickle’s Daily Oil Bulletin

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EDITORIAL

PIPELINE NEWS January 2011

Pipeline News Publisher: Brant Kersey - Estevan Ph: 1.306.634.2654 Fax: 1.306.634.3934

Mission Statement: Pipeline News’ mission is to illuminate importance of Saskatchewan oil as an integral part of the province’s sense of community and to show the general public the strength and character of the industry’s people.

Editorial Contributions: SOUTHEAST Brian Zinchuk - Estevan 1.306.461.5599 SOUTHWEST Swift Current 1.306.461.5599 NORTHWEST Geoff Lee - Lloydminster 1.780.875.6685

Associate Advertising Consultants: SOUTHEAST • Estevan 1.306.634.2654 Jan Boyle - Sales Manager Cindy Beaulieu Glenys Dorwart Kristen O’Handley Deanna Tarnes SOUTHWEST • Swift Current 1.306.773.8260 Doug Evjen Stacey Powell NORTHWEST • Lloydminster Daniela Tobler 1.780.875.6685 MANITOBA • Virden - Gail Longmuir 1.204.748.3931 • Estevan - Jan Boyle 1.306.634.2654

To submit a stories or ideas: Pipelines News is always looking for stories or ideas for stories from our readers. To contribute please contact your local contributing reporter. Subscribing to Pipeline News: Pipeline News is a free distribution newspaper, but is now available online at www.pipelinenews.ca Advertising in Pipeline News: Advertising in Pipeline News is a newer model created to make it as easy as possible for any business or individual. Pipeline News has a group of experienced staff working throughout Saskatchewan and parts of Manitoba, so please contact the sales representative for your area to assist you with your advertising needs. Special thanks to JuneWarren-Nickle’s Energy Group for their contributions and assistance with Pipeline News.

Pipeline News Estevan, SK Ph: 306.634.1015 Fax: 306.634.1041 Published monthly by Glacier Ventures International Corporation, Central Office, Estevan, Saskatchewan. Advertising rates are available upon request and are subject to change without notice. Conditions of editorial and advertising content: Pipeline News attempts to be accurate, however, no guarantee is given or implied. Pipeline News reserves the right to revise or reject any or all editorial and advertising content as the newspapers’ principles see fit. Pipeline News will not be responsible for more than one incorrect insertion of an advertisement, and is not responsible for errors in advertisements except for the space occupied by such errors. Pipeline News will not be responsible for manuscripts, photographs, negatives and other material that may be submitted for possible publication. All of Pipeline News content is protected by Canadian Copyright laws. Reviews and similar mention of material in this newspaper is granted on the provision that Pipeline News receives credit. Otherwise, any reproduction without permission of the publisher is prohibited. Advertisers purchase space and circulation only. Rights to the advertisement produced by Pipeline News, including artwork, typography, and photos, etc., remain property of this newspaper. Advertisements or parts thereof may be not reproduced or assigned without the consent of the publisher. The Glacier group of companies collects personal information from our customers in the normal course of business transactions. We use that information to provide you with our products and services you request. On occasion we may contact you for purposes of research, surveys and other such matters. To provide you with better service we may share your information with our sister companies and also outside, selected third parties who perform work for us as suppliers, agents, service providers and information gatherers.

Editorial Reason to cheer in 2011 It was heartwarming to watch Nickle’s Daily Rig locator (www.riglocator.ca) this fall. That’s a little ironic, because the warm feeling resulting from the strength of drilling is due to the onset of winter freeze-up. After a wet late summer and fall, drilling took off in November and December. On Dec. 3, the drilling rig count spiked at 101. It hit that level again on Dec. 13, before starting the customary December slide towards Christmas. That was the highest number of active rigs since October 2008. Many people we spoke to were quite pleased to hear that number. It may be a psychological number, but having 100 rigs going in Saskatchewan at any one time is encouraging for the industry. One camp operator told us that after recent meetings with operators in Calgary, they anticipated things to “explode” early in the New Year. Indeed, during January of 2010, drilling took off after the Christmas holidays were over, and didn’t drop until spring breakup took hold. Much of this current push for drilling is driven by oil prices ranging in the high $80s per barrel, plus the backlog from the summer. Already we’re hearing about strains on the labour force with regard to finding experienced hands. You’ll note that it’s oil we’re talking about, not gas development. It’s going to take a serious rise in gas prices for that sector to pick up. In many ways, the optimism we saw in the sector in 2007-2008 is back. Oil prices are strong, drilling activity is strong, there’s work to be had and people are

making money. More specifically, if you aren’t able to make money in this environment, perhaps you’re in the wrong business. This month Pipeline News focused on finance and admin in the oilpatch. What it really comes down to is where do you get your money, and how do you handle it? One company told us of their stringent business processes that allow them to consistently know how they are doing financially, as opposed to talking to the accountant once a quarter and finding out how they did. Another spoke of keeping on top of invoices, making sure the money is coming in. To make money, you need to have people to work for you. As one financial adviser pointed out, benefits and pension plans are crucial to obtaining and retaining the best talent. One thing has us a little concerned, however. The economic crisis in Europe, with Greece and Ireland in severe trouble, and Portugal and Spain next in line, plus a slow recovery in the U.S., could potentially lead to a double-dip recession. That wouldn’t do this industry any favours. While oil at $88 may be good now, oil at $105 could stifle the slow economic recovery and push economies on the edge into despair. No one wants to see oil dip to the $30’s range, like it did during the spring of 2009. That’s a roller-coaster ride most people don’t want to get on. We’re optimistic that won’t happen, however. Saskatchewan is going strong, and buoyed by a strong petroleum sector, should have a promising 2011. Happy New Year, from Pipeline News!

PIPELINE NEWS January 2011

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Opinion SaskPower blinks on carbon capture From the top of the pile Brian Zinchuk

On Dec. 10, we found out that SaskPower will indeed be rebuilding Unit 3 at the Boundary Dam Power Station, near Estevan. However, they are not going to be fitting it with the much-ballyhooed carbon capture system at this time. When it came to carbon capture, SaskPower, and through it, the province of Saskatchewan, blinked. The plant will be designed with future carbon capture in mind. The press release noted, “Boundary Dam 3 will be rebuilt with a state-of-the-art Hitachi turbine custom-designed for carbon capture systems. “SaskPower will continue with technical work on the integrated carbon capture and storage system proposed for the Boundary Dam Power Station. This work will be supported by funding provided by the federal government, which has committed $240 million to assist in the development of carbon capture technology in Saskatchewan. “SaskPower will defer a final decision on construction of the integrated carbon capture and storage system until the new federal thermal coal power

generation emissions control regulations are completed. “The company estimates it would cost $1.2 billion to rebuild Boundary Dam 3 with a fully integrated carbon capture and storage system.” The Cancun, Mexico climate change talks just wrapped up in mid-December. Did you notice it? Nope. That’s because essentially nothing of substance came out of it, following nothing coming out of the Copenhagen talks a year previous. In the meantime, the United States has been waffling so much on carbon regulation, you’d think the entire government eats breakfast every morning at IHOP. Last June, Canada’s then environment minister Jim Prentice made it clear no one is going to be building new or rebuilding existing coal fired plants without the ability to limit greenhouse gas emissions to that of a similar-scaled combined cycle natural gas unit. However, the federal government has also made clear Canada will not act on climate change initiatives without the U.S. also participating. We won’t go it alone. This put SaskPower, and the province, in a pickle. We need to replace Boundary Dam 3 now, or we are going to be short on power down the road. So do we spend $1.2 billion on a maybe? No, we don’t. By choosing to go ahead with work that will be able to accommodate future carbon capture technologies, we hedge our bets. If we really do have to spend that money, we will, when we absolutely have to, but not before.

A billion dollars buys an awful lot of wind turbines. Or it can buy natural gas-fired versions of both a baseload and peaking station, just like the ones being built near North Battleford. Add another $200 million to make $1.2 billion, and you get your baseload plant, peaking plant, AND wind turbines. One of the losers in this waiting game is the oil and gas sector in the Estevan area. Some producers have already been considering the idea of CO2 flooding for enhanced oil recovery (EOR), but they will need a local source before getting serious about it. There are already two CO2 floods nearby, at Weyburn and Midale, but they use CO2 that is pipelined some 200 miles from North Dakota. With the Boundary Dam CO2 capture project on hold, that means any substantial CO2 EOR project in the area is also now effectively on ice. Correspondingly, additional oil production through tertiary recovery, and the associated revenue to the province and jobs for the workers, will also have to wait. In Alberta, a secure supply of CO2 for EOR has been a stumbling block. New Technology Magazine noted in its December edition that as CO2 EOR stalls, polymer floods ramp up. CO2 EOR may be missing the boat. It may be a bit of a blessing in disguise. It’s going to be hard enough to find workers and accommodations for them to handle the $354 million Unit 3 rebuild. I have no idea how Estevan could handle a $1.2 billion project at this time. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.

Oracle of Oil sees an economic punt in 2011 Happy New Year. What this greeting means of course, is that it’s time to reflect on the accuracy of my predictions a year ago, while looking ahead at what’s in store for the oil and gas economy in 2011. Readers may be amazed to learn that all my predictions for 2010 were bang on, as I rely on hindsight for accurate and insightful foretelling. I was bang on about Premier Brad Wall nixing the potash deal, and my writings about Husky Energy’s third quarter earnings were perfect to the penny. Unfortunately, I can’t rely on the hindsight method of forecasting for 2011, but trust me this is going to be a good year for drilling. My confidence is based on the forecasting of the Petroleum Services Association of Canada that I shamelessly plagiarize to position myself as an Oracle of Oil. Like me, PSAC is expecting 12,250 wells to be drilled in 2011, an improvement from the anticipated official total of 11,350 for 2010. Saskatchewan will enjoy the largest improvement with a predicted 16 per cent increase in the

Lee Side of Lloyd Geoff Lee

drilling rate to 3,500 wells. Manitoba will also be busy with an anticipated 10 per cent increase to 550 wells. Alberta could see a one per cent jump. I am also taking the liberty of relying on the optimism of the Canadian Association of Oilwell Drilling Contractors that predicts more oil directed drilling and a marginal improvement in overall activity for 2011. Your reliable Oracle of Oil is also confident that this should be a good year for sales of heavy construction and mining equipment in Western Canada.

According to the industry experts who share my view, the heavy equipment distribution business boasts high margins from selling parts and providing specialized mechanical services, meaning sales should increase with the recession at an end. As for the economic fortunes of the United States, our biggest trading partner, we won’t know which way their economy will go until the Super Bowl winner is determined. According to a theory called the Super Bowl effect, if a team from the National Football Conference wins, the national economy will do great. If the team from the American Football Conference wins, the economy will be a bummer. There is no comparable effect in Canada with the Grey Cup although another Rider win could help fund a roof for Mosaic Stadium and warm up the local construction economy and the fans in Regina. Yes, the Oracle of Oil sees good times ahead for the industry – and a winning 34 yard Rider field goal into the wind that will capture our hearts and minds in the fourth quarter of 2011.

PIPELINE NEWS INVITES OPPOSING VIEW POINTS. EDITORIALS AND LETTERS TO THE EDITOR ARE WELCOME. Email to: brian.zinchuk@sasktel.net

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PIPELINE NEWS January 2011

Boyd sees blue sky for energy sector

By Geoff Lee Pipeline News reporter Geoff Lee spoke with Energy and Resources Minister Bill Boyd in a year -end interview shortly after the announcement of the December land sales numbers. Q: What is the reason for Swift Current leading the December 2010 land sales? A: I think it’s a very good story here. In Swift Current we are seeing a similar thing happen to what has happened in the Weyburn and Estevan area. New technology is certainly unlocking the resource in that Lower Shaunavon play. Clearly companies are stepping up and bidding in strong levels in that area. It is the first time we have seen that area of the province lead in term of land sales, and I think it’s a good trend that we are going to see develop here. Q: What will that mean to the area economy? A: There has been $25.2 million in land sales in that area (December 2010). What that also means is that you’ll see a lot of drilling activity realized in that investment – production and jobs associated with that. Q: Where else is increased drilling activity happening in the province?

A: It’s all over the province. The Lower Shaunavon is very strong along with the Weyburn/Estevan area. We are seeing lots of activity in Lloydminster, and in the Kindersley/Kerrobert area as well. We are seeing greater activity in the province all the time, greater investment, greater business activity and more jobs associated with it. Q: Do you think this trend will spill over into 2011? A: We are very optimistic of that. We are seeing stable prices for a barrel of oil. As a result of that, companies are looking to invest very heavily in our province, and that’s great. The Petroleum Services Association of Canada forecasts a 16 per cent increase in the drilling rate for Saskatchewan in 2011. - Ed. Q: Do you expect to see more horizontal drilling in the Lloydminster area? A: Yes, we are seeing more and more of that kind of activity and more and more applications for horizontal drilling. I think that’s going to be the style of drilling we are going to see in greater abundance in Saskatchewan. It’s resulting in more investment but also much greater returns for the companies involved. Clearly, the technology has advanced to be utilized all across the province. We think that’s obviously a very good thing. Q: Will higher prices for petroleum and natural gas rights slow down land sales? A: It hasn’t yet. I think what it points to is that companies realize there is a great opportunity to do business in Saskatchewan. They are moving forward and bidding appropriately for these properties. Prices go up because of competition. We see very active bidding on the parcels of land that are available and more companies coming in to bid in Saskatchewan, and greater prices as a result of that. Q: Do you see any hope for further development of the oilsands in 2011? A: The oilsands are a little bit further off. They require much greater investment and probably more technology and infrastructure has to be put in place. We are still optimistic that we are going to see that develop into a significant resource in the future. Q: Do you see any signs of the gas well tax incentive working to increase gas drilling? A: Small signs – gas prices are at very low levels in comparison to oil, and as a result of that, we are seeing a shift in companies from gas to oil. I think that trend will be in place for awhile. Technology has really made a difference in terms of shale gas plays, and as a result, we are seeing very low levels of prices for gas. Our incentives have helped a little bit, but not the level we were hoping for initially. The gas well incentive is volume-based and establishes a maximum royalty rate of 2.5 per cent and a freehold production tax rate of 0 per cent on the first 25

million cubic metres of natural gas from horizontal wells drilled between June 1, 2010 and March 31, 2013. Ed. Q: What is your highlight of the year regarding energy? A: I think the continued application of technology. What we are seeing is companies are, in greater numbers, using horizontal drilling methods, multistage hydraulic fracking or using different kinds of solvents or waterfloods or CO2 – all of those kinds of things are creating more activity. More business is being thrown off (spun off ) as a result of that, and clearly more jobs. We are seeing our production in Saskatchewan moving forward. We see greater amounts of drilling being done all the time, and largely that’s a result of the technology that’s being applied. Q: Are labour shortages becoming more of a problem? A: It’s always a situation where you need to have qualified and more available labour components. We are seeing more training take place in Saskatchewan in the trades. Generally, greater business activity attracts more people. We are seeing that in terms of our labour markets in Saskatchewan. There are more people moving back to Saskatchewan. We are also seeing greater numbers of immigrants coming to Saskatchewan. That’s why we have the greatest population in our province that we’ve ever seen. Q: Do you see more jobs for Aboriginals? A: That is an area of significant increase to our province. We see it as a great resource – First Nations communities are getting more active in the job market – still not at a level we would like to see, but moving forward nevertheless. Q: What are your expectations for 2011 in the energy sector? A: I expect we will see continued strong growth in our economy across the province. The forecasting groups are saying Saskatchewan will lead or nearly lead in almost all areas of economic activities. We are going to continue to help to facilitate that as a government. We expect to see the continued optimism that there is in our economy. All forecasting companies are expecting Saskatchewan is going to have a very good year in 2011. Our job is to help facilitate that and we are working very hard at that. Q: Will there be any new oil and gas regulations in 2011? A: We think our regulations are at the appropriate level. We see the environment being protected; we see development taking place and investment taking place in Saskatchewan. We see a royalty structure that is appropriate for the resource that creates opportunities, but also generates a good return on that investment for the people of Saskatchewan.

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PIPELINE NEWS January 2011

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Several drillers booked solid until spring breakup ɺ Page A3 The company just put its second rig to work in November in Alberta’s Cardium play, near Lodgepole, for PetroBakken. Rig 1 is going steady, hopping the border between Saskatchewan and Manitoba for Tundra Oil and Gas near Sinclair, Man. In early December, it was near Frys, Sask. “We’re booked solid right now. We’re good after road ban, too. If you’ve got good iron and good crews, if you’re not busy right now, something’s wrong,” Rae said. “It’s exciting times. I love it. I’ve been waiting forever for Saskatchewan to blow the doors off.” Weyburn-based Panther Drilling general manager Jim Kopec said on Dec. 8, “It’s picking up now with the cold weather. We were fighting mud up until two weeks ago.” “For the new year, I think it’s going to be pretty busy.” At that time, Rig 1 was just completing its Level 4 inspection, and going out the door in the coming days to join Rigs 2 and 3 in the field. Kopec said all three of their rigs were fully booked up until breakup. A concern of the oil companies, he said, was the amount of moisture last year and the snow already received this winter, indicators for a possibly long spring breakup. “They want to go hard through the winter,” he said as a result. Michael Smith, vice-president of operations and general manager for CanElson Drilling’s Saskatchewan operations, has heard similar concerns about breakup. CanElson’s Saskatchewan fleet is based in Carnduff. On Dec. 8, they had five of six rigs operating, with the last one moving the next day. In the prior month, they had three rigs down due to wet weather. Smith anticipated they would be running right up until Christmas, and then following the holidays, be active until breakup. “All our rigs are booked right until road bans,” he said. “I believe the road bans are going to be long this year.” Some operators are looking at booking beyond road bans. CanElson has enough people, Smith added.

“We’re as busy as we can be,” said, Kevin Fuller, vice-president of operations with Lasso Drilling Corp. Lasso is a two-rig company with one rig in the Viewfield area, and the second not far away at Benson as of Dec. 8. Ray Coleman, AKITA Drilling Ltd.’s operations manager, said, “We’re booked for the season for all the rigs we have people for.” However, he noted it is hard to find additional workers. Coleman anticipated AKITA will be busy until the sun comes out in March. They typically don’t book into the summer season at this time of year. As of Dec. 8, all eight of AKITA’s rigs in Saskatchewan were listed as either drilling or moving on Nickle’s Rig Locator. Five of those rigs were listed working for Husky. Four AKITA rigs were in the Lloydminster region, two were in the Swift Current area, and another two were pursuing potash in the Lanigan area.

Oil¿eld worker succumbs to injuries near Turtleford A 58-year-old Turtleford man employed by Flint Energy Services Ltd. died from injuries he incurred from a workplace accident at an oilfield lease in westcentral Saskatchewan early in the morning of Nov. 30. An RCMP news release said the Turtleford man was working on an oilfield lease site roughly 11 kilometres south of Mervin at the time of the incident. An Occupational Health & Safety official reported the accident involved a flush-by unit and is being investigated. Turtleford RCMP, Turtleford Fire and Rescue and St. Walburg Ambulance were dispatched to the site at about 1:20 a.m., where they found the man trapped in a piece of equipment, RCMP said. The man was treated at the scene by emergency personnel and taken to Turtleford hospital where he died.

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PIPELINE NEWS January 2011

Oil Chat with Bruce Penton

Bruce Penton, acting city editor with the Medicine Hat Daily News and syndicated columnist will be contributing a Q&A with inÁuential Canadian Petroleum personnel each month for Pipeline News.

Legacy Oil and Gas’s

Trent Yanko

“It’s a capital intensive business. You can have the most brilliant people coming up with a great idea, but if you can’t get the money when you need the money, you may never get that opportunity, or never be able to fully realize on it.” - Trent Yanko Trent Yanko is the president and CEO of Legacy Oil & Gas, a publicly traded exploration and production company. It is the seventh oil and gas company with which he has been involved. Legacy Oil & Gas was named “producer of the year” in the December edition of Oilweek. Yanko was named Saskatchewan´s Oilman of the Year in 2007. The 43-year-old native of Regina now lives with his wife and two young children in Calgary. Yanko spoke in late November with Bruce Penton, currently the acting city editor of the Medicine Hat News. Pipeline News: How many different companies have you been associated with in your oil career? Trent Yanko: The total is getting up there. Through Legacy, there have been seven companies, I guess. PN: Can you name them? TY: Sure. I started out at SaskOil in Regina, basically out of school, as a reservoir engineer. I worked with them in Regina and up in Lloydminster with the heavy oil group. That's where I cut my teeth in the industry. I left them in ’93 and joined a little Reginabased junior company called Lateral Vector. It was a private company that we took public on the TSX — the TSE at the time. We also did projects in southeastern Saskatchewan and expanded into Alberta, but we also had the first on-shore production-sharing contract in China. So I spent from 1994 to ’97 travelling back and forth. We also had a deal ongoing in the Ukraine at the same time. I got to do a lot of interesting things. Unfortunately, the company wasn’t a financial success, but it was great for my career as far as exposure to lots of different technical things, but also the business side. I left them in 1997 and went to Startech (Energy) and was a reservoir engineer and ran their southeast Saskatchewan assets. The downturn came in ’98 and it wasn’t a great place to be — an oil producer — so I left Startech and joined Watrous Securities which is now part of Scotiabank. They were specializing in divestitures of oil and gas asset companies. I did that for about 14 months. Did 35 deals in 14 months. A lot of work, but I met a lot of interesting [people] in

different capacities, so it was a good experience. PN: From there, you went where? TY: I went to Exterra Energy, which was a private company that I founded and formed, and was the largest shareholder of. It was always a goal of mine to form my own oil and gas company. I still liked the industry and wanted to get back into it. The hangover of ’98-’99 was over and it was starting to look like a better time. (My time away) hadn’t jaded me for the future. I worked at Exterra right up until 2003 when I sold the company to StarPoint Energy. StarPoint was an exploreco spinout from when Crescent Point converted to a royalty trust. It was a small, 600-barrel-aday company, but I rolled my company into that and joined them as a vice-president for production. I kept some land on the side and had a little company called Drill-X with which I drilled a few wells and eventually sold, so that accounts for two (companies). We grew StarPoint very aggressively from 200 barrels a day to 9,000 in just over a year and it converted to a trust. Out of that trust conversion came another exploreco spinout and that was Mission Oil and Gas. I moved on with Mission Oil and Gas — we were a 500-barrel-a-day little junior that came out of StarPoint in 2005 — and were the guys that were behind the Bakken play initially in Saskatchewan. We had a vision that this was potentially going to be a big play and went out and executed on that. Eventually we merged Mission with Crescent Point. So that core of Bakken holdings Crescent Point has now came from the efforts we put in at Mission. Mission closed in 2007 and I took almost two and a half years off. Left the industry, did some travelling with my wife. We saw a bunch of things around the world. Basically took it easy. Part of it was because I wanted a break, but part of it was that the industry really felt ‘peaky’ at that time. It was difficult to get land. There was a lot of competition. I thought it was difficult to start up a little company in that environment and so just decided to stay away. It worked out pretty good, because what happened in 2008 decimated a lot of guys. I couldn’t say I saw that coming, but ... PN: You were travelling at the time, right? TY: I was on a ship in the Arctic at that time

when I heard Lehman Brothers went down. It was good to be away from that. In early 2009, there was an opportunity to start again. You could pick your place. You could pick your time. Oil wasn’t $142, but it wasn’t $32. It was $60. Guys were still on their backs financially, so if you came up with a new company, capitalize it, focus on light oil, that’s the idea of Legacy. PN: What did you see in the Bakken play so early compared to some of your competitors? TY: We knew what was going on in Montana; that’s where the play originated. We saw a similar looking type of reservoir in Saskatchewan, so it was a bit of an analogy. We tried to borrow heavily. ‘Keep It Simple, Stupid’ for the Montana guys didn’t really work. Initially we had to ‘Saskatchewanize’ it a bit on the technology to really dial in that frac and that completion. Once that started to click for us, we realized we could be on to something big, so were very aggressive in accumulating land and continued to drill wells. A lot of the industry ignored it and looked away and weren’t real big believers in the play. It was an uphill battle the whole time, not only with our peers, but with a lot of the investment community. PN: What do you recall as the most difficult aspect of putting together your first company? TY: Access to capital. It’s a capital intensive business. You can have the most brilliant people coming up with a great idea, but if you can’t get the money when you need the money, you may never get that opportunity, or never be able to fully realize on it. The difficulty is if you’re just starting out, and may not have a track record, not that well known, you have to go to relationships, leverage those relationships — people who know you, who can get you into a circle of investors. We were fortunate with Exterra, which was my first one ... my wife and I put in a good chunk of the money. The raise wasn’t that big and we really didn't have to raise a lot more money. We actually had some good success. It was an exploitation, an acquire and exploit company. We weren’t drilling dry holes. We were buying hard assets and then optimizing them. It had that lower-risk profile, which led to success. ɸ Page A9

PIPELINE NEWS January 2011

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One of Sask’s movers and shakers:

Trent Yanko

ɺ Page A8 There are a lot of guys these days drilling $3-and $5-million wells. So if you’re that little guy starting out, it’s daunting to say OK, I’ve raised $5 million and I’m putting $3 million of it into one well. You swallow hard. PN: How does the North Dakota Spearfish play compare to Bakken? TY: It feels very familiar, especially in North Dakota, because it looks like geologically, the zone is present. Some vertical wells have produced. Quite a number of indications, either through old logs, or core, or even on seismic, that the zone is there, but it hasn’t really taken off from a vertical perspective. The nice thing about that play is that the zone has produced in Manitoba and the Manitoba horizontal play probably has 190 wells into it. There’s a high degree of confidence that the oil is there, and a better degree of confidence that there’s a methodology to get it out of the ground. We don’t have to invent that wheel. We’re just taking it and moving further afield, taking that application and moving it south of the border. Geology doesn’t understand geopolitical borders. We feel there’s a strong case for that to be present and we’re working on that right now. PN: How long does it take your company to get back the expenses associated with drilling a well in southeast Saskatchewan? TY: Typically a lot of the wells we work on, if they fall into the average range, they have about a 12or 14-month payout. You get your money back; you’ve paid for your royalties; your operating costs, etc., in roughly a year. It is attractive from an economic perspective and very attractive from that small company perspective, because you’re getting a payout quickly and getting that certainty that ‘I can live to fight another day.’ PN: How would your life change if the price of oil went from, say, the mid-$80 range as it is today to around $150 a barrel? TY: Again, we’re an oil-weighted company and we have very big leverage to higher oil prices, so it would financially be very attractive to the company, but what it would also do is really ramp up the competition. There would be a bit of high-fiving going on, but at the same time, you would really have to scramble to ensure you had enough raw materials, i.e. plays or land, or assets, to capitalize on that, because the competition would be fierce. PN: What do you see happening to the price of oil in the next year or two?

TY: I see it continuing to move upwards. The demand in the U.S. gets too much attention — I know it’s an important source — but developing countries don’t seem to be slowing down in their thirst for oil. If the U.S. economy does recover in the next year or two, that’s only going to augment it. And I think the supply is really not there. Even if the demand grows by a few per cent a year, there’s not a lot of spare capacity left in the world, and what’s left is heavy and more difficult or more expensive or more remote. We’re not running out of oil. But I think we’ve run out of the $15 oil and the $30 oil and the $50 oil. Costs are going up, and they almost have to in order to bring on more supply. The oilsands guys — they’re excited about the oilsands potential — but they need $60 or $70 oil to make those projects go. PN: How early in your life did you realize that you and the oil industry were made for each other? TY: I was a co-op student at SaskOil. I was attending the University of Regina in engineering and they had a co-op program where you go to school for four months and work for four months. I got a posting at SaskOil in the reservoir engineering department and after two-thirds of my first day, I phoned my girlfriend at the time — she’s now my wife — and said, ‘God, I love this.’ It’s been that way ever since. It’s unusual, because a lot of people spend a lot of their working careers trying to find out what they love. It just hit me right then and there. PN: Away from work, and apart from travelling, what are your special interests? TY: Right now it’s been kids. We have a real young family. Oldest boy is 23 months old and youngest is four, so any free time — and I try to make as much as I can — is spent with them. I’m kind of a car nut. I’ve gone to a few different driving schools in North America, get out on the track and try different cars out. Still enjoy skiing when I can get out there. But definitely, it’s kids, kids, kids right now. PN: Where did you go when you travelled extensively a couple of years ago? TY: Went back and forth to the UK a couple of times. Egypt. South Africa a couple of times. Out to the Seychelles, a tiny string of islands in the Indian Ocean. Arizona, Hawaii, California a number of times. Overall, we really enjoyed South Africa. Thought that was just a tremendous place. PN: Athletes have other athletes as idols. Do you have people in the oil industry you look up to? TY: Somewhat. It’s different in Calgary because it is a relatively young oil patch, but you probably see more of that in the U.S. — the Boone Pickens of the

world, larger than life and they’re splashed all over the place. A lot of the guys who have been doing it for longer than me aren’t that much older than me. They’re in their 50s or early 60s. There’s not a huge generational gap. PN: If you’d never got involved in the oil business, what might you be involved in today? TY: I was leaning towards environmental engineering. I thought it was up and coming as a growth industry. Probably be involved in the environmental side. I know it sounds odd for an oil-and-gas guy, but we have extremely stringent regulations, and it’s not (as it was) 90 years ago. This industry is very well regulated and the people who are participants in it take care of things properly. If you’re running a business correctly, you’re making money, but you’re also not doing it at the expense of safety, health or the environment. PN: That leads me to my last question: Is the concept of an electric car something that worries you guys in the oil patch? TY: Not at all. It’s going to be a long transition period before we get off of oil and gas. That could be 20 years. The prices, unfortunately, have to be a lot higher for a lot of this technology to be universal. Unfortunately, there will be pain involved with that. People getting hit in the pocketbook is usually the catalyst to seeing new technologies emerge. There has to be an economic reason to move, and right now there isn’t. Oil is extremely transportable. A small amount of gasoline can move two tons a mile. It’s an incredibly efficient and power-packed source of fuel and it’s involved in so many other things. Not just transportation; it’s plastics, it’s in the medical field and it permeates all over the world and it’s going to gravitate to the highest value. If you can eliminate diesel, great, but it’s going to be used up in other areas. The other challenge with electric cars is that if you converted even a small portion of the vehicles in North America to electricity, you’ll bring the electric grid down. It’s already maxed out. We need way more generating capacity, way more transmission capacity, and we’re talking trillions of dollars in investment. So it’s not going to happen anytime soon. It will happen, but it’s going to take a couple of decades, and someone’s got to be making money to do it. Subsidies only go so far. The American consumer says ‘I want green technology and I want this and want that’ and it’s like, ‘OK, well then, gasoline is now $9 a gallon, or $7 a gallon.’ They’ll be like ‘What?’ I don’t need it that badly.’ There’s gotta be a break point before all this happens.

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PIPELINE NEWS January 2011

Lloydminster a hot spot for BDC loans By Geoff Lee Saskatoon – The BDC office in Saskatoon has put small- and medium-size oil and gas service companies in the Lloydminster area near the top of its customer list for financial and consulting services. BDC is the Business Development Bank of Canada that works to develop Canadian business through financing, venture capital and consulting services with a focus on the manufacturing, technology and export sectors of the economy. Services available to oilfield businesses include turnkey financing for commercial real estate, equipment and machinery, working capital for growth projects, start-up financing, and market expansion. “The service sector is where we see most of our work today in the oilfield,” said branch vice-president Lyndon Holm. “About 10 per cent of what we do is start-up, but the balance at the development bank is helping existing companies grow and get to the next level.

“As a company, we are getting into reserve lending (for primary producers who own the wells) alongside other financial partners in the industry. “A lot of the work that we do in the oilfield sector – whether it’s service or primary is about realty – clients build a new head office or they build a new shop. “We do a lot of the work out in the market. especially in Lloydminster. “It’s always been a strong market for us. It’s been a growth market.” Holm says strong demand for commercial real estate financing for new buildings or expansions in Lloydminster is due to BDC’s ability to offer more flexible terms and conditions than the rest of the banking industry. “Guys that are running high growth companies – we are a good fit for those companies because we offer those flexible terms that they can’t get elsewhere,” said Holm. “Examples of that will be the amount of financing we will do on a property. If a typical bank did up to 75 per cent financing, we’ll do up to 100 per cent. “It allows the company to preserve their working capital. In other words, they put a smaller down payment into their building than they would otherwise have to. “That allows them to keep their money to grow their business,” Holm said. BDC’s innovative term financing features fixed or floating rates and repayment schedules up to 30 years for commercial real estate financing. Project-based financing and a comprehensive approach to risk assessment allows BDC to help businesses whose financial needs exceed the parameters of existing financing. For example, BDC can fund up to 100 per cent on realty purchases for strong existing businesses. Holm says BDC also offers loans to companies to purchase new or used equipment but at a more conventional level of financing of 50 to 75 per cent. “We are not as aggressive as some of the leasing companies and manufacturing companies that may finance their own product, but we do offer financing in that sector,” he said. BDC serves the financial needs of target companies in Saskatchewan from offices in Regina, Saskatoon and Prince Albert. Holm also says interest in investment loans from the oil and gas sector has stabilized in recent months, but he notes areas of the province that are located in a natural gas market are still struggling. ɸ Page A11

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PIPELINE NEWS January 2011

Access to capital has improved a little ɺ Page A10 “If you are in a conventional oilfield, the price of oil has come back, but we are still not back to 2007 and 2008 levels,” he said. “Access to capital is still tighter than it was, and people are still looking for capital in the appropriate amount. “Access to capital has improved a little, but still there is gap in terms of what people want and get to grow their business.” Holm says some people may perceive that it’s easier to get a loan from BDC since it is owned by the federal government, but he stresses the BDC is a “for profit” organization. “We look at viability in business no different than anybody else. We

take on a little more risk in terms of a project for a good company,” he said. The BDC will provide subordinate financing for acquisitions, shareholder buyouts, and working capital and provide financing options for foreign or domestic market expansion activi-

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The Saskatoon BDC ofÀce provides a lot of oilÀeld lending and consulting services to oil and gas companies in the Lloydminster area, particularly commercial real estate loans. Photo submitted

ties.

On the consulting “Certainly export side, BDC works with a is one of our key areas,” variety of businesses to said Holm. “With the help them obtain their high dollar, export busi- Certificate of Recogniness has been hurt in the tion (COR) and ISO last year or two, but we certification. do support a lot of man“A lot of guys in the ufacturers. A lot of their oil patch definitely have product may go all over to be COR certified to the world.” get contracts with oil

companies or to bid on certain jobs,” said Holm. “We do a lot of that kind of consulting in the oilfield sector. “We also do other consulting like HR consulting which is a big topic for Saskatchewan companies and Lloydminster companies in

particular. “The labour pool is so tight. We help companies with their retention strategies to keep key people and to make sure they have the resources they need to grow. “We are sort of a one stop shop for financing and consulting services.”

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PIPELINE NEWS January 2011

On the road to recovery Morley Muldoon is more relaxed these days having partnered with Natuzzi Capital Corporation to put the company on a solid Ànancial footing. The partnership recently acquired Pro-Line Trucking Inc. to grow its rig moving operations.

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Story and photos by Geoff Lee Wainwright – Morley Muldoon Transport Ltd. in Wainwright has hired Aaron Toth as chief operating officer to help the oilfield transportation company avoid financial bumps in the road heading into a smoother year than the previous few have been. In fact, Toth and two partners formed Natuzzi Capital Corporation in June and acquired an ownership stake in Muldoon Transport to help grow the company. Since Toth came onboard, Muldoon Transport acquired ProLine Trucking Inc. from

Acheson, Alberta in November, and more deals are possible in 2011. “It looks like there is no end in sight for awhile,” said Muldoon who sees blue sky ahead. “It looks like it’s going to stay steady. “There’s enough work in and around the Wainwright, Kindersley and Conklin areas that we don’t need to go anywhere else.” Muldoon Transport can deploy anything from 400-inch bed trucks and tandem, tri-drive, and planetarydrive winch tractors to 40-tonne pickers, and multi-wheel trailer combinations equipment to

move one or more rigs simultaneously. The company can also provide expert logistical co-ordination when necessary. In addition, it operates specialized pilot vehicles and a monitored storage facility. The Pro-Line deal adds five winch tractors, a bed truck, a picker and about a dozen trailers to Muldoon’s fleet of rig moving equipment. The purchase raises the total number of units available from locations in Kindersley and Wainwright from 14 to 21. Prior to the beginning of the recession in late 2008 and ’09, Muldoon Transport ran 34 units, but that all changed with bad economic tidings from a variety of sources at the start of 2009. “This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then – via a variety of channels – on the rest of the global economy.” Those were the words of a Forbes.com financial writer posted online Jan 15, 2009, and the reality of that forecast hit Muldoon Transport and the entire energy industry like a freight train to ruin. “We threw the dice,” said Muldoon of his decision to purchase additional equipment in 2008 without knowing what lay ahead. ɸ Page A13

PIPELINE NEWS January 2011

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Tough measures restore company to health ɺ Page A12 “We were this close to having everything paid for had we tapered off in the spring of ’08. “We were assured it was going to be another busy winter. Nobody saw that coming. We just had a little more debt than we should have. “Before we did any purchases, we looked to make sure we were going to be looked after but then the industry tanked, and there was nothing you could do about it. Once that happened, the slide was on and your equity was dropping out.” Muldoon had to sell off some of his trucks at 40 cents on the dollar in 2009, but unlike a lot of oilfield transport companies, he survived on a shoestring budget. “In 2009, we laid off a ton of people,” he said. “We just ran a skeleton crew. We’ve been hiring back since July and August of this year. “There is not too much you can do when your industry tanks on you. You just have to ride it out. We were fortunate – not to go belly up as other companies did. We made it through.” Muldoon says they got through to last summer when things picked up by having “just a brutal operating budget” as he put it. “We had nothing to spend. We cut everything back just to make it through.” Asked what business lessons he learned from his own ordeal, Muldoon smiled and related the story behind the decision to hire Toth, hoping history doesn’t repeat itself financially speaking. “He’s a good manager,” he said. “When I got hold of Aaron in the spring of 2010, he was working for Winacott Equipment Group at their Western Star truck division in Saskatoon. “My picker driver wanted a Western Star picker truck. He liked the Western Star cab better than the Kenworth. So I phoned Aaron and said we are still

Swamper Brandon Alpine works on trying to get the brakes on this booster to disengage.

struggling. “Aaron came over and we talked about trucks, and he was establishing our numbers and seeing where we were at, and he said ‘you know Morley, it’s not that bad, I’ve seen worse.’ He says ‘let me do some checking.’” Muldoon goes on to say that Toth formed Natuzzi Capital Corporation because he thought they could gain some breathing room for Muldoon Transport by refinancing equipment. “By doing so, Aaron was interested in what we got going, so now he’s our COO and he’s managing our financial operations.

“I am back with the day-to-day operations coordinating rig moves etc,” said Muldoon with another smile. Another lesson Muldoon learned from the recession is to have more cash reserves, and not expand as quickly without being properly capitalized. “There is nothing wrong with borrowing as long as your terms and interest rates are correct,” he added. “We are doing good and we are looking to go hard. If there are acquisitions out there that are feasible to do, that’s what we’ll do. It’s busy all over – Kindersley – everywhere.”

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A14

PIPELINE NEWS January 2011

Credit union merger Lloydminster – Provincial oil and gas companies in search of homegrown financing could find a well endowed cash cow with the proposed merger of Conexus, Innovation, and Synergy credit unions, all of which are based in Saskatchewan. If the merger is approved by a collective vote by members from Jan. 18-26, the new financial entity will have the makings of a provincial credit union with more than $7 billion in assets.

“We are referring to it as a provincial credit union,” said Les Messmer, CEO of Lloydminster-based Synergy Credit Union. “The reason is we will have ‘reach’ in most of the key markets in Saskatchewan through 74 communities and 84 branch locations.” The merger plan also includes 11 insurance offices, six real estate offices and six mortgage brokerage offices to serve Saskatchewan businesses and individuals.

Messmer says his short answer is yes to the question of expanding the size and scope of financial services available to the oil and gas sector with the merger. “We could consider offering new services to various sectors because of the scale of the company that will be considerably larger than any one of us is today,” he said in mid-December. “What exactly those might be or what they might look like, I can’t

AdverƟsement

comment on at this time, but that is certainly one of the reasons the boards of the three credit unions are looking at this – to look at new products and services that we could offer to new sectors.” Messmer says one of the key benefits of a merger is to better service companies in the oil and gas sector that have multiple work locations or operations that move around the province. ɸ Page A15

PIPELINE NEWS January 2011

A15

could Âżnance oil boom

Synergy Credit Union in Lloydminster says its proposed merger with Conexus and Innovation credit unions would create a new provincial credit union that would better serve larger oil and gas companies as well as other companies in Saskatchewan.

Éş Page A14 “They are not all going to have multiple locations around the province, but if they do, it will be much easier for them to conduct business,â€? said Mess-

mer. “What comes with a company that is larger, for us, is that we are able to deal with larger businesses. “Whether it be for term loans or purchasing equipment or assets

of any kind or lines of credit we can deal with businesses that are larger.� All three of the credit unions held information meetings on the proposed merger in November and December in a bid to sell the merits of creating what would be the largest credit union in Saskatchewan and the fourth largest in Canada. The merger must be approved by 75 per cent of the total vote, and Messmer says a yes vote will mean every employee from all three merging companies will have a job. “Saskatchewan is

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growing and we are growing as businesses. If anything we will probably need more people, not fewer,â€? he said. “This is about growth. This is not about scaling back or laying people o.â€? Messmer says if the merger takes place, the new business entity would go into eect on Jan. 1, 2012 along with a name change and signage to be picked by the new board of directors. In the meantime he says “it will be business as usual for people

who deal with anyone of the three of us,� with a seamless transition already in progress. “Behind the scenes, we will do a lot of work to make sure it’s seamless,� he said. “We have already done a lot of background technology and processes for people – it’s already streamlined. “If someone goes to any of our branches today, we can actually handle their basic business transactions and we’ll just build on that during 2011.�

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PIPELINE NEWS January 2011

Baytex ending income trust with few hiccups Calgary – Canadian income trusts will go the way of the dodo bird effective Jan. 1, 2011 when trusts will be taxed as regular incorporations. The federal government decided to axe the income trust model which enabled companies to avoid paying corporate tax at the expense of individuals and families. Baytex Energy Trust

is an example of companies converting to a corporation in keeping with the federal government’s Tax Fairness Plan for Canadians announced Oct. 31, 2006, and they are doing so with few hiccups. Asked if their business strategy would change with the conversion, Baytex president and chief executive officer Anthony Marino

says no in a corporate question and answer document. “Management and the board of directors have determined that the best strategy to create unit holder value is to continue their strategy of exploiting and developing Baytex’s inventory of repeatable, low risk exploitation projects,” said Marino. “In addition, although we primarily rely on organic development projects, we will also pursue accretive acquisitions in core areas with production and reserve upside.” The Calgary-based oil and gas company will be renamed Baytex Energy Corp. with an increased capital budget for 2011 of $325 million for exploration and development compared to $235 as a trust in 2010.

The capital spending increase is designed to bump up average production to 47,000 to 48,000 barrels of oil equivalent per day from the 44,250 to 44,500 boepd projected for 2010. The 2011 production mix is forecast with a weighting of 66 per cent heavy oil, 17 per cent light oil and natural gas liquids and 17 per cent natural gas. The investment hike is in keeping with a corporate strategy to become a “growth and income” model with a production growth rate of approximately eight per cent in 2011. Baytex describes a growth and income company as one that offers investors a total return made up of both growth in reserves and production as well an

income stream from the cash flow generated by the business. The company says it expects “a compelling return to its investor through this combination of growth and income.” In fact, Baytex has approved a $0.20 per share dividend as a corporation which is an 11 per cent increase from the current monthly distribution of $0.18 per trust unit. The company attributes its ability to increase its distribution to shareholders to its underlying business strength and the strong price of oil. The final December distribution as a trust will be paid to unit holders on Jan. 17, bringing the total cash distributions paid by Baytex to approximately $1.25

billion since the trust began September 2003. The company also believes its conversion from a trust to a dividend paying corporation should not be a taxable event for Canadian and U.S. investments accounts. Income trusts were able to distribute their dividends tax free and were getting taxed only on the money remaining after the dividend distribution. Baytex has also increased the amount of their revolving credit facilities to $625 million from $550 million with available credit lines of approximately $250 million to finance their business plan. The operating plan calls for 60 per cent of the 2011 capital program to be directed to Baytex’s heavy oil operations. The largest ongoing project is the horizontal well cold production project at Seal in the Peace River oilsands. Baytex plans to complete its first 10well commercial thermal module at Seal with start-up by the end of 2011. ɸ Page A17

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PIPELINE NEWS January 2011

SPE awards

There been a shufÁe in the executive ranks of the Lloydminster Society of Petroleum Engineers (SPE). November technical lunch host and community outreach coordinator, Dale Luedtke, second from left, and Christin Taylor right (Bristin OilÀeld Services) presented outgoing members, Ryan Roen, public relations coordinator (Husky Energy) and Al Pankiw, scholarships and bursaries coordinator (Tierra Alta Production Systems) with portable cooler gifts for their service. Luedtke is also stepping down from the board. New members named to the executive recently are Glen Martinka, technical luncheon coordinator (R &M Energy Systems), Trent Rowley, scholarships and bursaries (WellTec), Dustin Fallsheer, community outreach (BAR Engineering Co. Ltd.) and Rick Stephens, community outreach coordinator (Grit Industries Inc.) Photo by Geoff Lee

Going smooth ɺ Page A16 The company will advance its cold production drilling program in the Lloydminster area. For the first time, horizontal wells will make up the majority of wells drilled in this area. Also planned are two new steam assisted gravity drainage well pairs at Kerrobert as part of the heavy oil program. The balance of Baytex’s capital program will target light oil development in the Bakken/Three Forks formation in North Dakota and the Viking play in southeast Alberta. Other light oil developments are planned in the Viking in southwest Saskatchewan, and the Cardium formation in central Alberta.

Future Now Energy delivers rebates North Battleford – Future Now Energy, a provincial retail natural gas supplier, got to play Santa Claus in 2010 with the delivery of rebate cheques to its business and industrial customers – in time for Christmas. The North Battleford office also issued rebate cheques to customers across the province in 2008 and 2009 in keeping with their goal of having the lowest natural gas supply rates. “We will continue to give rebates to qualified customers and do our best to have the most competitive pricing in North America,” said Tim Cimmer, president and CEO. The cheques are well-timed, says Cimmer given, 70 per cent of most customers’ annual natural gas bill comes during the winter months. Future Now supplies natural gas to SaskEnergy which is responsible for the distribution, service and billing to all customers in Saskatchewan. Cimmer congratulates SaskEnergy on their great service and competitive distribution costs in a news release, noting the distribution costs of the Crown corporation are among the lowest in North America. Future Now Energy is a full-service energy supplier serving customers throughout North America with a head office in Calgary.

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A17

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PIPELINE NEWS January 2011

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A19

Restored wooden pumpjack to be functional

Don Kinghorn chair of the Wainwright Pumpjack Restoration Committee stands on a pile of new parts at a yard in British Columbia. The parts were made from Douglas Fir by restorer Bernard Werner from Kimberly, B.C.

By Geoff Lee Wainwright – Wainwright has two armies that are both worth saluting. The official one is Camp Wainwright for military personnel, and the other is an ad hoc army of volunteers who march to the call of the Wainwright

Pumpjack Restoration Committee. The key strategists are Clare Clemmer, Randy Tizzard, Phil Valleau and Morley Muldoon under the leadership of project chairman Don Kinghorn. Their mission – to restore the historical, but weather-beaten wooden pumpjack at Petroleum Park along Highway 14 to its original working state.

Volunteer work crews gathered at Petroleum Park in Wainwright to assemble the new parts for a restored wooden pumpjack. Photos submitted.

Pictured in this September photo is a volunteer crew laying out the key parts of the restored wooden pumpjack at Petroleum Park fronting Highway 14 in Wainwright. More than $87,000 has been raised toward the target goal of $100,000.

The restoration is nearly complete. The original pumpjack was built onsite by British Petroleum in 1925, approximately four miles north of Wainwright on land adjacent to a farm owned by Kinghorn’s father, Austin. A similar pumpjack, located three miles north of town across the road from that Kinghorn farm has also been restored and erected at Heritage Park in Calgary. Husky Oil donated the 1925 pumpjack to Wainwright in 1966, and it gradually fell into disrepair until the pumpjack committee was formed in 2007 with a fundraising goal of $100,000. The work so far has involved manufacturing new wooden parts cut from Douglas fir, a job that fell to restorer Bernard Werner in Kimberley, British Columbia. Werner also restored the other wooden pumpjack on display in Calgary. The metal pieces of the Wainwright exhibit were kept locally and powder coated to look new again. Kinghorn’s army mustered at Petroleum Park this past September to assembly the finished pieces under the engineering direction of Werner. The committee has raised more than $87,000 to date, and fundraising will continue until the final pieces of the pumpjack puzzle are put in place this spring. The finishing touches includes installing a drive belt and rope around the wheel and hooking up an electric motor so the pumpjack arms move up and down. There are also plans by the town to erect a roof covering to protect the display from the elements. Kinghorn notes dozens of volunteers from area oil and gas companies contributed countless hours and equipment for the project. All donations will be recognized on a site plaque. Kinghorn is the owner of Don’s Speed Parts that has raised over $9,000 from proceeds from three annual pumpjack snowmobile rides in Wainwright. The fourth fundraising ride will be held in February.

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PIPELINE NEWS January 2011

ATB Securities invests in relationships By Geoff Lee Lloydminster – Business and personal investment services go hand in hand at ATB Securities Inc. in Lloydminster where relationship building has generated approximately $135 million in accounts. “If we are talking about oil and gas business owners, that represents about 40 per cent of the accounts,” said Trevor Ollen, a financial adviser. “I would say about $80 million of the business is oil and gas related.” Ollen divides his time between Lloydminster and Vermilion, and business continues to grow along with the pace of the oil and gas and agricultural sectors. “There are two main drivers that are growing our business,” said Ollen. “We are a little bit market dependent, but we are also dependent on the quality of advice that we provide and the growth of our service area. “As Lloydminster grows, we are absolutely going to grow with it.” ATB Securities is a wholly-owned subsidiary of ATB financial, the largest Alberta-based financial institution and a Crown corporation with large lending accounts to the oil and gas industry. Ollen works out of the local ATB Financial branch with partner Mark Dupperon and an assistant. “Our business is more about dealing with customers who have oil and gas businesses,” said Ollen. “The bulk of what we do is dealing with those customers, whether they are just starting out or selling their business and looking for how best to tax efficiently or dealing with their retirement. ɸ Page A21

Trevor Ollen, a Ànancial adviser and partner at ATB Securities, says the Lloydminster branch manages an account base valued at approximately $135 million, mostly from oil and gas business accounts. Ollen grew up in Hillmond and attended high school in Lloydminster and graduated from the University of Alberta.

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Customer appreciation a main focus of ATB Securities

ɺ Page A20 called Common Sense for the Lloydminster Source newspaper to “get people think“It’s dealing with the dreams and struggles of all those things with oil and ing” as he put it. gas clients and other clients too.” “I wish that financial literacy were taught in high school,” he said. ATB Securities provides business succession planning, “I have so many clients say ‘if I knew then what I know estate planning, retirement and investment advice and tax now what a difference it would make.’ My answer to that is The biggest value we add is let’s get your kids in here, and teach them that as early as planning among its menu of personal and business financial services – with long term relationships in mind. possible – that’s what the intent is of the column.” allowing them to focus on In fact, the night before the Pipeline News interview, Some of the topics Common Sense has dealt with are their business and enjoying whether to invest in a retirement savings plan or a tax free the branch hosted a customer appreciation social, one of several scheduled during the year. saving account, how to look at retirement planning, and what they’ve created with “We let clients know that we understand how to take specific information on taxes. their families, and letting us care of them,” said Ollen. One of his latest columns advises business owners to take care of the rest. “We really get to know a client, and we also kind of make use of the small business tax and invest inside their - Trevor Ollen, Financial Advisor own business due to changes in tax rates and laws. demand that they take some action too – that they take ownership of the process. Ollen also dispenses financial advice on a volunteer ba“The biggest value we add is allowing them to focus on sis as president of the Lloydminster SPCA – taking him their business and enjoying what they’ve created with their back to his roots growing up on acreage in Hillmond, Sasfamilies, and letting us take care of the rest.” katchewan, where he always had a cat or a dog. ATB Securities works as a partner with business owners, and involves their “Some friends were involved on the board, and they needed a treasurer, so clients’ lawyers and accountants in the investment game plan. being a financial guy they asked me,” he explained. The securities professionals can also draw on solutions experts in taxation, “I was treasurer for a couple of years and it just kind of progressed. I have for example, from ATB’s corporate centres in Edmonton and Calgary. been president for four years. Owners of oil and gas businesses can also set up a lending account or a credit “There is a lot of stuff going with a new building. We have decided to abanfacility at ATB Financial that has assets of $26.5 billion with 165 branches and don our current site. We are working closely with the city to locate a site and 131 agencies in 242 communities in the province. develop a purpose-built building for the shelter. “That’s a big benefit for us,” said Ollen. “Our oil and gas clients can go to “There is no signed contract yet that says this much is going to be paid by the them if they want to set up some sort of lending facility or credit facility. Our City, and this much will be paid by our donations.” partners at ATB Financial can look after that credit facility for them. “We can be a complete one-stop shop. We can even take that company public.” Ollen says what makes ATB Securities stand out from competitors is the value of service they provide and a fee structure without any upfront sales fees. “We have dealt with so many oil and gas companies,” he said. “We understand how oil and gas operators work and we understand the drivers of their business. “The incentive for someone who gets paid the way we are, is to manage that relationship as long as possible. The longer and happier you are with us, the more we are going to make,” said Ollen. “The big thing we do for business owners is try to get them focused. Often oil and gas clients focus on one business initially, and they do a very good job of running their business, and that’s what made them wealthy. “Then there will be different opportunities that pop up, and they start other businesses. Often what that does is distract them from that initial business, so the initial business can suffer sometimes. “Our main philosophy for clients is to get those businesses managed by someone else or maybe sell them so they can focus on that main business. “Let’s invest as much money as we possibly can into that business, and let us look after the rest.” Providing financial advice comes easy for Ollen who writes a regular column

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PIPELINE NEWS January 2011

A23

Community Futures open to oilÂżeld Âżnancing Lloydminster – Community Futures Lloydminster and Region has been helping to ďŹ nance oilďŹ eld businesses for the past 23 years in its role as a business development lender – with a sector focus on oilďŹ eld trucking. “We have a portfolio that allows us to lend up to $150,000 per client,â€? said manager Scott Kovatch. “We have traditionally been approached by the trucking industries associated with the oil patch. “We have deďŹ nitely written a signiďŹ cant amount of loans in that particular sector of the oil patch. “We are hoping we can change that in the future, and be involved in other sub sectors.â€? ɸ Page A24

Manager Scott Kovatch says the Community Futures Lloydminster and Region ofÀce has provided Ànancial services to the oilpatch for the past 23 years.

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PIPELINE NEWS January 2011

Many potential clients interested in self-employment Éş Page A23

Community Futures also oers clients access to a resource bank of information about small business services and related partnership organizations. “We are a pathďŹ nder and have relationships with those resources,â€? said Kovatch. “We can help people get in touch with the proper individuals. “We have our ďŹ nancial limitations, and we have partners that we deal with that can allow us to ďŹ nd support for business outside of the services we oer. “We are very good partners with the Business Development Bank of Canada and Alberta’s Agriculture Financial Services Corporation. “We work with them on a regular basis along with the other conventional banks.â€? Community Futures also works with organizations in Saskatchewan and Alberta that support entrepreneurs in the oilpatch who have an Aboriginal heritage. The Clarence Campeau Development Fund is an equity position organization in Saskatoon that works with Saskatchewan MĂŠtis. “They have a portfolio of about $20 million in an equity position in companies that they are involved with to the tune of approx $10 million,â€? said Kovatch. “Individuals who work in the oil patch who are non-status or MĂŠtis have a source of ďŹ nancing as well.â€?

OilďŹ eld loans are available for starting or expanding a business, implementing a new technology, upgrading facilities and equipment, developing marketing materials and for building working capital for anticipated sales growth. Kovatch says trucking has traditionally been a popular lending niche for Community Futures since many clients are interested in self-employment and want to be in charge of their own destiny. “Trucking in the oilpatch is probably the most common way to be selfemployed in the oilpatch,â€? added Kovatch. “Therefore, those individuals that were seeking to be self-employed and start up their own businesses found us as a source to do that type of developmental lending for them. At that point in time, it was just a good ďŹ t.â€? Community Futures has a speciďŹ c Self-Employment Program that provides business training and ďŹ nancial assistance, but any entrepreneur can seek help with their business plan and apply for funding. “There will always be a limit to us as a developmental lender,â€? cautioned Kovatch. “We don’t operate under the same conditions and criteria as other banks. “When you are looking at small to medium size businesses, anywhere from $5,000 to $150,000 is quite adequate for a signiďŹ cant number of businesses, whether it’s in the oil patch or in industries that support the oilpatch. “For trucking, for example, if you don’t already own your own truck, then you know there is speciďŹ c cost there for at least one or two trucks, and that can add up relatively quickly. “There are other businesses in the oilďŹ eld services that don’t necessarily have to have that large of a ďŹ nancial load to become active in the oilpatch.â€? As a development lender, Community Futures is able to partner with another lender. The Royal Bank or CIBC, for example, could be willing to lend an applicant $200,000 of their $300,000 goal with an additional $100,000 from Community Futures. “It really depends on the net worth of the individual, and the size of the business plan, and what type of equity they have to bring to the table,â€? said Kovatch who suggests even larger loans are possible. “We have been involved in situations where we join eorts with another Community Futures’ oďŹƒces. “Say, for example, an individual was operating a business that was in the Lloydminster region and in the Bonnyville region where we have an oďŹƒce. “If the two of us were to put our resources together, we could have a situation where we could provide ďŹ nancing up to $300,000. Asked if he knew how aware the oilpatch is about Community Futures lending services, Kovatch says no surveys have been done that would tell him that. “As a community economic development advocate and a business lender, we are aware of the oilpatch being one of the most signiďŹ cant parts of the economy, so therefore, we pay particular attention to it,â€? he said. “As such, we like to support it in any way we can.â€? When it comes to deďŹ ning what kind of ďŹ nancAcid and oil resistant neoprene upper ing Community Futures won’t approve, Kovatch says • Acid and oil resistant stitching, laces and hardware that would really depend on a review of the business • High visibility reflective strips plan on a case by case basis. • Acid and oil resistant rubber outsole for slip “What I don’t want to say is speciďŹ cally what we resistance in extreme cold temperatures • Ice Bear out sole design for additional can or cannot do, so that the oilpatch believes that is traction in ice and snow what we are limited to doing,â€? he said. • Light weight PU base is cold crack tested to 50,000 flexes at -50C “We need to say that each particular client needs • Light weight Gel-flex mid-sole provides to be assessed on their speciďŹ c needs, and their abilcushioning to reduce fatigue and ity with regards to the business plan that they bring improve comfort • Improved fit allows for maximum to us. comfort and support “I am careful not to say what we can and can’t do • Metal free safety toe and plate as far as what we take for collateral; what we take for with Electric shock resistant sole • Baffin -100°C 8 layered inner boot security; and the types of relationships we have with • Microcellular waffle foot-bed our clients.â€? traps air and moisture

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A25

Acklands-Grainger to expand in Saskatoon Saskatoon – Customers of Acklands-Grainger Inc. in Saskatoon will have about a year to flip through the new 2,880 page product catalogue before the doors open to a new mammoth distribution complex. Acklands-Grainger Inc., one of Canada’s largest distributors of industrial, safety and fastener products, plans to begin construction of a 117,000 square-foot facility in Saskatoon in early 2011 with an early 2012 completion date. The new facility, originally announced last August, will be located in the Marquis Industrial Park, and will replace Acklands-Grainger’s existing 60,000 sq. ft. distribution centre on Quebec Avenue. The project will include an adjacent 100,000 sq. ft. warehouse along with a branch showroom and regional support centre to service its expanding product lines and customer base. “This new facility will help us deliver more products next-day to our

Scott Wilson, a sales rep with Walter Surface Technology, helped to staff the AcklandsGrainger booth at the 2010 Lloydminster Heavy Oil Show. Acklands sells some of Walter’s products aimed at the oil and gas market.

Saskatchewan customers,” said Frank Murray, Acklands-Grainger ’s general manager in Saskatchewan. Acklands-Grainger carries more than 89,000 products and nine product categories including hand tools, power tools, metalworking, fasteners, electrical, facility maintenance, material handling, safety, equipment and fleet. The company employs 220 people in 24 branches in Saskatchewan including three locations in Saskatoon. There are also outlets serving booming oil-

field service communities such as Estevan and Kindersley, North Battleford, Unity and Swift Current. “Acklands-Grainger has been in Saskatchewan for more than 100 years and we’re committed to helping local businesses have the supplies they need to keep their facilities safe, efficient and functional and employees safe on the job. Our new space will help us do just that,” said Murray. The distribution centre is expected to house more than 50,000 industrial, safety and fas-

tener products including welding equipment, hand and power tools, electrical, cleaning and safety supplies. The adjacent branch will feature product displays and knowledgeable employees on hand to help customers easily find and order the products they are looking for. “Acklands-Grainger is an important member of the Saskatoon business community and we’re

excited about the investment they are making in our province,” said Tim LeClair, chief executive officer of the Saskatoon Regional Economic Development Agency, in the project news release. “The company provides critical products and solutions that help local businesses and government run their dayto-day operations and respond to unexpected emergencies.

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“This larger distribution centre is critical for supporting Saskatoon’s growing mining, manufacturing and energy sectors. We look forward to working with them as they open their new facility.” A c k l a n d s Grainger’s parent company is W.W. Grainger, Inc., with 2009 sales of $6.2 billion in North America, Asia and Latin America.

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PIPELINE NEWS January 2011

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A27

CLS recruits for the bene¿t of employers Lloydminster – Recruiting foreign workers for agriculture and oil and gas industries in Western Canada and Ontario has a lot more in common with livestock exporting than you would think. In fact, CLS Consulting Ltd., which recruits overseas workers, was started in Lloydminster by entrepreneur Sydney Palmer who was born and raised on a farm near Marsden, Sask. He maintains his attachment to the land by owning a feed mill just south of Lloydminster. “I got into the livestock export business, and sold the first Canadian bull to Australia in 1981, and sold the first boatload of cows to China in 2001,” he said. “When BSE broke out, it slowed things down, so I got into the recruitment business, and took what I learned from the farm and the export business, and put it into immigration. “I was helping people to emigrate to Canada on a voluntary basis, so we decided to get into as a business. “We approached it that we were going to work for the employer and look after his needs.” Originally, Palmer recruited foreign workers for the agriculture industry then turned to recruiting for the oil and gas industry in Western Canada with welders, mechanics and carpenters in strong demand by both sectors. Today, CLS has offices in China, Ukraine and the Philippines, and continues to operate as a subsidiary of Canada Livestock Services engaged in international trade. ɸ Page A28

& Talk about dedication. Sydney Palmer, president of CLS Consulting Ltd., personally interviews every overseas candidate for various provincial immigration nominee programs before they are recommended for hire to oil and gas and agricultural employers in Western Canada.

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PIPELINE NEWS January 2011

Testing applicants overseas ɺ Page A27 In the past five years, CLS has brought more than 2,500 skilled workers to Canada for jobs in Saskatchewan and Alberta mainly through provincial immigrant nominee programs. “We are only bringing in full-time workers, and I prefer to bring in people with immigration in mind,” said Palmer. “Immigration comes with a different set of rules. If a company is really interested in retention, why would want the person to go home after you trained them?” “If employers go through the work permit program, it will cost them $3,100 a person because they are liable for our cost plus the return airfare of the worker. “If they go with an immigration program through us, it will cost them $1,000 per person. A lot of the cost can be passed to the employee, whereas with a work permit those costs can’t be passed on.” CLS has several immigrant workers on its payroll in Lloydminster to handle foreign language communication, data entry and complete the application process for the employer if requested. “We also have an office in Manila now, so we can do quite a bit in Manila that that would normally be done here,” said Palmer. Manila is the capital of the Philippines. Shane Schneider has been brought onboard as a customer service liaison who markets CLS’s employment solutions to employers looking to hire and retain skilled workers. The federal government’s Citizenship, Immigration and Multiculturalism Ministry estimates Canada will welcome between 240,000 and 265,000 new permanent residents in 2011. Sixty-five per cent of these immigrants will enter

Shane Schneider, a customer service liaison for CLS Consulting, works with closely with employers to assess and meet their recruitment needs for permanent immigrant worker hires or workers brought in on temporary work permits.

Canada through economic streams. While hire truck drivers are in high demand, the federal government has only given the OK for to recruit overseas for long haul driving positions. “Anybody running a local trucking company doesn’t qualify,” said Palmer. “That has become a big issue for us.” The strongest demand for immigrant workers for the oilfield is coming from oil and gas companies in Lloydminster, and from Estevan in southeast Saskatchewan. “A lot of the oil companies are struggling to compete with the agricultural manufacturing people,” said Palmer. “So what we are finding is that retention seems to be the No. 1 problem. Once they get a person, can they keep them? “What we are finding as a whole is that the Philippine community has filled that gap with good retention. “The reason we challenged the Philippines is for a good reason. We are one of the few companies that are really trying to source for the needs of the employer. “Most recruiters are working for someone who

phones up and says ‘I want to get to Canada and find me a home.’ We have taken the approach that that doesn’t help retention. “What we find is that people who come from poorer countries come for a better life for their wife, their children and themselves. They are very happy to stay in small town Saskatchewan and small town Alberta. “The employer that helps them get here – they become quite loyal to them. CLS is one of the few recruitment companies in Canada that actually interviews or tests each overseas applicant before being recommended to the employer. “When we interview a welder, we take a welder in and test them ourselves,” said Palmer. “We test everybody ourselves to make sure they fit the needs of the employer we are hiring for. “Part of our job is to teach the employer how to get these people into a community with retention in mind. “If you are going to treat them like cheap labour, you won’t keep them long. When we have potential customers looking for cheap labour, we don’t deal with them. People who have that attitude will always have labour problems.” In 2010, Palmer spent more than 250 days travelling to recruit new workers with several trips to countries such as the Philippines, China, Vietnam, the United States, Dubai and Italy. Palmer will be heading back to Dubai in January to “recruit people that are more oil oriented than maybe what is in the Philippines,” as he put it. “They might still be Philippine workers, but if I can find a Filipino who has worked in Dubai for six or eight years that would love to move to Canada, what better person to bring in?”

PIPELINE NEWS January 2011

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Site¿nder GPS releasing OilTrax on smartphones Saskatoon – SiteFinder GPS is adding its OilTrax map software to the Apple iPhone and other

smartphone brands beginning in January following its recent release on the Blackberry smart-

Glenn Fagnan, a partner at Midwest Communication in Lloydminster, says customer response to OilTrax software has been excellent. He expects sales of OilTrax to grow even quicker now that it is available on the BlackBerry smartphone along with new applications. OilTrax is developed by SiteFinder GPS that plans to release it on iPhones and android OS smartphones in January for the oil and gas market.

phone. The Western Canadian company is a Garmin equipment distributor, and a Garmin third party software developer with sales of more than 20,000 copies of OilTrax to oil and gas companies. OilTrax is an oil and gas speciďŹ c application that allows for routing on LSDs, the legal subdivision grid system, with section and range, and township and meridian locations. The system was originally intended as an in-cab Garmin GPS satellite-based navigation device, and can also be used on most computers. The popularity of wireless hand-held smartphones has opened the doors to new applications and growth for SiteFinder, although the

iPhone is not yet available in Saskatchewan through SaskTel. “The advantage of putting it on smartphones is that almost everybody is already carrying a device on their person,� said SiteFinder owner, Allen Abraham from his Saskatoon distribution centre. “Wherever they go physically, they have that map with them. “Some people still want to have a dedicated device in their vehicle, but they want to carry this in case they are out-

side the vehicle. “One of the nice things about it is that it’s a wireless device, so updates are made wirelessly. We are doing something new every month.â€? For example, data on new leases, well sites, roads, trails and land ownership information is updated regularly along with the integration of new features. The Blackberry is the ďŹ rst smartphone to oer OilTrax with new applications such as road condition reports, and real-time highway safety

cameras. Up and coming applications will be rig moves, road bans, weather maps, weather conditions and a new mileage log that is approved by the Canada Revenue Agency. “We are hoping to have the system on iPhone by the end of January, and then the Android OS system smartphones,â€? said Abraham, who expects the iPhone will be for sale in Saskatchewan in the near future. ɸ Page A30

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Where was that LSD again? ɺ Page A29

is closest on the map. ready an established that OilTrax is now once people find out phones have large size “Basically, the soft- OilTrax dealer can look available on the Black- about it because then screens. It’s almost the “From a business ware is an efficiency and after them from the Berry is getting begin- you are only using one size of a Garmin. It’s perspective, the Black- safety tool. If I were to Garmin perspective or ning to spread. going to be an all-in-one device,” he said. Berry is fairly popular, tell you to go to 14-9- the smartphone per“It will be popular “Some of the smart- tool.” but a lot of people who 16-13-W3, how long spective.” work in the industry car- would it take you to find Asked how sales ry the iPhone as well.” out where that it is?” were going with the first OilTrax for BlackWith OilTrax you BlackBerry applications, Berry smartphones also punch in the numbers Abraham said, “So far, allows users to check co- and off you go by turn- so good,” even though ordinates for land and by-turn directions. It it’s new. oilfield POIs (points of operates like a standard “The dealers and interest) and search ad- GPS, but it’s on a smart- the end users we have dresses and other oil and phone. been working with have gas data. “The feedback has found it to be a very sta“The core of OilTrax been pretty positive,” said ble product,” he added. is LSD identification Abraham.”It’s a money Midwest Commuused as a routing tool maker for the user. If it nications in Lloydminwith turn-by-turn direc- helps them with their ster began selling Oiltions to the location,” efficiency, they can do Trax last August based said Abraham. more in less time. on customer demand, “We have morphed “It’s a specialty tool and store partner Glenn it into a multi-purpose for the oilfield that going Fagnan says the retool because it does a lot to grow and add more sponse from the oilfield more now than just put value as it goes along. has been excellent. · Lightweight & user friendly you onto an LSD.” “It cuts down on “We sell a fair · Quick Installations “A lot of what we’re time getting to a site. amount of the Garmin · 3 wall heights - 25”, 33”, or 45” doing is based on user If you have 20 wells to units but we do sell a lot · All are zero ground disturbance feedback on what our stop at, it will sort them of the software,” he said. · 30 or 40 mil liners, top or bottom mounted customers want to see,” to provide the most ef- “It’s just a matter of let· Geotextile available said Abraham. “The ex- ficient way to cover off ting people know we sell · Sting doors pansion of applications those wells,” Graham it, and it basically sells · Crossover steps is based on customer said. itself. feedback. Sitefinder also has “We’ve done a little · We offer full service installations and/or “I had a fellow the locations in Edmonton, bit of advertising, and technical support for your personnel other day who said ‘ev- Alberta and Burnaby, we’ve had in on our eryday this thing makes British Columbia, with shelves, and word of me money’ because it an extensive dealer net- mouth has brought a lot makes him more ef- work in Western Can- of people in. ficient. When you get ada for sales of Garmin “The satisfaction is FACTORY DISCOUNTS, LOCAL FABRICATION, COMPETITIVE PRICES paid by the well or the hardware and OilTrax 100 per cent. We haven’t job, you get there faster, applications for smart- had any body come back and all you do is follow phones. with any problems. They along.” “We like the end say it’s one of the best in BlackBerry users can user to work with some- the industry,” Fagman Your full service secondary containment specialists navigate to their LSD one who is local for them said. www.prodahlenv.com location using up to six from a support perspecMidwest also sells a maps including OilTrax tive,” said Abraham. variety of smartphones 4201 - 37th Ave. Lloydminster, SK · P.O. Box 1443 Phone 306-825-5933 · Email: prodahl@sasktel.net mapping, satellite imag“Anyone who is al- and Fagman says news ery or street maps. “You can look at things in satellite view, and still use your OilTrax as a routing application,” said Abraham. “It becomes basically a GPS when you lose cellular coverage. You may not have the ability • New and used OCTG for • New and used lined to use your phone, but you will have the ability resale tubing for resale • Pipe cleaning to use the map to navi• Stock API couplings • Third party EMI gate.” • Storage of customer OilTrax will also • Thermoplastic lining of • Straightening OCTG & Line pipe allow a company to import their own procustomer tubing • Re-threading • API Couplings prietary data onto the BlackBerry. The new smartphone applications will allow employees to work safer by being able to track themselves and their coworkers in the field. “You can set it up so you can see your coworkers in real time,” Phone: 403-444-5554 Email: info@polycore.ca said Abraham. “If someWebsite: www.conestogapipe.ca Website: www.polycore.ca one is stuck, everyone can log on and see who

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PIPELINE NEWS Saskatchewan’s Petroleum Monthly

B-Section

January 2011

Grantech software netting sales

The accuracy of cost estimates for facilities such as this liquid tank farm in the Montney region of B.C. results from more than 1,000 algorithms built into the O&G Advisor software based on more than $12 billion of projects completed by Grantech worldwide.

By Geoff Lee Calgary – In a world of tight money, getting an accurate estimate of capital and operating expenses can make or break the bottom line for oil and gas companies and fortunes in publicly-traded stocks. Grantech Engineering International Inc., a privately owned Calgary-based company, has its own Oil and Gas Advisor software that generates quick, onthe-money estimates for clients with oil and gas projects in mind. “Today, it’s much more important that producers get their costs right because their budgets are a lot tighter than before the recession,” said Tim Toews, business development project manager. “That’s why they are looking for very accurate cost estimates.” Grantech specializes in front end engineering design and project management consultancy services including cost estimates for projects based in unconventional gas plays, such as those in northeastern British Columbia. Recently, Grantech used its proprietary O&G Advisor software to cost the engineering and construction management of an 80 mmcf/d gas processing facility and pipeline in the Montney shale gas play in that region of B.C. “We did all of the engineering from the conceptual through to the construction and startup over 14 months,” said Toews. “Our original O&G Advisor estimate at the beginning of the project was within two per cent of the final cost. “That was a really good benchmark that we are quite proud of. The software works well. We are getting it out there. Clients are telling other clients, and we are quite busy right now.”

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Having the ability to accurately estimate capital and operating costs helps to generate full service engineering, procurement and construction management work for Grantech Engineering. This is an amine facility for a sour gas application engineered and built by Grantech in the Montney region of B.C. Photos submitted

Grantech often gets the nod to see a project through its entire life cycle, from planning and conceptual design, to operation and maintenance, based on its accurate O&G Advisor cost estimate. “I would say we use it 90 per cent of the time,” said Toews. “For engineering projects, we use it up front. It helps bring in a lot of business as well.” Grantech has designed a lot of different oil batteries and off-gas projects in the oilsands too, but their engineering specialty is gas processing facilities, compression stations, dehydration systems and major gas plants. “Northeastern B.C. has been a fairly big focus,” said Toews. “We have done a lot in the Grande Prairie and northern Alberta region and in Saskatchewan as well. “The Horn River area of B.C. is exploding right now. We are working with one of the major producers and doing all of the estimating for one of the largest new gas plants to be built in northeast B.C.” Toews says it’s vital for clients to rely on accuracy when they are putting together their economics to determine if the project will go ahead or not. “If the economics are not accurate and the project ends up costing more, that project may be cancelled mid-stream,” he said. The O&G Advisor simulates the capital and operating cost of oil and gas facilities using more than 1,000 mathematical algorithms based on Grantech’s history of more than $12 billion of completed projects worldwide. Grantech is a Canadian- owned company with a resume of completed international oil and gas projects in places such as Russia, Egypt and the Middle East. ɸ Page B2

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PIPELINE NEWS January 2011

Algorithms based on history of $12 billion of completed projects ɺ Page B1 “We have a huge historical database that our president Grant Shomody has gathered over his lengthy career in the oil and gas industry,” said Toews. “Because of that huge database, we have programmers that are continually adding new algorithms to keep it up to date. We are always continuing to add more data points on a daily basis. “Data points are based on the projects that we are currently doing. “The O&S Advisor is best for a Class 4 to Class 5 conceptual estimates. We also do estimates right up to Class 1 – up to the last day of construction onsite. “We gather data points from all phases of engineering, all the design phases, right through procurement and construction and startup.” Grantech is currently using the O&G Advisor software exclusively in-house and employs four full time programmers while a team of engineers verifies the conceptual design and data for clients. The software uses a drag and drop interface to enter specific requirements while the cost estimating tool accesses historical databases and specific algorithms to generate costs. The system can also generate a variety of capital and operating cost reports. The O&G Advisor cost estimates are touted as being less expensive than employing a traditional team of estimators. The software estimates also take into account the locaIn addition to off-gas or tail-gas solutions for the oilsands and oil batteries, Grantech has tion and region of a project along with transportation, venalso designed in-situ and SAGD applications in the Alberta oilsands. Pictured is a typical dor availability, logistics and labour factors. liquids tank farm designed and built by Grantech for gas facilities in northeastern B.C. “For example, in the Montney region versus the Horn River region, you have to take into account the location and how busy industry is, and what the shop (vendor) availability is,” said Toews. “Right now in Alberta, it’s getting tough to get to the shop (vendor) sometimes. You need to ensure you have the right timing and the right logistics. The region plays a huge factor along with transportation costs. “Horn River is more remote. There is a big difference between an estimate for a 100 mmcf/d sour gas facility a day in Montney, versus Horn River because of the remoteness. You start looking at camps and logistics and roads to move equipment. “The software can also take into account the producer’s costs. The producer has to have a management team. It factors that in sometimes.” Toews says O&G Advisor estimates have been proven to be plus or minus three per cent on major equipment purchases and plus or minus 10 per cent on total project costs. “Companies need accurate estimates,” said Toews. “Different departments of the big producers are competing for that budget to get their project to go ahead. “The more accurate they can be with their cost, the more likely their project is to go ahead. “That’s what we seeing recently – you know there are competing factions within a company both coming to us and getting estimates. It’s been good.” Toews says Grantech will be generating a lot more work from the Horn River area, and he expects business to pick up in southeastern Saskatchewan as well. “We have done a few estimates there, and we are hoping to get a lot more out of all three provinces. We haven’t done any work in Manitoba yet,” he said. “There is gas down by the border in the Estevan area, and it’s getting a lot more attention. We are Grantech’s capital cost and operating cost estimates for oil and gas projects such as these gas compressor hoping to get more work down there in the future. “We would like to do the work for every single estimate. The cost estimates help us get the job. units in the Montney area of B.C. typically come within “It’s a great tool. If clients are looking at the economics we have, the tools, the software and the plus or minus 10 per cent of the actual facility cost usexpertise that will give them a good accurate estimate.” ing the O&G Advisor software.

PIPELINE NEWS January 2011

B3

Innovation starts at the top, says Schlumberger speaker By Geoff Lee Lloydminster – Schlumberger invested $802 million in research and development in its global oilfield services operations in 2009. The budget included a few dollars for some sample mixing kits. These enabled audience volunteers at the Lloydminster Society of Petroleum Engineers (SPE) technical lunch on Nov. 17 to help guest speaker, David Bexte answer the title of his topic, Is innovation a good thing? Bexte is the manager of Schlumberger’s Regional Technology Centre for heavy oil in Calgary, where geoscientists and petroleum engineers work together to solve key technical challenges associated with heavy oil recovery. The audience experiment required two volunteers to add and stir a package of coarse sandy material in water, followed by the medium and the finest grades, to create an unexpected slurry. The demo proved Bexte’s point that innovation often involves counter-intuitive thinking that he says many oil companies view as risk. Bexte defines innovation as Thomas Edison did as being 99 per cent perspiration and one per cent inspiration, but he said to his oilfield audience, “The organizations that we belong to focus on 99 per cent perspiration. “We are very busy at trying to improve what we do, and we know there is a large opportunity in heavy oil whether it’s mining or thermal or insitu or CHOPS (cold heavy oil production with sand),” said Bexte. “Our managers and the shareholders of the companies we belong to don’t necessarily have a comfort to rely on inspiration. They want a tangible result that will increase profitability. “Inspiration isn’t necessarily measurable financially.” Bexte says small companies with an entrepreneurial spirit have an innovative edge with organizational structures that allow staff to interact and share knowledge and ideas very quickly. “You need a variety and diversity of players in that group,” said Bexte. “You need a broad spectrum of all the disciplines that have any bearing at all to your endeavors because they look at the world in different ways. “The differences are where you find innovation.” Bexte says the key to the success of Schlumberger’s RTC is that’s “it’s multidisciplinary; it’s

co-located, and it has enough latitude and mandate to pursue projects with little risk of immediate reorganization.” The Calgary RTC opened in December, 2008 as the seventh Schlumberger RTC, and the second to focus on heavy oil. The Calgary RTC has helped Schlumberger to become a leading global oilfield services company supplying technology, information solutions and integrated project management that optimizes reservoir performance for customers working in the oil and gas industry. “The objective is to identify problems and enter into collaborations to solve these problems in the heavy oil industry specifically in Canada, but not constrained to Canada,” said Bexte, who manages an eight-person team. Research projects include, but are not limited to: innovative geological and geophysical services, advanced well placement strategies, new formation evaluation and characterization techniques, and new integrated completions and monitoring programs. ɸ Page B5

David Bexte, manager of Schlumberger’s Regional Technology Centre in Calgary, delivered the Ànal technical lunch presentation of the year to members of the Lloydminster Society of Petroleum Engineers.

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Keeping fresh with ideas

and this is one of the most pleasant assignments that I’ve had so far. “It’s been quite successful. There’s been a number of recent publications in SPE and other organizations that has discussed some of the successes. Beyond that, much of what happens is proprietary until publish and release dates have expired.” Asked if Schlumberger is an innovative company, Bexte replied, “I believe we are an innovative company, but beauty is in the eye of the beholder. “I will leave it to everybody to make their own decision on what they perceive.” Schlumberger introduced a number of new technologies for wireline, downhole reservoir testing and reserves management software applications at the SPE Technical Conference and Exposition in Florence, Italy, in September 2010. These are described in detail in the company’s third quarter results released Oct. 22.

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Wayne King, president and CEO of Grit Industries Inc. volunteered to conduct a “counterintuitive” experiment in innovation. The demo was part of a presentation on innovation that was given by David Bexte, manager of Schlumberger’s Regional Technology Centre at to the Society of Petroleum Engineers’ technical lunch in Lloydminster.

ɺ Page B3 Schlumberger RTCs around the world specialize in addressing key issues in the drilling and production industry such as unconventional gas, gas condensates, carbonates and sub-basalt imaging. Bexte says the motivating factor behind the launch of the Calgary RTC “was the need to capitalize on innovation recognizing that heavy oil has a lot of room for development and a lot of room for growth, and believing that R and D and new ideas ultimately will help us improve. “It filled a gap in the portfolio of research organizations that lets us innovate and develop projects and solutions quickly,” he said. In his presentation, Bexte noted that only one large oil company made it onto a list of the 50 most innovative companies even though 72 per cent of corporate executives say innovation is important. He says top management support for innovation is essential in terms of dedicating time and a budget to supporting new ideas. “The budget is the management commitment,” said Bexte. He says the work culture also needs to be flexible and dynamic, and it helps to have co-located teams and a collaborative environment and facility design as is the case with the Calgary RTC. The heavy oil centre features a 3D visualization centre, a high-performance computing cluster, a multi-use conference centre, and an interactive collaboration space designed to accommodate locally based scientists and engineers, as well as short- and long-term visiting experts and clients. “As part of the apparatus, we liaise with lots of academic organizations around the world,” said Bexte. “We also bring in visiting researchers as required by the mandates of the different projects. We do rotate staff as an assignment on their career paths. It’s a very good developmental role and it keeps the ideas fresh. “I have worked for Schlumberger for 20 years,

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40247758•10/23/09

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PIPELINE NEWS January 2011

R&M Energy gets new building so much better for internal communications and having all departments working as one big team. “We should be settled in by January.â€? Saunders attributes the need for more space to steady regional growth in sales and service of their products for the heavy oil market. “We have a lot of new products for the high temperature market that we are selling and servicing for our heavy oil customers and we need the space,â€? said Saunders. “We are happy that there is opportunity to get into another building. “We would like to support our valued customers who have supported us. That’s how we are able to go ahead with the plans for the new building to accommodate growth in a partnership with our customers,â€? said Saunders. R&M’s agship

product is the Moyno progressing cavity pump that Saunders says has been around for many years and has proven its quality over time. “There is a lot of Monyo equipment that’s in the ďŹ eld,â€? he said. “The producers have run these pumps for many years so they are quite dependable.â€? The Monyo pump is capable of handling a wide range of uids from water and light crude to highly abrasive heavy crude. “The dierent elastomer conďŹ gurations and the technology over the last few years in the make-up and composition of those elastomers have helped to increase the run life of those downhole pumps,â€? said Saunders. “The PC pump shop is where we put our rotors and stators together, and we pressure test them and test the pump-

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Area manager Rob Saunders with R&M Energy Systems Canada says growth in sales and service of Monyo PC pumps has prompted the company to lease a new 14,000 sq.-ft. building in the Hill Industrial Park.

ing eďŹƒciencies here. We assemble them and distribute them from here.â€? The pumps are manufactured at R&M’s Canadian manufacturing headquarters in Edmonton and distributed from locations throughout Western Canada and international markets. R&M Energy is an American owned company based in Willis, Texas. In the Lloydminster area, business is also strong for R&M’s Rodec tubing rotators, rod rotators, rod guides and surface pumping equipment. Rodec tubing rotators and accessory products are designed to effectively distribute wear evenly around the entire internal circumference of the production tubing. “It’s a fairly good product,â€? said Saunders, who pointed to rows of large sized tubing rotators packaged for delivery and installation to customers for heavy oil thermal applications. “We have been very successful with them.

40249211•06/25/10

Lloydminster – Employees at R&M Energy Systems Canada in Lloydminster are expected to get their Christmas wish to move from two locations into one new building in the Hill Industrial Park by the New Year. The relocation will allow the company to combine its cramped PC pump shop and administrative oďŹƒce with its tubing rotator and surface pump shop under one roof. “The two shops will be consolidated into the new building,â€? said area manager Rob Saunders. He who provided a guided tour of the existing shops and the ongoing site construction the week before the move began on Dec. 6. “We are giving the two shops up to our landlord and they are renting them out to new people. “It will create a lot of eďŹƒciencies being under one roof. It will be

They eliminate a lot of downtime and lost production so it’s of great value to the producer. “Growth with R&M products is demonstrated by the volume of activity.â€? R&M has a sta of 14, and is looking to hire a couple more employees for the new building. “Like everyone else, we are trying to ďŹ nd the most qualiďŹ ed people, but with other people looking for similar kind of employees, it’s always a challenge,â€? said Saunders. The new building is located on a three acre site, and will allow for more growth with more than 14,000 sq.-ft. of shop space and 2,500 sq.- ft. of oďŹƒce space designated over two oors. “We have a nice big boardroom, a big ďŹ le and storage room and a good front end showroom. There is a lot of oďŹƒce space and a huge yard for storage,â€? said Saunders. “This is a Christmas present for employees.â€? The surface pumps and tubing rotators will be located on the east side of the new shop with the

west side reserved for the PC pumps, test benches and product inventory. Each shop is equipped with a two-ton mobile crane for easier and safer lifting of products and equipment. “The crane will make life a lot easier and safer to manipulate rotors and stators and surface pumps and tubing rotators and heavy equipment from one part of the shop to the other,� said Saunders. The PC pump test benches will sit on a wheeled cart system that tracks the full distance of the lengthy centre drain. “It will make life a lot easier for the pump technician for pulling rotors and stators. You will be able to let the equipment do the work,� said Saunders. The available space for the tubing rotator and surface pump shop will house the pressure testing dyno and an array of maintenance equipment. “Our mobile service mechanics will go out and do a preventative maintenance program on them. If they need repair, they are brought back into the service shop,� said Saunders.

This large Rodec tubing rotator is for a heavy oil thermal application. R&M offers an array of tubing wear prevention solutions including rod rotators and rod guides.

PIPELINE NEWS January 2011

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Veracity to mark 25 years of Âżnancial planning

Meet the team of Veracity Financial Services professionals in Lloydminster. Back (l-r) Adam Teasdale, certiÀed Ànancial planner; Barry Davis, branch manager and senior advisor; Travis Bagnall, certiÀed Ànancial planner. Front (l-r) Aleshia Zabok, administrative assistant, and Deb Wawryk, client relations specialist. Photo submitted

Lloydminster – Veracity Financial Services continues to keep pace with the growth of the oil and gas industry in Lloydminster as it heads into its 25th year of business with a full suite of ďŹ nancial planning services. “Veracity is a general practice that has reďŹ ned its oering over time as our clients’ businesses, careers and circumstances have evolved,â€? said Barry Davis, the ďŹ rm’s co-founder and branch manager. Davis works closely with business partners and certiďŹ ed ďŹ nancial planners, Travis Bagnall and Adam Teasdale and two assistants. “We pride ourselves on our approach of dealing with our clients’ affairs as we would with our own,â€? said Davis. Veracity oers ďŹ nancial planning, investment consulting, retirement planning, insurance planning, tax and estate planning services and related products to individuals and entrepreneurs. The company will celebrate its anniversary milestone on Sept. 2, and Davis expects the business will continue to attract new oilďŹ eld clients with their proven personalized team approach to ďŹ nancial planning. The company has conducted business with the Veracity name since 2002 and consults widely with other local professionals in the ďŹ eld such as lawyers and tax specialists. “We have built many good relationships over the years with accounting and legal oďŹƒces and that has been a tremendous asset to us to be able to work with people who

know and understand how they work within the business,â€? said Davis. “We are continuing to develop our expertise in providing advance ďŹ nancial planning issues and dealing with owners of business etc. “Our business has evolved just as it has with any other business in this town and we have adapted to new circumstances.â€? It’s not surprising that the majority of Veracity’s clients work in the oilďŹ eld, given the industry boom has led to a threefold increase in the population and development of Lloydminster since the company started in 1986. “What it has done is create a more dynamic business environment,â€? said Davis, who recalled Lloydminster being in an “economic lullâ€? during that time period. “In regard to what we have seen in the evolution of the oil and gas industry in our community, we ďŹ nd ourselves providing appropriate ďŹ nancial planning advice around the pension and beneďŹ t programs of small and large companies, making sure our clients are receiving the best value from their employer programs,â€? he said. “It’s really important for individuals to coordinate their ďŹ nancial planning with the beneďŹ t programs they’ve already got. “It’s all about personal ďŹ nancial planning. We provide sound net worth based personal ďŹ nancial planning advice taking the view of the whole client or their family, inclusive of clear retirement and estate planning.â€? Veracity also consults

on the best use of stock options and other payroll incentives such as owthrough shares provided by employers, taking individual client needs into consideration. Davis says employer incentives such as owthrough shares come with risk, and that it makes sense for a person to consider them in their own ďŹ nancial planning. Veracity’s advice is being sought more regularly these days from clients with succession issues such as mergers and acquisitions and buyouts involving quick growth oil and gas companies. “There’s a lot involved in succession issues,â€? said Davis. “What you see is that a lot of businesses

become very successful, very quickly, in this environment that we have here. “There are things that you can do to plan a succession that will allow you to take advantage of that growth. “We provide guidance in business succession issues. We consult with a client’s legal and tax adviser regarding the use of individual pension plans, retirement compensation agreements and estate planning arrangements.â€? Another area of growth for Veracity is the ever-increasing need for group beneďŹ ts for employees as a way for oil and gas companies to attract to attract and retain the best workers. “In the last ďŹ ve years we have been focusing more and more on the insurance side and it’s going quite well,â€? said Teasdale,

an experienced certiďŹ ed ďŹ nancial planner. “You can go through the newspaper and see how many job postings there are. It’s a competitive industry and a competitive town for good employees, so it’s important to keep them and attract them. “We act as a broker. We basically check dierent companies and ďŹ nd out which are oering the best rates and the most competitive product.â€? Veracity can provide quotes on packages such as group dental, health, disability and life insurance beneďŹ ts tailored to the needs of the employer and their budget. Asked how important group beneďŹ ts are to oil and gas companies in the Lloydminster market, Teasdale says, “when it’s competitive to keep employees, the stronger your group beneďŹ ts plan is, the

easier it is to keep those employees.â€? Teasdale says most employees initially put their dental and drug prescription at the top of their list of preferred beneďŹ ts, but they later discovery disability insurance may be more valuable. “Your ability to earn income is one of your best assets,â€? said Teasdale. “Covering that income loss with disability insurance if something were to happen to you – that’s just as, if not more important.â€? Teasdale says most companies with as few as three employees to 1,500 employees have some form of group beneďŹ ts for their employees. “That comes down to tailoring each beneďŹ t plan depending on the industry type and the number of employees and what they are looking for,â€? he said.

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PIPELINE NEWS January 2011

Feted rig tech makes a “cold” call to media Regina – There was a good reason Billy Wilson was not able to pick up his award for Outstanding New Journeyperson in the rig technician trade at the Saskatchewan Apprenticeship and Trade Certification Commission (SATCC) awards ceremony in Regina on Nov. 19. The 29 year-old Saskatoon native who moved to Martensville two years ago was working a shift in Grande Cache, Alberta, as a licensed motorhand on a Precision Drilling rig. His mother Norine, a journeyperson electronics assembler for SED Systems in Saskatoon who teaches her trade to new apprentices, was on hand to pick up the award for him. His dad, Lorry, a certified millwright who works as industrial mechanic, joined in the audience applause. Trades run in the family as his younger brother, Mark, is a carpenter. Wilson is one of the first graduates of a new rig technician apprenticeship introduced in Saskatchewan and Alberta in 2006, for Level 1 motorhand, Level 2 derrickhand, and Level 3 driller positions. In a phone call from his work camp about 30 minutes north of Grande Cache, Wilson expressed surprise he was the named top achiever in the new trade when he received a letter to that effect in September. “I never thought they were giving an award for our work,” he said. Wilson was one of 32 newly certified journeypersons singled out for awards among a class of more than 1,250 new journeypersons in Saskatchewan between July 1, 2009 and June 30, 2010. “I received the highest mark in Saskatchewan for the 2009-10 year,” explained Wilson, who credits hard work and experience for his success. “Math is one of my strong points,” he said.

Billy Wilson, a newly certiÀed rig technician, was working on this super triple Precision Drilling Rig 520 near Grande Cache in November, drilling for natural gas in deep wells. Wilson was born and raised in Saskatoon and worked on rigs for six years in the Cabri area near Swift Current. He began his apprenticeship there in 2007 with Precision Drilling. Photo submitted

Wilson challenged and passed the Level 1 exam during his first year of apprenticeship as he accumulated nearly double the required 1,620 hours of required on-the-job training. The rig technician apprenticeship in Saskatchewan requires a total of 4,460 hours of job training over three years with three, four-week classroom

training sessions. Wilson worked in the Cabri area near Swift Current for six years, and began his apprenticeship there in 2007 as a derrickhand with Precision Drilling. “They had a big push in the industry then – and thought everyone should have it,” said Wilson. “I thought I should jump on board and get going with it. “The first year I challenged, and the next year they sent me to school. I got paid a living allowance to go and I qualified for employment insurance.” In Alberta, wages rise with experience to approximately $39.50 an hour, depending on the level of the rig technician position. Wilson’s journeyperson status also qualifies him to work as derrickhand and motorhand anywhere in Canada as a Red Seal rig technician. “Ever since I left the Saskatchewan rig because of the recession – we were shut down – I am working motors on this rig,” he said from camp in Alberta. “Out here, I have been working motors for the past two months.” A motorhand maintains drilling rig engines, transmissions, heating systems, diesel electric generators and motors, hydraulic systems and other mechanical equipment. Approximately 130 drilling rigs in Precision’s Canadian fleet are either super series or high performance. In Grande Cache, Wilson is assigned to a Rig 520, a super triple rig working for Encana Corporation. These advanced rigs provide more precise control of drilling components and greater power efficiency than mechanical rigs, and are well suited for horizontal and directional drilling. ɸ Page B9

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Brett Franklin, Senior Vice President & Director, MNP Corporate Finance says oilÀeld service companies and private equity groups have been calling MNP regularly, reinvigorated by improved results and excited about the opportunities surrounding the Bakken oil reserve. With increased access to capital and the promise of continued growth over the coming years, both strategic and Ànancial buyers have made moves into the area, with multiple transactions either closed or pending in 2010. “The strength and success of companies in Southeast Saskatchewan, even through a recession, has attracted a number of strategic and Ànancial buyers to the area,” says Franklin. “Buyers recognize that this is an industry built on relationships and see the advantage of entering the market through an acquisition rather than attempt to directly compete with the local companies.” “Although there seems to be new urgency in the market, buyers are still being selective and looking for value, the potential for growth and good strategic Àts,” explains Franklin. He urges businesses to get assistance early to best position their company for sale. “Ideally, we like to meet owners two-to-three years before they want to sell so we can assist them with tax planning, restructuring, and most importantly, getting strong second-tier management in place.” Franklin mentions in contrast to other Àrms that may only be present in large cities, MNP has a strong presence in many local markets. “Due to our geographic

reach, we have many owner-managed businesses with whom we have built strong relationships,” says Franklin. “At the same time, we are dealing with large public companies and private equity groups looking to expand their operations. We feel we give our clients the best opportunity to be successful.” Hammermeister adds that MNP’s team of oilÀeld specialists encourage strategic planning that is balanced. “It is important to monitor Ànancial results, however proÀt most often improves once sufÀcient emphasis is placed on the inputs – your people, your processes and how you treat your customers,” he says. “We have seen some great results from this approach and with the emerging opportunities out there, it is a great time to get started.” MNP is a full-service business advisory Àrm with more than 50 locations across Canada. To assist oilÀeld companies, MNP delivers a full range of services from traditional accounting, audit and tax assistance to corporate Ànance, due diligence, post merger integration, business performance consulting and enterprise risk management. To Ànd out what MNP can do for you, contact David Hammermeister at 306-634-2603 or Brett Franklin at 204-336-6190 or visit www.mnp.ca

PIPELINE NEWS January 2011

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Martensville driller among the top Regina – It was a night to remember in Regina for Saskatchewan’s top performing journeypersons and apprentices, and for the Saskatchewan Apprenticeship and Trade Certification Commission (SATCC). SATCC hosted an awards presentation to the top 32 newly-certified journeypersons from this year’s crop of 1,250 journeypersons certified in 47 trades from July 1, 2009 to June 30, 2010. The awards ceremony held Nov. 19 was also an occasion for industry associations to provide scholarships to apprentices or awards for high achieving new journeypersons in 14 trades. Of special note for the oil and gas industry, William Wilson from Martensville won the Outstanding New Journeyperson award in the rig technician (driller) trade. “The purpose is really to celebrate apprenticeship and give some recognition to people who are the outstanding achievers in their trade, and have achieved the highest marks from the journeyperson exam,” said Rick Ewen, director of apprenticeship for SATCC about the cer-

emony. “It’s an opportunity to do that, and to celebrate that they have done so well. They are invited to bring the person who was their mentor. It may have been an employer or a journeyperson who helped them a lot. “Additionally, there are a lot of industry awards and scholarships that are given out at the event. Industry is a full partner in this exercise to recognize the trades,” Ewen said. Three apprentices were recognized for achieving gold medals in the provincial Skills Canada competitions in Prince Alberta last April. The 2010 recognition awards follow a period of steady growth in apprenticeship numbers as Saskatchewan’s economy gains strength. The total number of apprentices registered with SATCC rose to 9,136 in 2009-10 from 5,915 in 2005-06, a 54 per cent increase. “As the economy goes so do our apprenticeship numbers,” said Ewen. “Right now, Saskatchewan is riding the crest of very good economic activity. When that happens, our apprenticeship numbers go up significantly.”

Presentations to outstanding new journeypersons were made by Garry Kot (Àrst row, seated left), board chair of the Saskatchewan Apprenticeship and Trade CertiÀcation Commission and Clare Isman (Àrst row, seated right), deputy minister for the Saskatchewan Ministry of Advanced Education, Employment and Immigration. Photo submitted

Ewen explains the demand for new tradesperson in the last five years is not specifically due to the strong oil and gas sector, but from all sectors of the economy clicking at the same time. “Almost of all of the mines in this province have undertaken major expansion, especially the potash industry,” he said. “You earn wages in any industry, and you’re going to spend money. If it’s on new houses and things like that, there is a direct impact on the construction sector. “Certainly construc-

tion in the oil industry – where they are employing people in pipefitting, concrete work or electrical – all those areas would see increased numbers as well.” One of the newest trades in Saskatchewan and Alberta is the rig technician for motorhand, derrickhand and driller positions developed a few years ago in partnership with the Canadian Association of Oilwell Drilling Contractors. “Those three trades are in the development stage, and it’s the same in Alberta,” said Ewen.

Rig tech takes top honours ɺ Page B8 The triple rigs, with more hoisting capacity, are typically used in deeper drilling in the foothills regions including the Grande Cache area. “It’s really busy,” said Wilson. “We are drilling for natural gas. In Cabri, we were drilling for natural gas in shallow holes. These are deep holes. “It’s booming – the way the economy is, this

a really busy spot here.” Wilson lives in a camp about a half hour north of Grande Cache, and works 12 hour shifts, 14 days on and seven days off in all kinds of weather. It was -44 C the night before he called for the interview, and he was getting ready for another bone chilling night shift. Despite the frigid temperatures, he swears it is easier to dress for winter than for summer when

you can’t really drop too many clothes. “In the winter time you can always put extra woolens on,” he said. “You are protected pretty good. Dressing warm is all it takes. “There are precautions you take. If you feel too cold, you go and warm up. They don’t want [you] to get frost bite or hypothermia, so we take care of each other.”

On his days off, Wilson drives back to Martensville to see his daughter. Asked if he would like to work closer to home, he says it would be nice, but admitted he hasn’t tried to look for work anywhere else. “I am kind of happy where I am here,” he said. “I would like to move back once things are a lot more stable.”

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“These trades are gaining some traction. They are trades that are specific only to the oil industry.” SATCC also noted that interest in the Saskatchewan Youth Apprenticeship (SYA) program has soared since being introduced as a pilot project in 2005 with two schools and 39 youth apprentices. “As of the end of June 2010, we had 242 Saskatchewan high schools, and more than 4,400 high school students formally registered in the program,” said Ewen. Today more than 200 graduates of the SYA program are registered with employers as apprentices, and are earning good wages as they complete the requirements for trade certification. “It has just exploded on us,” said Ewen. “It’s really a popular program. It is not a technical training program, in the sense that we don’t put

a hammer or a wrench in somebody’s hand, and say ‘here’s how you do this or you do that.’ “It’s a career development program. It makes people aware of working in the trade.” Asked about the effect that retirements from the Baby Boomer generation are having on the supply of new journeypersons, Ewen says filling the gap is going to be challenge for some trades in the years ahead. “In the 1980s, there was an economic crunch and a backing away from training which resulted in a lowering of the supply of apprentices and journey persons to the workplace,” said Ewen. “We are starting to feel the effects of that as a lot of people are moving toward retirement age. “The big news is the big jump (apprentice numbers) in the last few years – the fact that most programs are three to four years in duration is going to go a long way to filling that gap. “We think things have levelled off a little bit right now too. Things have found their natural exuberant level. We are anticipating that the growth has reached the point where it will plateau for a little while. “But as the economy continues to grow – with the big opportunities in the mining industry where we are hoping to find a lot of apprenticeships – there’s a good opportunities for the numbers overall to grow, and for more and more people to become certified,” Ewen said.

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PIPELINE NEWS January 2011

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PIPELINE NEWS January 2011

B11

Fire can’t stop the Unsinkable Butch McLean By Brian Zinchuk Bienfait – The Titanic may have had the “Unsinkable Molly Brown,” but Estevan Plastic Products has the Unsinkable Vernon “Butch” McLean. On Nov. 25, Estevan Plastic Products, located on the eastern edge of Bienfait, went up in smoke. The fire started at 5:55 p.m. “We were building a tank,” explained McLean, 72, who was working with his foreman, Dave Sernick, at the time. “We had just repaired this pump. We filled the pump oiler with oil, and stroked the pump.” Oil came out of the exhaust port on the pump and hit a nearby halogen work lamp. The glass broke, and then the bulb. “When I looked down, there was a stream of fire down to the floor.” Fibreglass residue under the pump got going, and so did the tank they were working on. Ron Gibson, a neighbour, has just stopped by. “He came in to see what we were doing, and got there just in time to see it all happen,” McLean said. ɸ Page B12

Butch McLean still has a smile on his face, even after his business burnt down a week earlier.

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PIPELINE NEWS January 2011

Positive attitude remains after ¿re

ɺ Page B11 They got a two-inch, 100-foot fire hose out, but by the time it was stretched out, the fire was too far gone. Both Bienfait and Estevan’s fire services responded. By the time Estevan got there, it was long gone. “In a couple hours, it was done. Everything that was inside was gone,” McLean said. A week later, the steel beams supporting the ceiling still sagged like wet noodles. The nearby office trailer was spared, along with several completed tanks. McLean has replacement insurance on the building. “We’re looking for replacement facilities to continue operations,” he said on Dec. 3. Even though McLean has been interested for

a while in selling the business, he’s plowed right back into it. “You have to. If I don’t go on, you don’t get insurance,” McLean explained. “We’ve got $300,000 of work on the board,” he said. Business has gone “straight up” since September, he noted. In the meantine, his staff was remodelling another building that he owns in Bienfait. The plan is to sell or rent it out. For the fibreglass business, McLean’s been lining up replacement equipment and supplies. All four employees have been retained. This isn’t the first time fire has beset McLean. In the first year of operation, in 1969, a fire due to improper ventilation took out his fibreglass plant in Estevan. He was building bathtubs at the time.

Windstorms have caused major building damage on two occasions as well, leading to severe financial difficulties at the time. “In my lifetime, I’ve had two fires, and two wind storms.” “The first time I burned down, I walked back and forth down the road for days and thought, ‘Where do I go from here?’ There’s only one way to go – up.” “It’s going to be business as usual in a couple weeks. We’ve already bought a truck and forklift.” He would still like to sell, once the business is up and running again. “One guy wanted to sell me a truck. I said with my luck ...” The man interrupted, “Butch, you haven’t got any!”

PIPELINE NEWS January 2011

B13

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PIPELINE NEWS January 2011

Production accounting, but not in Calgary Estevan – Nearly all significant oil producers in Saskatchewan have their production accounting based in Calgary. All, that is, except for Penn West Energy, whose Saskatchewan production accounting is based in Estevan. It’s a quirk that has withstood two decades of mergers and changes in ownership. The Estevan production accounting operation was established by SaskOil in 1992. It stayed through the Wascana Energy, Canadian Occidental, Nexen, StarPoint, Canetic and Penn West eras. “Every company has reviewed it, and all came to the conclusion to leave the team in Estevan,” said Kim Elson, supervisor. “Management has come to the conclusion we’re a well-oiled machine. It’s best to leave us be.” The team is made up of Elson, Barb Forseth, Stella Lapierre, Bob Small and Kristin Dupuis. Marie Dukart is on leave. Among the six of them them, they have approximately 110 years production accounting experience, according to Elson. If oil is the blood of an oil producing company, then production accounting could be considered its nervous system, keeping track of where everything is. “We’re responsible for all the production, revenue and royalties calculations and reporting for southeast Saskatchewan and the U.S. (North Dakota),” Elson said. “We’re the only production accounting team for any other major company in southeast Saskatchewan outside of Calgary,” she noted. “We track it right from the wellhead to market,” Small said. “We have to make sure all the volumes of oil, gas and water are accounted for as it comes out of the well, accumulates in batteries, gathering systems and gas plants.” Elson said, “The field staff track it. We have a production volume reporting system that we use.” Information is entered into the company-wide network program. Production numbers are recorded daily. For those in production accounting, their lives revolve around two monthly deadlines – month end, and the pipeline splits staggered before mid-month. The second involves verifying volumes with the pipelines and various marketers. They deal with the month prior, so in January, production accounting is done for December. “If our reporting isn’t correct, it has a very large impact on revenue for the company,” Elson said. Amendments happen from time to time. Operators will test wells periodically to determine volumes per well on a multi-well battery. Revenue has to be determined per well, and split out to the various owners. Many wells are joint ventures through farm-in agreements. And when it comes to royalties, they don’t all go to the province. “We do have a very large number of freehold leases,” Elson said.

Penn West Energy stands out from other substantial producers in southeast Saskatchewan. It has its production accounting team based in Estevan, not Calgary. From left are Stella Lapierre, Barb Forseth, Bob Small and supervisor Kim Elson. Missing are Kristin Dupuis and Marie Dukart.

Added to that, recent changes in provincial venting and flaring regulations will mean more gas to track. “Not all batteries sell gas,” explained Forseth. Gas is a small percentage of southeast Saskatchewan production. “We are expecting the volumes to be low,” Elson said. “We expect to be set up and capturing all these volumes by February in this area. We’ll be prepared for SER (Saskatchewan Energy and Resources) to implement that in the fall.” “Penn West has been progressive on capturing gas,” Small said. In 2011, production accounting for southwest Manitoba may be shifted to Estevan. Production in the Waskada field is anticipated to eventually exceed all of Penn West’s other Williston Basin production. When it comes to United States production accounting, it’s, well, different. “It’s done manually on a spreadsheet,” Lapierre said. Saskatchewan’s adoption of the Petroleum Registry of Alberta will have a “huge impact” on production accounting, they said. Asked if things will be easier, Small nodded his head. “Once we get everything shifted,” he anticipates. “Change is hard, but it will be a good thing once we get through it.” They all welcome the change. In the field Field experience is valuable for production accountants, according to Forseth. “They have a better understanding if they see it in the field, and not just a day tour,” she said. “The operators and foremen and engineers are in the office - just walk down the hall.” “We go out to the batteries and review at the schematics and measurement points,” Elson said.

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PIPELINE NEWS January 2011

Midale gains new motel

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Rental units planned for future development By Brian Zinchuk Midale – There are big plans in the works for housing development in Midale, spurred by the pressing demand for accommodations in the region. If all goes according to plan, the motel currently under construction could be doubled in size in short order, followed by multi-family units behind it. That’s according to Irvan Berg, who is heading up the project. Berg, along with five other partners, are building the Come On Inn and Suites on the north side of Highway 39 in Midale. The target date for completion is late January to early February. The group has been focused on building mini-storage units, beginning two years ago. That led to the motel idea. “I figured there was a need,” Berg said, warming up from a frigid day on the work site. The shell of the building was nearly complete on Dec. 9, but the power had not yet been connected, so they had no heat inside. “When we were down here, you could never find any rooms,” he said. Berg and his crew have built six mini-storage units in Moose Jaw, another two in Gravelburg, and two in Weyburn. It was the Weyburn project that spurred the Midale Motel. Berg is from Moose Jaw, as are most of the investors. One is from Nanaimo, B.C.

Irvan Berg points to where the kitchenette will be installed in this room.

“There’s 18 rooms and a caretaker suite on it,” said Berg. “The plan is, if they fill up by spring, we’ll add an addition, another 20 rooms plus a lounge.” Asked why he chose Midale, Berg responded, “I spent about three weeks running around the country here. I figured this was the ideal location – the middle of the oilpatch, between Estevan and Weyburn, on a major highway. “Land was a good price. We bought 23

acres,” he said. Weyburn had also been considered, but didn’t make the cut. The addition, if it goes ahead, will see the lounge added on the west side, and a north wing connecting to the lounge. It would be built so that yet another addition could be added, if need be. But that’s not all. “We’re planning on doing duplexes, fourplexes,” Berg said. “The plan is to put housing and apartments here.”

Very few rental units have been built in Saskatchewan over the last 25 years, as the economic model favours condo development. “It is easier to get money if you’re building and selling,” Berg acknowledged. But they are intent

on making these rental units. “We’re going to build and run them ourselves,” he added. “We’re going to build them as we can fill them.” “The oilpatch is the main driving factor in this area,” he said. With the motel, a highway location helps out, too.

“We will be cheaper than both Weyburn and Estevan,” Berg forecast. Asked about camps in both locations, he said, “Certain people use the camps. I think we’re going to be fine. I’ve worked in the oil patch, and I’ve stayed in camps, and I prefer a motel.” He worked on drilling rigs off and on for two years out of Lloydminster, and spent another two years moving rigs. Berg grew up in the Hudson Bay area. The amenities will include continental breakfast, Laundromat, 32-inch flat screen TVs, kitchenettes in several rooms, and, according to Berg, comfortable beds. “A bed is essential for a good motel,” he said. “We’re planning updates every five years.” “We’ve hired a manager out of Gravelburg with seven years experience. She has a list of four people interested in cleaning rooms.”

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PIPELINE NEWS January 2011

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B17

Paying the bills

Ellen Delorme, left, Virginia Deitze, and Vaila Lindenbach take care of Penn West Energy’s accounts payable in their Estevan ofÀce.

Estevan – If you’re a service provider, one of the most important contacts you will have with an oil company is the accounts payable department. For Penn West Energy in southeast Saskatchewan, Manitoba and North Dakota, that’s handled by Ellen Delorme, Virginia Deitze, and Vaila Lindenbach in their Estevan office. “We handle approximately 700 vendor invoices per week,” explained Delorme, who reports to Shelley Michie. In a world of electronic data and wireless communications, invoicing, at least initially, is still handled the old fashioned way. “Usually the suppliers themselves mail the invoices to us. Most of it is mailed in,” Delorme said. “We receive paper copies here. They get sent to Calgary for scanning; electronic copies get sent back.” While on a ridealong with a hot shot company last winter, Pipeline News found out it’s vital for vendors not to lose the stickers or stamps they are issued on

a job site. The accounts payable staff confirmed this, pointing out that each sticker or stamp will have codes that tell about the location in the field, and what type of work was done. “We use that information and key it into our account system,” Delorme said. That information tracks expenses to the location and to the right month. Each location is considered a “cost centre,” and has expenses calculated for it. Joint venture partners need to have their share sorted out. Pipeline News has heard from several sources that in the local oil patch, some companies will take up to 120 days to settle accounts payable. Mergers and acquisitions can cause backlogs, Delorme explained. Penn West’s standard payment terms are 60 days, she said. Deitze noted that some things will slow down or speed up that number. Having all the proper coding speeds up the process, she said. Payments are still more often than not

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done with paper cheques, as opposed to direct deposits. The cheques come from Calgary. Lindenbach noted there is a steady flow of invoices. However, the end of the month is usually heavier, Delorme added. Do they have to chase people down for invoices? No, according to Deitze.

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PIPELINE NEWS January 2011

Ron Areshenkoff and Reynold Bert are the partners behind Spectra Financial – Manulife Securities Investment Services Inc., in Estevan. Behind them is the Andex chart, showing Ànancial returns over the last several decades.

Bene¿ts are crucial Estevan – When it comes to attracting or even retaining employees, one area of the compensation offered by businesses should not be overlooked – benefits packages and retirement plans. That’s according to Ron Areshenkoff, partner with Spectra Financial – Manulife Securities Investment Services Inc., in Estevan. Reynold Bert is the other partner in the firm. Spectra Financial provides independent, confidential Insurance and Financial services to the business community of southeast Sas-

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katchewan. They are also contracted to provide insurance and financial services to the various credit unions in the area. Spectra administers the Chamber of Commerce Group Insurance plan for southeast Saskatchewan. “Our core business is primarily providing group health and dental benefit plans and group retirement pension/ RRSP plans for the oilfield industry,” Areshenkoff said. For the employers (owners), they also offer tax efficient solutions for getting money out of their company and into their own personal net worth. In an area where the competition for skilled workers has been tight for several years, Areshenkoff pointed out the importance benefits plans play in the recruitment of employees by companies. Asked if oilfield employers can operate without providing benefits plans, he responded, “Five years ago, you maybe could have done that. But times have changed – employees and their families now place a very high priority on the protection a group insurance and group retirement program provides.” “As an example, a wave of trucking firms have put benefits plans in place over the past few years, that maybe never had them in the past. It’s one of the employment terms people want factored in,” he said. “To some degree, companies are forced to implement a benefits plan to access the labour pool to access higher-skilled or quality labour.” Younger, “bulletproof ” guys may not realize the importance of a benefits package, but often family members will. That is normally a spouse, or a parent. “A lot of times we’ll get parents who call and want clarification on the coverage their son or daughter has,” Areshenkoff said. ɸ Page B19

PIPELINE NEWS January 2011

B19

Safety nets catch employee prospects ɺ Page B18 “We’re an independent insurance and financial firm. We deal with all the insurance and investment company’s and ‘tender’ the needs of our clients out. We constantly monitor the industry and find the best product at the most economic price to fit the client’s specific need.” A key advantage of small businesses providing a benefit plan to their employees is the economy of scale offered. People seeking individual plan coverage outside of their group coverage are required to pass a medical underwriting process to qualify. That will often exclude members outright, or exclude a specific condition like diabetes, for example. However, with a group plan of three “lives” or more, as the industry puts it, then group health and dental coverage is automatically issued. “Everyone is accepted, regardless of any specific medical conditions they may have,” Areshenkoff said. To qualify for group insurance coverage, employees typically have to work a minimum of 20 hours per week for the company. “The other advantage or component of implementing a group insurance program is tax efficiency,” Areshenkoff said. “With a health and dental plan, you can pay those premium expenses with company pre-tax dollars, not employees or company after-tax dollars.” “While employed, the benefits are immediate and obvious. The other often overlooked advantage of an employer-sponsored plan is that when an employee leaves the workforce, they have the opportunity to take coverage with them, no questions asked, if done within 60 days of their last day of work,” Areshenkoff explained. In Canada, legislation allows employees leaving a company, to transfer life insurance and health and dental coverage to individual plans without requiring medical underwriting But, they must do it within a certain time frame. For life insurance the limit is 30 days and for health and dental coverage the limit is 60 days. Former employees can choose to take the coverage with them, and conversely, pay for all associated future premium costs themselves. Employers should let members leaving their employment, know about that they have a one-time option of taking this coverage with them, Areshenkoff explained. In many

cases, this will be the member’s last opportunity for coverage if they have adverse medical conditions. Individuals taking their coverage with them when they leave, does not in anyway impact the company’s group plan premiums going forward, he added. “To me, one of the primary advantages or priorities in a group insurance plan is setting up a structure that members (if needed) can access the best health

care specialists in the world, to deal with their medical condition.” Beyond Saskatchewan’s health care system, which Areshenkoff calls “very good,” and the wellpublicized Mayo Clinic, he speaks of the “Best Doctors” program. This program will ensure members have access to the best specialists in the world, specific to their condition, when they need it the most. ɸ Page B20

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Engineer John Reid of WaterÁood Sales and Service, Estevan, right, explains the process of building a skid package to the Desk and Derrick of Southeast Saskatchewan on Nov. 22. Photo by Brian Zinchuk

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Bene¿ts packages key to recruitment ɺ Page B19 “We normally always include Best Doctors (or some similar referral program) on all group insurance plans we construct,” he said. “Provincial governments are always trying to control costs, which leads to limitations in diagnostic and treatment opportunities” he pointed out. “If you want access to the best health care (diagnosis and treatment) you can possible get, you want to have access to a program such as Best Doctors.” Areshenkoff said there are Canada Revenue Agency incentives provided to businesses and their owners for implementing benefit plans. These include potential reduction to employment insurance rates, and cost plus provisions to the owners and their

families. Benefits plans provide a safety net to owners, employees and their family members. This normally reduces the stress and pressure involved with worrying about what an injury or illness would do to a primary income earner or family member, according to Areshenkoff. “If you or someone in your family gets sick, becomes disabled or passes away, there’s a program to help.” Looking longer term, he said, “We try to communicate to employees that there is a significant expense to the business in providing these benefits. But, if employees have the peace of mind knowing there is a safety net in the event of sickness or injury, they can focus on helping the company grow and be profitable. If

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they are able to help the company achieve these long term objectives, when members leave the work force, they will have also funded their retirement or ‘non-working’ year’s income requirements. They will have financial dignity when they leave their employer with a Group Retirement program.” “Those employees can focus on going to work each and every day and fulfilling their duties. Those other pressures are reduced or removed outright.” “We’ve had people applying for jobs, seek our opinion on the benefit plans offered. People are making job selection decisions based on the benefits being offered. We all know people or families who have been without coverage and experienced the financially

devastating consequences of an illness, injury or death. “Most employers want to provide that for their employees. They truly want to makes sure their people are looked after in the event of a significant hardship,” Areshenkoff said. They also want to make sure people appreciate what having benefits entails, he noted. There is a significant expense to the business. Packages typically start at $200 per employee per month, and can go up to $400 per employee per month, depending on age, income, occupation and family circumstances. A legal office has a lower risk factor than a physically demanding profession such as a pipeline company has, and will be priced accordingly. While Areshen-

koff and Bert offer and service all the different insurance company benefits plans, the chamber of commerce plan stands out, according to Ken Willoughby, regional marketing director of the Chamber of Commerce Group Insurance Program. That’s because of two primary advantages. One, it’s run on a notfor-profit basis and two, it’s a fully pooled plan. Most plans want to recoup some or all excessive expenses paid over the following few years. If you have an employee that incurs a very expensive treatment plan such as multiple sclerosis, the costs can place a burden on the company’s future premiums. “The Chamber plan’s growth has been phenomenal over the last few years,” Willoughby said. “The oilfield industry is a significant part of that Chamber growth in southeast Saskatchewan.” With virtually all major insurers not offering coverage to groups under three lives, the Chamber steps in to fill the void, he said. “They will offer coverage right down to one life.” Pensions Pension plans are the other major benefit for employees. “Most in the oil patch are matching contributions retirement plans,” Areshenkoff said. “The oil patch definitely has richer and

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healthier programs than many other sectors of the economy. The majority of retirement plans have a three-part component to them,” he said. The first part is what the employer puts in. The next is what the employee is required to put in. These two are typically done on a 50/50 matching basis. The final portion depends on the type of plan. It may be a laboursponsored fund that provides members the additional venture capital tax credits. They are available through certain investments, like Saskatchewan’s own Golden Opportunities Fund or SaskWorks Venture Fund. Alternatively, employees may chose to make additional voluntary contributions to their retirement pension/ group RRSP plans. It’s not uncommon to see plans that increase the level of contributions as the employee’s time with the company increases. A general rule of thumb is if you invest 18 per cent of your income into your retirement savings account, for a 20 year period, you will historically replace your income for a lifetime after 20-plus years, according to Areshenkoff. That’s based on 62 years of historical data where traditional institutional pension plans have returned on average eight to nine per cent per year, he noted. “We manage over $100 million (predominantly in retirement investment plans),” Areshenkoff said. “We seek out the best investment/pension managers in the industry who are obsessed with controlling risk and preserving capital. Our office prides itself on protecting and growing wealth in a responsible, disciplined manner.” “I think people quickly realize it takes a lot of money to live and there is no safety net if you leave the workforce and have no funds accumulated. Ultimately we are all responsible for ourselves and need to create our own retirement safety net. Welfare is not an option,” Areshenkoff said in conclusion.

PIPELINE NEWS January 2011

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An option besides banks and credit unions tures program would only consider an application if they had been declined by an bank or

credit union first, since they did not want to compete with the financial institutions,

Harkness explained. That is no longer the case. ɸ Page B22

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OfÀce: (306) 634-4577 Fax: (306) 634-9123 Cory Harkness is general manager of Sunrise Community Futures

Weyburn – Where do you go when the bank says “no?” Even if the banks says “yes,” should you look at other options? The Community Futures program offers small businesses financing options that can help these ventures get off the ground, or to expand. Community Futures is funded by Western Economic Diversification, a federal department. In southeast Saskatchewan, Weyburnbased Sunrise Community Futures is there to help out start-ups and expansions. Sunrise is a stand-alone, non-profit organization whose voluntary board determines what projects it will invest in. Sunrise Community Futures’ territory is essentially the corner of Saskatchewan southeast of Regina, from Highway 1 to the U.S. border, and from Highway 6 to the Manitoba border. “In the southeast, we focus on economic

development,” explained Cory Harkness, general manager. “We focus on helping create new business and helping people with expansions. We see a lot of people in here trying to start a new business. “We pose questions here their bank will pose. We try to work with them,” Harkness said. “We’re all about business and entrepreneurs. Right now, the dominant industry is the oil patch. Right now, we’re in an oilfield boom. “Everything in this southeast region is a supported by the oil patch, from the grocery store to trucking. At least 50 per cent of the things we see are oil patch value-added business. Every second person coming in the door has a business idea that will be more successful if the oil patch is busy.” Agriculture is the constant, he noted, but agricultural loans are

handled by the Farm Credit Corporation. It used to be that the Community Fu-

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PIPELINE NEWS January 2011

Sunrise Community Futures provides choices ɺ Page B21 “Ideally, everyone we deal with gets approved at their bank or credit union, and we don’t have to lend to them. If their local bank or credit union would finance them, fan-

tastic.” Harkness spoke of leveraging, or co-lending, where Community Futures takes a second position to a bank or credit union. That financial institution might be will-

ing to finance up to 75 per cent of a project, for example. Community Futures might top up another 15 per cent, with the entrepreneur bringing 10 per cent to the table. “We can lend up

Sholter Horsman Furniture & Appliances in Estevan’s steel sales division suffered a blow in late-November. A Àre that started in the centre of the building quickly engulfed both the furniture storage and steel sales ends. Here, an excavator can be seen removing material on Dec. 3. Photo by Brian Zinchuk

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to $150,000. That’s our max,” Harkness said. In the above example, that could equate to a total $1 million package, with 15 per cent from Community Futures. “We let the bank or credit union determine the minimum owner equity,” he explained. “We like to see everyone have ‘skin in the game.’ We want that owner to have something at risk. The owner has to have something at risk aside from sweat equity.” Sunrise Community Futures will still lend to people declined by a financial institution, he added, but they ask the entrepreneur to try their financing with those institutions first. “We finance higher risk businesses. We charge higher interest rates. We have shorter amortizations.” Those rates are fixed, and run four to eight per cent above their bench-

mark, the Weyburn Credit Union’s prime rate. Current rates are “extremely cheap in the scheme of things,” according to Harkness. The maximum term is 10 years, with a typical term being five years. However, Harkness encourages borrowers to go to their financial institution and pay out Sunrise. “We are a developmental lender,” he explained. For the entrepreneur, the trade-off may be to take a higher interest rate, or get no loan at all. “We usually deal with higher risk business ventures,” Harkness said. It can take anywhere from two days to two months to put together a loan application, Harkness said. The application is then taken to the board for a decision, and an answer can come back in 10 business days. The board is made up of regional volunteers.

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Sunrise Community Futures has been around since 1997, but they still struggle with awareness. Most people aren’t familiar with them. “We’ve got about $1.8 million out there across 30 loans,” he said. Their oilfield-related loans include a concrete business, numerous fluid-hauling trucking businesses, and a hotel. Harkness was formerly a commercial lender with the local credit union. He recalled that during the 2008 run-up of oil prices, “Everyone wanted to be in business. “We’re here to help people get into business, but also to make people aware of what business entails. It isn’t for everyone. “There’s a lot to running a business. It’s an education process, one the banks and credit unions don’t have time to assist you with. They are there to lend. When you go to them, you should have the best business application possible. That’s what we help with,” Harkness said. Banks and credit unions, he noted, want sustainable businesses to finance. “We want to create an educated entrepreneur.” “Do you have a bookkeeper? Do you have an accountant? A lawyer? You’re building a team. Your team is more than you. “Entrepreneurs bring the idea, the drive, the willingness to work,” he said. But they don’t necessarily have the technical expertise of those key team members. Sunrise offers training like “bookkeeping from a shoebox” and human resources training sessions to assist. “How do you go about finding good staff? Once you have them, how do you keep them?” Harkness said about human resources attraction and retention. They don’t do business plans for prospective clients, but do provide some guidance in that regard. “You need an idea, and an understanding to get a business together. It’s not just a business plan on a napkin, which I’ve seen,” he said.

PIPELINE NEWS January 2011

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Apex Distribution giving back to minor hockey By Daniel Hendriksen For Pipeline News Estevan - For lots of kids growing up in Estevan, playing hockey is one of their favorite things to do. It goes without saying that without the time and commitment of parents, coaches and other volunteers, these kids wouldn’t be able to play. Other large contributors to local minor hockey teams that we don’t always think about are the sponsors. The team sponsors help pay for things like jerseys to take some of the fundraising burden off the children and their parents. One of the local sponsors in the Energy City is Apex Distribution. They have been the title sponsor of the Estevan AA midget team for six years now. Ken Wallewein of Apex says their sponsorship of the team is about giving back to the community. “We like to support not just hockey but all minor sports as much as we can to support the community that supports us,” Wallewein says. Apex had let Estevan Minor Hockey know they were interested in taking over one of the teams, and fortunately they didn’t have to wait long as the sponsor the midget AA team did have was stepping aside. And with the success of the Estevan AA midget program has had over the years, it couldn’t have worked out better for them. “Not that the other AA teams don’t do well, but the midget team has done very well; they’ve won a couple of provincial championships, which kind of helps

Whatcha workin' on? Kramer Ltd. Àeld mechanic Peter Lylyk gets close and personal with a Caterpillar 583 sideboom in Lynco Construction’s workshop. Lylyk has been with Kramer for 35 years. Here he’s installing a positive air shutoff on a recent acquisition. Photo by Brian Zinchuk

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out with the name recognition as well,” Wallewein says. Apex also sponsors other youth sports, and while they aren’t shy to support adult activities either, Wallewein admits they’re likely to be “more generous” when it involves kids. “It’s mainly cash donations that we make to help them offset some of the cost that they incur to run the team,” he said. “They still need to do fundraisers, etc. but it definitely helps them when we cut them a cheque every year.” The expectation levels are that the jerseys supplied by the sponsors are going to last more than one season, so that’s not an expense they incur every year. “There are home and away jerseys but you try to replace them periodically,” Wallewein said. “They’ll make three seasons sometimes and the odd time they’ll have to replace one or two.” With such a dynamic oil industry in the area, Apex doesn’t have to rely on their sponsorship of minor hockey to get their name out there, but Wallewein said it doesn’t hurt. “We have 200 customers, but probably 20 make or break our business so if we didn’t do it, would we lose any of those customers? That’s pretty tough to say, but if you’re successful in business and you’re making money, it’s kind of our corporate obligation to put money back into the community,” he said. “That’s just being a good corporate citizen.” Several Apex employees have children who play minor hockey in one age group or another, and they have no plans to discontinue their support anytime soon. “We can’t say anything is forever, but we have no reason not to continue on with the team that we’ve had for the last five ore six years,” said Wallewein.

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PIPELINE NEWS January 2011

Oil patch buoys Midale Credit Union Midale – There are some special considerations when lending to oil patch companies, according to Bob Harris. Harris is the general manager of Midale Credit Union. It’s one of the few independent credit unions left in Saskatchewan that hasn’t been swallowed up in a wave of amalgamations. Indeed, it expanded its office in 2008. “We’re very proud of where we come from,” Harris said. “We are doing our best in a global economy that keeps changing.” “Because of the oil patch, there’s jobs for younger people in the area. The economic benefit is substantial. If you look around town, there’s lots of young people, babies. Our demographics aren’t the same as some smaller rural communities in Saskatchewan because of the industry that’s here. “Our membership is diverse in age. That’s always a positive.” “We do a fair amount of commercial lending. We have larger accounts as well. We’ve taken accounts from startup to where they are today. “Our loan base is 40 per cent consumer, 36 per cent agriculture, and 24 per cent commercial,” Harris explained. Of the commercial, the vast majority is in the oil sector. Asked if it is easier to get a loan from a credit union than a bank, Harris responded, “We are more in tune with the local economy and what’s going on. In some cases, yes, we have a belief in our people maybe a charter bank won’t have. “We have a lot more flexibility in dealing with people. All the decisions are made right here. We’re not going to Calgary or Toronto to have decisions made. That gives us an edge that way. “I like to believe service is one of our top priorities,” Harris said, adding they’ve even drawn commercial clients from Estevan and Weyburn. With reference to providing banking services for the oil patch service sector, he said, “It’s a very cyclical industry. However, it’s a very good industry. “One of the things different with the oil patch is the length of time in the service industry when they get paid for their work. Some companies are up to 120 days before you see cash flow. That’s a long time for a company to sustain its business. “There’s some companies out there, if you don’t like their terms, you don’t work for them.” The normal standards in finance is anything over 90 days is considered unacceptable receivables for margining their operating loan, he explained. You have to make some exceptions if they’re going to be dealing with such companies, according to Harris. “You have to know who your client is going to be working for and what

Midale Credit Union’s staff includes, from left, Geoff Grodecki, manager of lending; Pam Chapman, admin support; Jolene Martin, member service rep; Norma Rosengren, receptionist/loans clerk; Rhonda Penny, member service rep; and Bob Harris, general manager. Missing are Britney Fischer, loans ofÀcer, and Susan Oesch, ofÀce manager.

terms are arranged,” he said. “When you look at the oil patch, it’s a very labour-intensive business. You’ve got to fund your payroll. You start up today, and say you have 10 employees, chances are, you have to fund three to four months of payroll before you see first money coming in. “It’s more cash intensive up front. Most of the guys that are working, they know. They’re entrepreneurs and they seem to find a way to make it work. For the most part, the receivable is a good receivable. You know the money is coming in, it’s just going to take a while.” With a high price of oil and level of activity, are there a lot more people looking for money for business ventures? “I wouldn’t say a lot more, no. There’s always inquiries. We’ve been extremely busy, but that’s just the way it is in this area now,” he responded. ɸ Page B25

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Boyd still con¿dent of oilsands development (Nickle’s Daily Oil Bulletin) Despite the province not yet having a commercial oilsands industry after years of testing, Saskatchewan Energy Minister Bill Boyd remains confident the resource will eventually be developed. Speaking at The Canadian Institute oilsands symposium on Nov. 30, the minister said technological and engineering challenges are the largest hurdles at the moment. “Our oilsands are much deeper into the earth’s surface and as a result of that, it will be in situ extraction methods that will be employed,” he said. “Perhaps things like the THAI [toe-toheel technology] will be a part of that, that’s a possibility. “It’s not a case of companies just not being prepared to move in that area just yet, it’s a technological challenge, an engineering challenge.” Given significant incremental capital re-

quired to advance its oilsands assets in Saskatchewan and Alberta and little in the bank to do so, Oilsands Quest Inc. said in August it was putting the brakes on its Axe Lake steam assisted gravity drainage (SAGD) pilot and Wallace Creek drilling program as it seeks strategic alternatives that could include the sale of the company. The company announced in September it was initiating a process to divest its Eagles Nest oilsands lease and Pasquia Hills oil shale permits, following a determination by the board of directors that these assets are non-core. Oilsands Quest retained TD Securities Inc. to assist the company in reviewing strategic alternatives and the sale process for these noncore assets (DOB Sept 22, 2010). Petrobank Energy and Resources Ltd. also holds land in the Sas-

katchewan oilsands region. “We’re waiting to see what the next stages of (oilsands) development will be,” Boyd added. “I think you will see it developed in a very aggressive way once the technology and engineering challenges have been met. “It’ll either be met by companies within Canada and the United States or it will be met by someone else. The Chinese are very interested in developments in Saskatchewan [and] oilsands developments. We’ve had a team speaking to them for some period of time about the possibilities.” Boyd said he’s heading to China in the early part of 2011 to speak to companies about opportunities in the province. “We hope that through a process of bringing together investment dollars, we’ll see that area developed in Saskatchewan in the

Midale Credit Union makes decisions locally ɺ Page B24 “Attracting qualified staff is an issue,” he said of their clients. “This boom has created real estate values that have increased substantially. There’s no places to live in Midale. Trying to attract people, you can find a body, but you can’t find a place

for them to live,” Harris said. Talking to counterparts in the financial community, he said, “They can’t believe a house in Midale, Saskatchewan, would be over $200,000.” That’s driving the consumer side of the credit union’s portfolio.

A 40 per cent consumer lending portfolio is high for a rural credit union, he said. Usually, agriculture is much more significant.

near future,” Boyd said. Challenges also exist with regard to having a sufficient road network and power infrastructure in the remote region of northwestern Saskatchewan, but Boyd is confident there will be solutions. “Some of the ways we may be ... looking at for power infrastructure is small nuclear reactors,” he said. “We think there’s some good potential for that kind of application into more remote areas. “We have the uranium as a province so we certainly should be using it.” Boyd, meanwhile, said the province, led by Premier Brad Wall, has

been a staunch defender of the Alberta oilsands in the United States, countering the “dirty oil” assertion south of the border by environmental groups opposed to oilsands development. “We think as a province, aligned with Alberta and British Columbia, we can be part of a solution for the energy security needs of Canada and the United States,” he said. “Our premier has been very aggressively ... speaking to that [dirty oil] issue in the United States, about energy security and how much out of line that is with the reality of what’s happening in oilsands development.

“We also talk about something that really resonates with the United States right now and I think that is simply conflict-free oil. I think they’re getting that message loud and clear in Washington these days.” Boyd also reaffirmed past commitments that the province will not make changes to its royalty structure. “Oil, after all, is a very significant contributor to our economy,” he said, adding that 27,000 people are directly employed in the oil industry in the province and there is an annual investment of roughly $2 billion for exploration and development.

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PIPELINE NEWS January 2011

Despite being held at the same time as Agribition, there was a good turnout for the Cenovus open house at Goodwater on Nov. 25.

Cenovus open house Goodwater – On Nov. 25, Goodwater’s community hall was taken over by numerous displays showing the various aspects of Cenovus Energy Corp.’s operations in the immediate vicinity. Every year Cenvovus, and its predecessor, Encana, puts on some form of open house in the Weyburn area, home to its Weyburn unit. The unitized oilfield is home to the highly-publicized carbon dioxide flood enhanced oil recovery project. The open house came almost a year to the day after Encana spun off Cenovus as its own company. Just under 40 people attended, most of whom were local landowners. Attendence may have been affected by holding the open house during the time Agribition was underway in Regina, according to

Twila Walkeden, community relations advisor with Cenovus. “We’ve got a fairly aggressive capital project with the CO2,” Darcy Cretin, operations superintendent, said of the company’s local plans. “We’ve got two rigs drilling here in the unit.” The company is expanding its carbon dioxide flood to the southeast, right up to the west side of the Rafferty Reservoir, southwest of Halbrite. “We’re going to be adding another ten patterns,” Cretin said. This will get us just about to the Souris River.” A pattern is a series of production and carbon dioxide injection wells laid out at regular intervals. Carbon dioxide, along with a water flood, sweeps oil to the producing wells. Most of the current work will

be in the PFRA pasture, with plans to get it done during the winter. “The big thing when we do these new patterns, we have to put in new flowlines. New facilities come with that. When you roll out an area, you’re putting in almost brand new infrastructure,” Cretin explained. Larger pipelines are needed, and old steel lines are upgraded to fibreglass. Carbon dioxide is corrosive. While it is dry on the injection side, on the production end, measures need to be taken to reduce the corrosive impact. That includes the use of fibreglass, steel pipe coated in fibreglass or stainless steel.

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Looks can be deceiving could help with dog care. We had discussed breeds and had decided on a Lab. Then I overheard the lady on the radio call-in show saying she had a Lab to give away. Calling her, I found out that the dog, Bear, was two years old. She had recently had a baby. One Woman’s Perspective on The real issue was that Life, Liberty and the Pursuit of they were living in a Land Locations place that did not allow By Nadine Elson dogs. I sent Bruce to inspect the dog. It was not love at Lab?” almost as soon as If Bruce was imfirst sight. It was, indeed, the question left my lips. pressed with the dog, quite the contrary. His head and his feet the next step would be to I looked him up were Lab. The parts in have the whole family go and down and was not between were indeter- over to see the dog. Inimpressed. He had nice minable. stead, the dog was now Seconds ticked by on my back step: lock, dark eyes but his black, curly hair was limp with and then came dawning stock and barrel, or in dirt and oil. He was of realization. Not only did this case: leash, food and average height but I had he have a leash attached bowl. expected him to be taller. to him, but nearby was a He was not what I My nose twitched. There big silver dog bowl and wanted. He was not realwas a musky odour ema- a bag of dry dog food. I ly a Lab. But what choice nating from him. He looked at my husband. did I have? Then I heard badly needed a bath, I “You didn’t!” I accused. my mother’s voice in my Bruce hung his head head, “Looks can be dedecided. I continued to stare sheepishly. “I’m sorry,” ceiving.” at him. He moved be- he said. “I just couldn’t I decided to give tween Bruce and me. leave him there, chained him a try. That day was “Where’s the Lab?” up to the front of an old over eight years ago I asked my husband, car. He really is a good and Bear has become Bruce. He nodded to- dog. He even knows a much loved member wards the black dog some tricks,” he added of the family ever since. now sitting between the hopefully. We overlooked what two of us, the object of We had been talking he didn’t have (a pediall my stares. I knew of getting a dog for some gree) and concentrated the answer to my next time. The kids were older, on what he did have (a question, “What part is being 9 and 12, so they wonderful and warm na-

Shifting Gears

Relentless closes purchase Relentless Resources Ltd. has closed its previously announced acquisition of a 100 per cent working interest in petroleum and natural gas rights on 1,295 hectares (3,200 acres) of contiguous lands in southwest Saskatchewan from a private arm's-length oil and gas company for a purchase price of $550,000. The assets acquired include 518 hectares of P&NG rights from the surface to the top of the Precambrian as well as 777 hectares of various deeper P&NG rights. The two sections of land with all P&NG rights (Viking rights) are prospective for the southwest Saskatchewan regional light-oil-resource Viking zone play which

uses horizontal drilling and multistage fracturing technology, Relentless said.

ture). Fast forward five years. The lady looked at me doubtfully. I was not what she wanted. “Looks can be deceiving,” I said. She inspected my driver’s licence and oilfield tickets. She looked me up and down and was not impressed. “Don’t let the pink glasses and lipstick fool you. I am not afraid to get dirty!” I told her. As the female owner of a hot shot business, she was not discriminating on the basis of my gender. I just didn’t look like a truck driver. “I have boots, coveralls, and a hardhat,” I said. That clinched it. She decided to give me a try. That day was nearly 3 years ago and I have been driving ever since. She overlooked what I didn’t have (hot shot driving experience) and concentrated on what I did have (a wonderful and warm nature).

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look like a truck driver, but … looks can be deceiving! Nadine lives in Estevan with her husband and family. Her mission, beyond delivering the goods quickly, is to have every interaction be a positive one. Smiles are free. She can be reached at missiondriver@hotmail.ca

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B28

PIPELINE NEWS January 2011

Safety stand-down targets new workers The most likely people to become injured or killed on the job are either young, or new to the job. It is with that in mind that Enform chose the focus for its annual safety stand-down project, encouraging oilfield companies to take a bit of time and really think about what’s happening

in the field. This is the 10th year for Safety Stand-Down campaign. “This year’s theme is safety leadership of new and inexperienced employees,” according to Rick Peterson, program manager with Enform’s safety services. Petersen is based in Calgary.

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fy young or new workers as being vulnerable. He pointed out that includes people who may have experience, but are switching trades, or starting new jobs, or have made an internal move. “Everyone was green at one point,” he said. The idea behind the stand-down is to get executives and senior management out of their offices and into the field, talking to front-line workers. It’s a chance not only for them to show their commitment to safety, but to hear concerns from front-line workers. “Those workers have

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opportunities to give feedback to those senior leaders,” Petersen said. It’s a voluntary program. There are free video and power point presentation downloads on the Enform website. Physical material, like posters and promotional items, can also be purchased. Last year, 373 companies registered for the support material, plus many more took part without ordering material. There were also 40,000 hits to the website. “This material is available to anybody,” Petersen said. Companies will often adapt the program to their own needs. A typi-

cal stand-down will go from one to two hours, often gathering front line staff at central locations. These meetings may occur during morning safety meetings. A focus week of Jan. 15-21 is meant to bring attention to the campaign, but companies can choose to implement it whenever it works for them. The program runs all year, Petersen explained. If you’ve seen the TV program Licence to Drill on the Discovery Channel, you might have noticed Nabors Drilling senior executives taking part in a safety stand down when filming took place.

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PIPELINE NEWS January 2011

B29

Leading a team of 10 ofÂżce administrators Estevan – One of the more prominent buildings on Estevan’s east side is Penn West Energy’s oďŹƒce building, where operations and administration for southeast Saskatchewan, Manitoba and North Da-

kota are based. Heading up the administration side in Estevan is Shelley Michie, lead administrator. After working for years with Husky in Calgary, Michie came back to southeast Saskatchewan, where she was raised. “Estevan’s home. I thought it was time to come back,� she said. Reporting to Michie are 10 administrators who support the operations side of Penn West’s Estevan district. Michie reports to the production superintendent, Kelvin Luedtke. Penn West is rapidly expanding in Manitoba operations. Michie just hired a new full-time admin person for Waskada, a position for which they had over 50 resumes. “The resumes come in every week,�

she said. She said attributes for being in administration include organization, adaptability, and dealing with changes and new processes all the time. You have to enjoy people, she added. All the administration sta have important roles to do, Michie said. “Everything we do rolls up to Calgary. It doesn’t start there, it starts here,â€? she said. Asked of the biggest changes of late, she pointed to the review and updating of all current processes that involve operations. “All companies, regardless of size, have the same things they have to do. It’s managing eectively,â€? she said of the key.

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PIPELINE NEWS January 2011

NuLoch expands borrowing base (Nickles Daily Oil Bulletin) NuLoch Resources Inc. has expanded its borrowing base on a $14 million demand revolving operating credit facility with a Canadian chartered bank. The line is now established at $25 million and is currently undrawn. In addition to this expanded facility, NuLoch has existing cash balances in excess of $14 million.

To assist the bank in its assessment of the borrowing base, NuLoch provided an independent interim reserve report with a Sept. 30, 2010 effective date that evaluated its Saskatchewan and North Dakota petroleum properties. “The interim reserve report demonstrates that NuLoch has delivered significant reserves growth in Saskatchewan and North Dakota with

3.7 million bbls of oil equivalent proved and 6.4 million BOE on a proved plus probable basis,” said NuLoch president Glenn Dawson in a news release. “The expanded line of credit will enhance the strength in our balance sheet as we proceed with our development program in the Williston Basin.” NuLoch commissioned AJM Petroleum Consultants to prepare a

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report of the company's Williston Basin petroleum reserves with an effective date of Sept. 30, 2010. The properties were evaluated in accordance with NI 51-101. The company's Alberta assets were not included in this evaluation. The Saskatchewan assets were estimated to contain 2.54 million bbls

of proved plus probable light and medium oil, of which 1.41 million bbls are proved reserves. The North Dakota assets were estimated to contain 3.84 million bbls of proved plus probable oil plus 69 mmcf of gas, of which 2.29 million bbls of oil and 38 mmcf of gas are proved reserves. The company’s gross

Cloudbreak plans SE Sask. purchase (Nickles Daily Oil Bulletin) Cloudbreak Resources Ltd. said it has entered into a purchase agreement with two arm's-length vendors to acquire a 100 per cent interest in three five year oil and gas leases covering approximately 1,120 acres (1.75 sections) of land in southeast Saskatchewan. The subject properties are undeveloped, but are located adjacent to existing light oil production and in close proximity to existing infrastructure. The consideration for the acquisition will be

$272.63 per acre, payable in cash. Cloudbreak will acquire a 100 per cent interest in all three leases subject to a sliding scale royalty on production starting at 17 per cent of production and being reduced by one per cent for each one per cent by which the aggregate of all government royalties applicable to production under a particular lease exceed five per cent, down to a minimum royalty in favor of the vendors of 10 per cent. To facilitate payback of drilling costs, the royalty will not apply to the first 30,000 bbls of oil

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reserves on a proved plus probable basis for Canada as a whole, as at Dec. 31, 2009, as reported in NuLoch's annual information form, was 2.78 million BOE. The company’s gross reserves on a proved plus probable basis for the United States as at Dec. 31, 2009 were 672,000 BOE.

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equivalent production from the first horizontal well or 20,000 BOE of production from the first vertical well drilled on each property to the Red River formation within four years after closing. An area of mutual interest of three kilometres from the outer lease boundary of each property will be in effect. If any land is acquired within any such AMI, it will form part of the property subject to the AMI, and be subject to the same royalty. The three properties, to be known as Parcels J11, J12 and J13, are located on a productive trend within a structural belt that is parallel to the Minton Red River oilfield. Parcel J11 is located directly on top of an interpreted basement structural high, and J12 is located on the northeast side of a basement structural high. All three parcels are in close proximity to Red River production. The Red River is a porous dolomite that typically produces oil at high flow rates from dome-like traps where the formation is draped over local basement highs. These three acquisitions have provided the company with an opportunity to gain exposure to the Red River play in the Minton area. They augment the company's J6 Red River prospect that was noted in its July 15 news release. As part of the company's growth strategy, it plans to retain Chapman Petroleum Engineering Ltd. to assess the NI 51101 resource potential of these parcels and complete detailed reviews of all its lands in final preparation for drilling.

PIPELINE NEWS January 2011

B31

Alberta to impose cellphone ban in 2011 Edmonton – Alberta is a Johnny-come-lately when it comes to restricting the use of hand-held cellphones while driving, but the province will raise the bar on road safety when its distracted driving legislation comes into effect in 2011. Bill 16, the Traff ic Safety (Distracted Driving) Amendment Act, 2010, restricts the use of hand-held cellphones and activities like texting, reading, writing, personal grooming, and puts restrictions on using other electronic devices while driving. The new law will come into force upon proclamation, with an anticipated grace period, and is expect to take effect by the middle of 2011. Prior to the new law taking effect, the province will launch a public education and awareness campaign to help Albertans understand the details of the legislation. This will be co-ordinated with traffic safety stakeholders and law enforcement. The legislation was passed in November and goes beyond Saskatchewan’s ban on the use of hand-held cellphones to talk, text, email or surf the Internet while driving that took effect Jan. 1, 2010. “This is a great day for traffic safety in our province,” said Alberta’s Minister of Transportation Luke Ouellette following the passage of the new bill. “This legislation is a bold approach and goes beyond restricting cellphones, and deals with the broader issue of distracted driving. Our message is clear: Keep your hands on the wheel and your eyes on the road.” The legislation permits the use of hands-free phones. Also, radio communication devices such as CB radios are allowed for commercial purpos-

es and search and rescue services. Drivers may use hand-held devices to contact emergency services — like 911 — and this legislation does not affect the official duties of emergency service personnel including law enforcement, fire and medical services. In Saskatchewan, experienced drivers are allowed to use hands-free devices while driving but new drivers in the province’s Graduated Driver’s Licensing program are forbidden to use cellphones of any type while operating a motor vehicle. The penalty for an offence associated with this law in Saskatchewan is $280, which includes a victims’ surcharge of $60, and four demerit

points under the Safe Driver Recognition and Driver Improvement programs. In Alberta, the proposed fine for the distracted driving offence is $172 with no demerit points. Drivers engaged in any of the identified activities can be charged under this new law. A distracted driver could face additional charges if they commit other violations such as running a red light or making an improper lane change. This legislation complements the current driving without due care and attention law — a serious offence with a fine of $402 and six demerit points.

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B32

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#5892A 2009 Chevrolet Malibu LT

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#5961A 2007 Pontiac G 5 SE Coupe Auto

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PIPELINE NEWS Saskatchewan’s Petroleum Monthly

C-Section

January 2011

The skeleton of the central area of the new building takes form.

Carpenter Donovan Stoney trowels fresh concrete.

Jarrod Chinski is the the site superintendent for Quorex Construction Ltd. Behind him is the north side hallway.

Energy Training Institute rises Federal funding deadline pressure eases Story and photos by Brian Zinchuk Estevan – An announcement by Prime Minister Stephen Harper in early December had officials with Southeast Regional College and the Energy Training Institute breathing a sigh of relief. On Dec. 2, Harper announced the deadline for completion of projects that qualified for federal infrastructure spending will be extended from March 31, 2011 to Oct. 31. The new Energy Training Institute in Estevan was under the gun to have at least some of the building up and occupied by the earlier date, but now the new schedule will fit their plans well, according to Craig Brown, president and CEO of Southeast Regional College. The college is the parent organiza-

tion for the ETI. “It’s very good news,” Brown told Pipeline News on Dec. 8, a day after he paid a visit to the construction site. “We’ll be totally completed everything by October 31 anyway. It looks like we’re clear sailing for 100 per cent funding, which is great.” Brown acknowledged that the federal deadline was a concern, and they didn’t want to be in the middle of a funding scramble with the other partners. It also takes some pressure off the builder, Quorex Construction Ltd. of Regina. The initial deadline required that one of the large training labs, and three adjoining classrooms be ready for occupancy by April 1, 2011. Part of that was optics, Brown said. The timeline adjustment may actually make

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it easier to complete the entire building sooner, he explained. To get into those initial rooms, subtrades would have been needed to complete them, and then come back later to complete the rest. The new deadline may change the sequencing of the subtrades and workflow, possibly resulting in the whole building being completed at an early date. The college has asked the builder if it is possible to move into the entire building on Sept. 1, 2011 instead of the planned Oct. 1. While there was mud to contend with early in the project, freeze-up has allowed work to progress. “Things are going very well, now that things have frozen up,” Brown said. “Structural steel is going up like mad,” he said.

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C2

PIPELINE NEWS January 2011

Spectra Credit Union closely tied to oil patch

Norm Nicol is executive vice-president of relationship services with Spectra Credit Union.

By Brian Zinchuk Estevan – In an area that’s at the heart of the action in southeast Saskatchewan, credit unions have been an important player in financing the local oilpatch. With branches in 10 communities, Estevanbased Spectra Credit Union has long and strong ties

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to the oil patch. “Spectra is fortunate to have a large oil and gas base of business,” explained Norm Nicol, executive vice-president of relationship services with Spectra Credit Union. “Our total loan base is $380 million. About

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$100 million is directly related companies in the oil patch,” he said, adding that a significant portion of their consumer business is with individuals working in the oil patch. “This credit union was very active in lending to the oil patch. “We want to lend to the oil patch, no question about it, but we need to mitigate risks,” Nicol said. “We apply the same credit adjudication process as the banks do.” “What separates us from the banks are our connections to the local community. Directors are elected locally,” he said. The credit union also puts a lot back into the community, typically into infrastructure projects, through the Spectra Foundation. Much of their petroleum sector clientele is in the service industry, from welding shops, trucking companies, people who sell pumpjacks, to a rathole company. Many of these businesses were grown from the ground up. They don’t handle much in the way of producing companies, as it is seen as a risky part of the business. ɸ Page C3

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PIPELINE NEWS January 2011

C3

Be sure to re-invest during good times ɺ Page C2 There are challenges in lending to the services sector. “It is cyclical, and prices can fluctuate wildly, as we’ve seen in the last two years,” Nicol said. From 41 years in the banking business, including 35 years in commercial lending, Nicol identified two main issues for these businesses – cash flow, and the sheer cost of doing business, especially on the capital side. Nicol points out the cash flow cycle and its issues. “It’s not uncommon to see 120 day receivable periods,” he said. When asked why, he said, “because the large oil companies can.” The smaller you are, the less ability you have to negotiate terms, he pointed out. That can make it tough when there’s bursts of activity, and then a slowdown. As a result, he said, “Our normal policy is at least 25 per cent equity in the company. “The companies that are able to withstand the swings are the ones that are well-capitalized.” Equipment, he said, is very expensive. Niche companies, he noted, can grow very quickly, and need equity to keep pace with growth. “It’s important a percentage of profit be retained for future growth, so you don’t find yourself cash-strapped. That’s a reality the smaller players have to understand,” Nicol advised. They still have to pay salaries and the fuel

bill, for instance. Spring breakup causes a delay in cash flow every year, yet is a period when you still have to pay bills. Having

succeed in spite of them- able?” tor. Working capital for of credit. Term loans are selves. It’s one thing to Generally there are assets like inventory and used for long term assets, be really successful in two key forms of lend- receivables are typically like equipment and real good times,” he said. ing they do for the sec- dealt with through a line estate. What you do to weather the storm when factors like world price of oil are out of your control makes a difference in the bad times. Resist the urge to spend money on the “toys” or luxuries in a really good year, otherwise you can find yourself in a cash bind later, he explained. When it comes a good capital base helps to capital costs, there’s weather that. nothing cheap about “Any companies that buying a service rig or get into trouble, that’s large heavy equipment. normally what happened Sourcing labour – not enough operating is another issue Nicol capital,” he said. pointed to. There is a A lot of businesses large demand, but short are run “by the seat of supply. their pants,” waiting to When looking at a see what cheques come business plan, Spectra in before paying bills. Credit Union looks for The trend is for tighter things like capitalization, reins on the cash flow. cash flows, revenues, ex“Often a small busi- penses, and labour. ness, either in the oil Nicol said, “We lend patch or somewhere else, cash, and we get paid is good at something, or back with cash. We need has good contacts. As to know how much cash their size grows, they you need, and when do don’t have the individual you need it. How much This truck, hauling two coils of rod, was seen in Estevan on accounting [expertise],” cash will you pay back, Dec. 3. Photo by Brian Zinchuk Nicol explained. and when will it be availIt’s important to have that accounting expertise working with you, he noted, pointing to reporting items like • Earth moving and Oilfield Construction payroll, GST and PST for government can be a • Lease Preparations and Restorations full-time job. • Pipeline Construction and Maintenance “Surround yourself with expertise you would • Snow Removal need to run the business,” • Road Building, Dugouts he said, with accounting • Trackhoe and Backhoe • Dozer Ripper and Winch Cats and legal at the top. “If • Lowbeds and More • Motor Scrapers, Graders any of those are missing, you are going to run into Celebrating over 30 Years in SE Saskatchewan! trouble.” “Sometimes people HWY. 47 N. AT BENSON Fax: 634-9798 • Cell: 421-0203

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PIPELINE NEWS January 2011

Top 5 things venture capitalists look for “If the team is good, the area they’re playing in has competitive advantage, the exit strategy is to build up from 500 to 4,000 barrels a day, and roll it to a larger company, we say that’s a thought-out strategy. That’s typical strategy and an achievable exit strategy based on experience” - Grant Kook

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WE RENT

Grant Kook is president and CEO of Westcap Mgt Ltd.

By Brian Zinchuk Saskatoon – With oil running in the $80-plus range, and drilling fleets running full out, it’s no small wonder many people are looking to capitalize on investment opportunities in the oil patch. Saskatoon-based Westcap Mgt. Ltd. is being flooded with proposals for investment. Westcap is probably best known as the manager of the Golden Opportunities Fund, a Saskatchewan-based labour-sponsored investment fund. Westcap manages approximately a quarter-billion dollars in funds. “We’ve seen more

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said, regarding the top priority, as well as their own personal risk taken in the venture. “How much skin do they have in the game?” Is their their team collectively well rounded? For publicly traded companies, governance is key. “Do they know how to drive shareholder value? Do they have the right geology, team and person that has experience that particular area?” The questions remain unchanged across all industries, but they can vary slightly due to differences in sectors. Instead of geology expertise in oil and gas it may be leading edge patents in the biotechnology sector. The second item venture capital firms look for is the company’s edge. “Is there a definable competitive advantage to the particular business they are working in?” Kook said. ɸ Page C5

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drilling company proposals and heard of more drilling company start-ups in the last three months than we’ve had all year,” said Tyler Bradley, an investment analyst with Westcap who looks after their oil and gas ventures. Grant Kook, president and CEO of Westcap, noted they have seen lots of interest from drilling companies and exploration and production companies. “There’s good activity in the oil and gas and service sector,” Kook said. When approached with so many pitches, what makes the good ones stand out? Pipeline News asked Kook to explain the top five things venture capital firms are looking for in a proposal. “It sounds cliché and old, but it is the truth and everyone says. You start by looking at competency, experience and expertise on the management team,” he

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Before you get the investment, you need an exit strategy

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A Ă are illuminates the Cenovus Goodwater plant at dusk. Photo by Brian Zinchuk

Éş Page C4 “In technology industry, are there patents? Are you a ďŹ rst mover?â€? “On the drilling rig side, what we’re looking for are companies that have strong employee retention strategies that stand out from the rest,â€? Bradley said. “We’re looking for dierentiated service strategies, and an aggressive, active sales strategy that stands out.â€? Kook said, “Whatever industry it is, be it the drilling sector, technology, or a service business, what is deďŹ nable that separates you from the industry? Is there a barrier for entry for someone copycatting you once you get up? Is your model copyable, or is there an advantage that makes it sustainable during the course of time that we’re in the business, which is normally four to six years?â€? The third point is a well thought out execution strategy. “You have a business plan, but have you thought out how you’re going to execute it? Does it take into account competitors, and how they will react? Does it take into account labour shortages, regulatory issues and changes in regulator issues?â€? Kook said. “Is the strategy well thought out, and are there any risks or pitfalls in the execution of it?â€? Westcap has plenty of experience in this regard, Kook noted. “Because we’ve looked at and invested in a lot of dierent oil and gas companies, a lot of dierent drilling companies, a lot of dierent management buyouts, we’ve seen a tonne of them. We’ve done a hundred deals in the last 12 years. We have a good feel of where the pitfalls of execution are. You’re probably not going to fool us, hopefully, and we have

a lot of industry partners to reach out to ensure that execution strategy is well thought out.â€? Assessment of a proper risk return matrix is Kook’s fourth priority. “What I mean by that is, is the capital we’re putting in relative to the stage of the company? Am I getting properly compensated for the risk I am going to take? It’s an early stage play, regardless if it’s oil and gas, drilling, new manufacturing process – is the risk relative to return properly compensated? “If I’m doing a management buyout, I’ve got a history of earnings to do a valuation matrix on,â€? Kook said. A management buyout is a lot dierent in risk than an exploration project. “The last one for us is an achievable exit strategy that we look for,â€? Kook said. “Are there various exit strategies we can count on? Can we deďŹ ne it? Is it a deďŹ ned exit strategy, like a ‘put clause?’ Is there a deďŹ ned time where there’s a mechanism where they take us out? “Or, in lack of a deďŹ nable exit strategy, what is the probability in the industry we’re investing in where there’s going to be a take-out or consolidation?â€? He pointed out that in the oil and gas industry, there’s a high likelihood of exits simply because of consolidation in the industry. In sectors where there aren’t as many mergers and acquisitions, they will deďŹ ne clauses for an exit. “If the team is good, the area they’re playing in has competitive advantage, the exit strategy is to build up from 500 to 4,000 barrels a day, and roll it to a larger company, we say that’s a thought-out strategy. That’s typical strategy and an achievable exit strategy based on experience,â€? Kook said.

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Service rig utilization hits 79% By Brian Zinchuk

Service rig utilization in December was at its highest level since October 2008. This crew could be seen south of Weyburn on Nov. 25.

Estevan – Saskatchewan’s service rig activity level rose to one of its highest points in three years by early December, with up to 158 of 199 service rigs working as of Dec. 14. That made for a 79 per cent usage rate, according to Nickle’s Rig Locator (www. riglocator.ca). Aaron Cugnet of Aaron Well Servicing Ltd. was taking delivery of their new Rig 4 in early December. He is a partners with Wes Cugnet in the Weyburnbased venture. “We’ve pretty much been steady right through,” he said. There was a slower summer due to rain, however. “It’s pretty much been non-stop,” he said. “When a company gets

a service rig, they generally keep it going all the time.”

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Daryn Petrowsky, field supervisor with Kindersley-based Lockwell Servicing Ltd, said all five of their rigs were busy when called on Dec. 8.

The company primarily works in the Kindersley area. The activity includes completions and workovers, he explained, mostly in the Viking formation.

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There was dampness all summer, he said, but as soon as it dried up, things became busy. He anticipated a busy winter. Independent Well Servicing field superintendent Jerry Mehler said “They’re all working,” of their eight rigs. It’s something of the sweet spot of the season, in that the ground has stiffened up, but the frigid cold has not yet set in. Like other service rig companies, the Estevan-based outfit had to contend with mobility issues during the wet weather. “The work was there for us, but we were down lots for not being able to move,” Mehler said. Vern Dornian, manager of Rockwell Servicing’s Estevan location, said one of their six rigs is a ‘floater’, while the other five are locked into long-term contracts. Two have been active with Mosaic’s potash

operation at Esterhazy for going on 10 years. All six Rockwell rigs based in Estevan were working when Pipeline News spoke to Dornian on Dec. 8. The workload is evenly split between workovers and completions, and is mostly in the Bakken, he explained. He doesn’t agree with the activity level being break up-driven, however, saying it has more to do with the typical rush before Christmas, when companies want to match their year’s budget within the calendar year. “Anyone laying back on jobs wants to get them done,” Dornian said. The Estevan location services both southeast Saskatchewan as well as southwest Manitoba. “Look at Manitoba. They’re spiking there, too. It’s crazy busy there, as it is here,” Dornian said. He noted it is very hard to get people. They have enough, but barely. A lot of green people are coming in the door. “We’re working hard to get our people moving up the ladder,” Dornian said. Those with experience on service rigs are not coming back to them, he explained, instead choosing other lines of work. As a result, they are doing extra training, quicker than usual. There are a lot of younger people from other provinces such as Ontario, Quebec and Newfoundland and Labrador, he said. “They’re all flocking here, trying to get work.” With all the new people to the industry, Dornian said, “Everybody’s in the same boat.”

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SaskPower defers carbon capture project Goes ahead with rebuilding Boundary Dam Unit 3 Estevan - SaskPower will rebuild Boundary Dam Power Station Unit 3, but will not be incorporating carbon capture at this time. However, it will be built with the capability to have such a system added at a later date. The company will invest $354 million to extend the life of the generating unit for 30 years. Boundary Dam 3 was scheduled to shut down in 2013 after 45 years of service. Work on the major components of the plant will begin in 2011, with construction scheduled to start in 2012. Operations are expected to commence in the fall of 2013. “We are pleased to be moving forward with a project that will provide a major boost to the provincial economy, lay the groundwork for greener energy, and help ensure Saskatchewan has a secure supply of power,” said Rob Norris,

Boundary Dam Power Station will see its Unit 3 rebuilt, but not with carbon capture technology installed at this time. It will be built with that in mind, however. Photo by Brian Zinchuk

minister responsible for SaskPower. Boundary Dam 3 will be rebuilt with a state-of-the-art Hitachi turbine custom-designed for carbon capture systems. SaskPower will continue with technical work on the integrated carbon capture and storage system proposed for the

Boundary Dam Power Station. This work will be supported by funding provided by the federal government, which has committed $240 million to assist in the development of carbon capture technology in Saskatchewan. SaskPower will defer a final decision on construction of the in-

tegrated carbon capture and storage system until the new federal thermal coal power generation emissions control regulations are completed. The company estimates it would cost $1.2 billion to rebuild Boundary Dam 3 with a fully integrated carbon capture and storage system.

“Considering the magnitude and importance of this project, we have the responsibility to ensure that the changes to federal regulations dealing with coal-fired power plant emissions are complete before proceeding,” said SaskPower president Robert Watson. Boundary Dam

Power Station is SaskPower’s largest generating facility, with six units and a combined generating capacity of 824 megawatts. The company’s three coal-fired power plants account for about 50 per cent of its generating capacity of 3,371 megawatts. SaskPower has a total available generating capacity of 3,840 megawatts when the production of independent power producers is taken into account. The Boundary Dam 3 project is part of an ambitious capital program that will see more than $10 billion invested in SaskPower’s power production and transmission and distribution systems over the next decade. During the last two years alone, SaskPower has added more than 400 megawatts of natural gas-fired generation and is in the process of doubling its wind power production.

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PIPELINE NEWS January 2011

Bookkeeping background Estevan – A background in bookkeeping has been a key beneďŹ t to Kelly McConnell, who is now co-owner and oďŹƒce manager of Kash Downhole Anchors Inc. The company is named after Kelly and her husband Tracy’s son, four-year-old Kash, who can occasionally be found looking up Backyardigans on a spare computer. The pair also have a daughter, Kallie, 14. “I took oilďŹ eld production accounting through Southeast Regional College,â€? Kelly said. “There’s ďŹ ve modules in the program. It explains everything.â€? The course included formations, extraction, calculation of payments, royalties, how to ďŹ nd a land location and the like. “I worked for Enbridge for a year,â€? she added. “I had some other opportunities. Taking that course opened up a lot of doors in the oil patch.â€? Kelly’s business experience includes running a Dairy Queen with her mother. Her father

used to run a trucking company. Tracy and Kelly have been together for 10 years, married for ďŹ ve. The idea “Tracy came to me in December 2007, and said he had this idea,â€? Kelly recounted. Her response? “If you want to do this, put it together on paper and we’ll see how this works.â€? They bought a software package on how to start a small business, and plugged away at the business plan for ďŹ ve months. “Then we went to the bank in May and got our money,â€? she said. Tracy was the local manager of Baker Oil Tools. He grew up in the area. He saw an opportunity with downhole anchors. “We just came in at the right time, with the right kind of business. There wasn’t anyone specializing in downhole anchors.â€? Anchors were overlooked, they felt. Companies focused on downhole tools, but not anchors. When it came time

You have to keep growing and expanding, explains Kelly McConnell. Just over two years in business, Kash Downhole Anchors Inc. has recently launched tubing drains, left and right, and pump seat nipples, centre.

to launch, Tracy had all the equipment and inventor lined up. Kelly found the building, on Perkins Street on Estevan’s east side. “That was a very exciting time. We didn’t sleep for two years,�

Kelly said. “When we went to the bank, we couldn’t even breathe. I asked Tracy, ‘Don’t you feel sick?’ “He had a smile from ear to ear. He was excited about our future, and I was very nervous.

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“We opened Aug. 1, 2008. It worked out very well for us. Everything was booming. I started Oct. 1. Until that point, Kelly was coming in on weekends, working behind the scenes, ďŹ guring things out. “That bookkeeping background came in handy setting up the accounting program,â€? she said. “It was a lot of sleepless nights for the ďŹ rst year.â€? The rule Working together, they needed a guideline to keep things in order. “Our rule was, when we started, Tracy does shop and sta, and I do the paperwork,â€? Kelly said. Following that, they could stay out of each other’s way. She said it’s important to have deďŹ ned

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roles so two people aren’t doing the same job, or stepping on each other’s toes. That idea came from talking to other people around town who work with their spouses, she said. “The good thing about owning your own business is you can work as hard as you want, then on days when it’s not busy, you do things you couldn’t do otherwise. “You work hard, hard, hard, but there’s quiet days that make up for it. “Sometimes, you have to bring your kids to work. Sometimes, you have to drop work for your kids. You try not to forget to have a life while making a living. Thank goodness for BlackBerries. I can keep track of everyone’s adventures.â€? Currently they have ďŹ ve employees, including the two owners. In staďŹƒng, Kelly’s philosophy is to ďŹ nd the right people who work hard and get along. Following that has worked out well for them. When it comes to receivables, Kelly said, “I used to work in collections. I have no problem phoning people up asking if our invoice is entered, and when I can expect payment.â€? They’ve tied into a new online invoicing system called Open Invoice that helps. “We do the work. They have a work order. We make them an invoice, and then I enter the invoice their system through Open Invoice.â€? It reduces the paper chase as well as the number of days it takes to get paid. “My accounts receivables are never over 90 days,â€? she stated. ɸ Page C9

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PIPELINE NEWS January 2011

bene¿ts of¿ce manager

C9

Kash Downhole Anchors Inc. has added pump seat nipples to their line up, seen here, as well as tubing drains.

ɺ Page C8 Staying on top of accounts receivables is “huge.” Every day she looks up the accounts receivable, the price of oil, the weather and the bank account. There’s a lot more to paperwork than invoices. “There’s all these fires to put out – shipping, etc.,” she said. “One little thing can be so time consuming.” Expansion “Now that we’ve got ourselves going with anchors, we’re expanding our business,” Kelly said. The two new products, introduced in late 2010, are pump seating nipples and tubing drains. Both are a logical extension of the anchor business. “It’s another draw to increase our client base. Kelly McConnell sets up her son Kash at the computer so she can get some work done. You always have to be thinking, changing, growing, expanding. 2003 - 379 Peterbilt “I love it. I can’t wait to get up every morning C-15 CAT 475 H.P., 13 SPD. Trans, 63” walk in bunk and get to work. There’s lots of opportunities now that we have a business.” My people Kelly is active with two womens organizations. “I’m the president of the Oilwives Club of Estevan,” she said. She is also vice-president of the Desk and ELECTRICAL CONSTRUCTION, Derrick of Southeast Saskatchewan. MAINTENANCE & SERVICE “These are my favourite people. Some of my best friends belong to Oilwives. When I came to town, I PLC’S, VFD’S didn’t know anybody, so I joined a bunch of things. I BATTERY CONSTRUCTION hooked up with the Oilwives Club.” TRENCHING At her first meeting, one person said she knew which restaurant was the best place to eat in southMOTOR SALES & REPAIRS We have two each identical trucks ready for the east Saskatchewan. She could tell from her husband’s oilÀeld. Equipped with PTO T&E pumps, positive Enform COR CertiÀed credit card statements. air shut off’s, turn key operations. “It’s very important to have a network of reAvailable Immediately. Price $45,000. 24 HOUR SERVICE sources. When you run into problems, you can ask 62 DEVONIAN ST. ESTEVAN, SK. Davidson Truck & Tractor Sales people who have been there, done that.” PH: 637-2180 FAX: 637-2181 It could be something as simple as who is the Moosomin, SK 435-3700 LOCALLY OWNED & OPERATED cheapest shipper when sending a box, or a pallet.

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PIPELINE NEWS January 2011 The ATCO Lodge Estevan held an open house on Nov. 27.

The rec room at ATCO Lodge Estevan features a pool table and many other amenities.

Sandwich orders at ATCO Lodge Estevan are custom-made each night. Camp manager Dennis Ripley shows a bagged lunch ready to go.

First cook Ron Gagne stirs the pot in preparation of supper at ATCO Lodge Estevan.

ATCO Lodge Estevan hosts open house Estevan – With the winter drilling and completion season now in full gear, ATCO Lodge Estevan held an open

house on Nov. 27 to show off its offerings. The floors glistened the day before the open house, when Pipeline

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News paid a visit. The camp opened in March 2010, taking some of the strain off the tight accommodations market in southeast Saskatchewan. “We keep this place as clean as possible, day in and day out,” said Dennis Ripley, who has been camp manager since it opened. As of late November, they had seen as many as 160 people at a time in the 196-person capacity camp. He reports they have stacks of comment sheets detailing how good the food is and the how clean the facility is.

“People feel at home here,” he said. The facility is composed of four dormitory wings, each with 49 rooms, washroom and laundry facilities. They are all connected by an Arctic corridor to the games room, workout area and dining facilities. Each room has TV and Internet. The open house included tours of the facility, and a chance to sample to food. “They’ll be impressed,” Ripley said. “With our prices and three hot meals, you can’t beat it.”

Camp prices may be higher than a hotel room in some cases, but once you factor in the cost of meals each day, Ripley explained they are competitive. “When the novelty wears off, they’ll find it’s a better go here, because you’ll have the meals provided. “Most of my staff here is local. I have a few from outside,” he said. Both Ripley and his executive chef, Dave LeBlanc, have had decadeslong military careers in food services. First cook Ron Gagne is a journeyman chef from British

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Columbia with several years experience working in camps. Second cook is Candace Dighans from Weyburn. In some camps, clients make their own bag lunches in the morning. At the ATCO Lodge Estevan, they place their order the night before. The sandwiches are made overnight, and are bagged, tagged and ready in a large refrigerator in the morning. Made from order sheets filled out by clients, each sandwich is made to order, right down to the type of bread and condiments. Ripley said it’s much more hygienic that way, as opposed to having everyone making their own sandwiches. “I have a sandwich maker that comes in the evenings. She’s in from 1 a.m. until 9 a.m.” They also have a cooler stocked with standard sandwiches for those who don’t place their orders. Portions left over from supper are put in take-out containers for lunch the next day, too. Breakfasts are a wide-ranging affair, from choices of eggs, bacon, sausage, to shredded potatoes, porridge or cereal. “You don’t get skinny,” Ripley said in reference to staying at their camp.

PIPELINE NEWS January 2011

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Overseas services leads to camp work initially in the infantry before changing over to food services. He retired as a warrant officer. LeBlanc is still in the reserves, also with a total of 35 years under his belt. A master warrant officer at the time of the interview in late November, he was due for promotion to chief warrant officer, the highest enlisted rank available in the Canadian Forces. As a chief warrant officer, he will be the regimental sergeant major (RSM) for the 38 Service Battalion. “You are the commanding officer’s senior adviser,” LeBlanc explained of an RSM’s duties. LeBlanc hails from Winnipeg, where the unit is headquartered. His duties as RSM cover Saskatchewan, Manitoba, and the Thunder Bay region of Ontario. “We crossed paths throughout the years,” LeBlanc said. “He was in one end of Canada, I was in the other.” “I was outside of Canada,” Ripley added. His home is St. John, New Brunswick. Asked about the difference between the military and running a camp, they both note a softer ap-

proach is needed. “You have to bite your tongue a bit,” LeBlanc said. “You have to cuddle them and guide them along, not do the army thing.” “You have to be diplomatic,” Ripley offered. “I used to box in the army when I was younger,” LeBlanc said. “I was the junior welterweight New Brunswick champ for three years.” He even tried out for the 1984 Summer Olympics. Ripley’s service involved extensive time overseas. He was in Cyprus twice, Egypt once, the Golan Heights six times, Bosnia once, as well as Afghanistan. While he did support work for troops in the First Gulf War in 1990-91, he didn’t deploy there. Indeed, even after he left the military and joined ATCO, he ended up in Afghanistan supporting the Canadian mission at Kandahar. He also spent two years in Kosovo with ATCO. A stint as assistant manager at ATCO’s Creeburn Lake Lodge in northern Alberta preceded his management of the ATCO Lodge Estevan. ɸ Page C12

“MORE THAN JUST GRAVEL”

Executive chef Dave LaBlanc prepares Àsh at the ATCO Lodge Estevan.

Estevan – ATCO and the Canadian military work hand-in-glove, so it’s no surprise to find two men with 70 years of military experience between them heading up the ATCO Lodge Estevan. Dennis Ripley is the camp manager, while Dave LeBlanc is the executive chef. Both of their military careers have been in food services. Ripley spent 28 years in the regular forces, in the army, followed by seven years in the reserve. He was

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PIPELINE NEWS January 2011

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a structure based on the military, which is good for us. We generally know where the company is going, and how to deal with things.” “This is why they take ex-military. We’ve been out and about. Our families know how it is. My wife doesn’t get upset when I’m away.” LeBlanc’s wife comes from a military family. Her father was an airborne medic. “My father was exmilitary. He was an engineer,” he added. Ripley’s father was also a career soldier, as a mechanic. Having risen through the ranks, both as warrant officers, it had been a while since they actually did hands-on cooking. Now you’ll find LeBlanc in the kitchen with several other cooks, and Ripley helping out on occasion if they are short-staffed. “As a warrant officer, you run the show. You’re given the manpower to run it,” LeBlanc explained, saying he spent many years in a management position. “There are days I find long because you’re older, but it’s good to get into the swing of things,” he said. Ripley noted, “In the cooking world, timing is everything. Five o’clock is five o’clock. The troops need to be fed.

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Merchant bank for oil patch Calgary – You’ve drilled some successful wells and want to buy out a partner. A land sale is coming up shortly, and you want to jump on the opportunity. Going to a big bank is going to take too much time. Where do you turn? That’s exactly the type of lending that Toscana Capital Corporation does. “We’re a Calgarybased merchant bank. We primarily provide debt financing to junior oil and gas companies,” said Brian Mellum, president and managing director. Toscana, which got its start in 2003, is managed by three partners who previously worked together in the oil and gas lending group of one of the major banks. They saw an opportunity in lending to junior producers. “We can be more flexible in how we lend,” Mellum said. The company has done about 85 deals over the last seven years, totalling approximately

$275 million. They only lend to companies with reserves in the Western Canada Sedimentary Basin. Their deals typically range from six to 18 months. “We’re primarily shorter term lenders,” he said. ”Our preference is to finance growth opportunities rather than provide working capital loans, although we will do both. “The ideal situation is where a company has an opportunity to acquire additional reserves or to accelerate development drilling on existing lands,” Mellum said. “We have more flexibility and can provide higher leverage on the producing assets than you would see from a bank.” They allow companies to avoid share dilution to take advantage of an opportunity. Buying out a partner or moving quickly to acquire land in a land sale are prime examples of the types of

Our preference is to finance growth opportunities rather than provide working capital loans, although we will do both. - Brian Mellum President and managing director of Toscana Capital Corporation. deals that Toscana will finance, according to Mellum. Being small also means being nimble. The three partners are the credit committee, Mellum explained. “We can generally tell within half an hour if a deal is financeable.” A deal can be turned around in as little as a week, whereas it may take a month with a big bank. Loan sizes range from $2 million to $10 million. “We’ve arranged deals as large as $25 million,” Mellum said. “Our asset base is about $55 million that we manage ourselves,” he

explained, adding they can access more capital through syndication. They deal with both

public and private producers with existing reserves and production. The smallest company they’ll deal with will have at least 200 boepd of production. Clients typically have $5 million to $100 million in existing assets. They also have to be cash flow positive. Toscana can come in behind a bank and take a secondary position, but the loan has to be secured. About half their deals are in this form. The other half has

Toscana in the first position. There is a price to pay, literally, for this flexibility. Mellum explained, “We’ve got a higher rate of return requirement than the banks but less than an equity provider would be looking for. We want a minimum rate of return of 15 per cent on an annualized basis.” “Our preference at this point in time is to finance oil over natural gas.”

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PIPELINE NEWS January 2011

Providing loans to junior producers Calgary – In a business where every well’s production will decline over time, it’s important to keep growing. To do that, you need the financing to pay for that

growth. Canadian Western Bank, headquartered in Edmonton, provides operating loans to established junior producers. Doug Crook is se-

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nior assistant vice-president and manager of energy lending, while Tim Bacon is assistant vice-president of energy lending for CWB. They both operate out of the Calgary main branch. While CWB has two Saskatoon branches, another in Yorkton, and one in Regina, energy lending is handled by the Calgary branch. If you want to borrow from them, you have to be producing beforehand. “Canadian Western Bank, like every other bank in this business, lends against production. In order to get a production loan, a loan to drill for other wells, you have to have an established base that supports the loan amount,” explained Doug Crook is the assistant vice-president and manager of energy lending Photo submitted Crook. “We focus first for Canadian Western Bank in Calgary. on production.” Bacon said, “We do Based on what bank you spend it on exploration with a map and some reserves-based lending. are dealing with, they drilling, you can. If you seismic data, that’s not Essentially, you have to have different methodol- want to spend it on other enough. have an established base ogies and different future forms of capital expendi“If you’re doing the of production from your price decks as to where tures, say optimizations, initial exploration work, proved, developed prothe commodity price is recompletions, etc., you that requires equity,” Baducing reserves. We try headed. We then devel- can. That’s really up to con said. to then look at the cash op an operating lending the company.” One of the main flow that emanates from amount that we’re willing Typically there is an things they look at is diyour existing production. to let the company have. interim review date set, versification of reserves. “Typically these are such as six months or They want to see more

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a year later, where the bank reviews the reserves of the company and reestablishes the new borrowing amount, Bacon explained. They are known as operating loans. Their main purpose is growth of the company. If you’re showing up

than a handful of wells, and hopefully in a couple different areas. “Difficulties and losses stem from lack of diversification,” Bacon said. “If you have only one or two wells, and one goes down, that can severely crimp your cash flow.” ɸ Page C15

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If you want to borrow to drill, you need production ¿rst ɺ Page C14 Items like overhead, royalties, and operating costs are other considerations. “If you run a fairly lean operation, that obviously improves your cash flow,” Bacon said. “Right now, 100 boepd of oil probably gives you a better netback than the equivalent amount of gas, given crude prices are good and gas prices are poor.” For their purposes, CWB wants to see a minimum of 50 boepd production. That’s a lot smaller than many other banks will consider, they point out. “There aren’t a lot of banks that will consider a loan of that size. That results in a relatively small loan. Most of the big banks turn their noses up at a deal like that,” Crook said. “Most of them look for a minimum 1,000, maybe 500 boepd.” Bacon said most other banks have interest in cross-sales to their commodity hedging groups and investment banks. CWB, on the other hand, is strictly a debt provider. CWB’s loans of this type run from half a mil-

RRL closes purchase in SW Sask. Relentless Resources Ltd. has closed its previously announced acquisition of a 100 per cent working interest in petroleum and natural gas rights on 1,295 hectares (3,200 acres) of contiguous lands in southwest Saskatchewan from a private arm’s-length oil and gas company for a purchase price of $550,000. The assets acquired include 518 hectares of P&NG rights from the surface to the top of the Precambrian as well as 777 hectares of various deeper P&NG rights. The two sections of land with all P&NG rights (Viking rights) are prospective for the southwest Saskatchewan regional light-oil-resource Viking zone play which uses horizontal drilling and multistage fracturing technology, Relentless said. The lands directly offset an existing Viking light oil pool.

“

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” 16 D

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lion dollars to $50 million. Crook said, “We’ve got a lot of clients in that range.” Smaller loans can be done more quickly, they noted. They also have a large number of $20 million to $50 million loans. These are typically participations done on a syndicated basis with other banks to spread out risk. “In the oil and gas industry, the dollar needs are pretty big. Even the biggest banks have strict guidelines for how much they will hold for a given borrower,” Crook said, explaining that in the 1980s, the big banks used to do large loans on their own, but no longer. “They paid for it. Now everybody has a lot more discipline.” As for the CWB’s plans for energy lending in Saskatchewan, Bacon said, “I’m hoping to build the book. “Everybody has oil plays now. There are continually new companies being formed, looking for bank financing.” They also try to provide an alternative for clients who may be disgruntled with their existing bank.

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C16

PIPELINE NEWS January 2011

Sophisticated business systems keep track of money Estevan – In late November, activity could be seen setting up a new office in a storefront on the main drag of Estevan. Bristow Projects Inc. is establishing a presence in southeast Saskatchewan. The company is based in Innisfail, Alta., and will be operating in Saskatchewan as a wholly owned subsidiary – Bristow Projects Saskatchewan, Ltd. It’s a second go-around for owners Ron and Doug Bristow, brothers with a long history in the

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oilfield construction business. Their original operation was called Bristow Welding & Mechanical Ltd. It started in 1984, and was sold to a public company, Octane Energy, in 2000. It was subsequently purchased by Nabors Drilling in 2004. The Bristows stayed along for the ride until 2008, when they decided to venture out on their own again. “Doug and I left in May of ’08 and decided we had enough big company experience and started out again,” said Ron Bristow, CEO and co-owner, who spoke to Pipeline News at their new Estevan office on Nov. 23. “Our background is in facility construction and small bore pipeline,” he said. They typically run up to 10 inch diameter for pipelines. They also have a fabrication shop at their home base of Innisfail. “We have a broad background in the industry,” he added. “We will be offering our services to all the local companies. We’ve already talked to a lot of them.” With new provincial venting and flaring regulations, he said steel pipelines will be needed for solution gas gathering systems. The older oilfields in the Innisfail region are “very busy” with activity, according to Bristow. “We have a lot of work at home, but that being said, we’re cautious from previous experience.” A substantial number of workers who had been with them for a long time followed, he noted. Their staffing level now runs between 80 and 100. “We’ve got a lot of loyal people. We have a dis-

ciplined, structured approach to how we do business. A lot of people like that, and it lends itself to loyalty. Business systems Bristow stresses their structured approach several times during the interview. With their original company, they grew from 20 people to over 100 in one year. It was chaotic, and led them to establish business systems and defined roles. Those business systems are now a key strength. He said, “To be an effective manager, you have to delegate with trust. Our system allows us to do that.” “We have three primary focuses: safety, first and foremost; our accountability and workmanship; and our business management system.” Other companies get together with their accountants at the end of the quarter and figure out if they made any money, he said. With their processes, they know every day where the company is at. “We have a daily visibility if we’re successful or not. Presently, the majority of our work is off of our rate sheet. We aren’t bidding much right now,” he said. The entire company is set up for electronic functionality from payroll to job-costing, including in the field. All quality control packages are delivered to the client in a digital format. Field supervisors enter their information, such as contractors, payroll and the like, daily. Variance reports help track any operating issues, and can be used to identify cost savings. “Actual costs come in every day,” he said. Some companies don’t give field supervisors the ability to generate invoices, but they do, Bristow said. ɸ Page C17

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Bristow setting up SE Sask operation ɺ Page C16 Their system self-populates. It all rolls into ongoing executive operating reports. “Many large companies do not have this visibility. Our bank appreciates the timely access we have to all aspects of our business and the ability we have to speak to our results as well as forecasts,” he said. “To stay on top of your business, you need this kind of accountability.” A computerized safety matrix tracks all employees training, including items such as First Aid, H2SAlive and drug and alcohol awareness. It also includes specialized training, and site specific orientations. Supervisors are given advanced warning of impending ticket expirations, so they can have staff recertified in due course. Bristow Projects has developed its own in-house bid calcula-

14th l nia n e i B

ees are trained from apprentice through to supervisor roles. It may limit growth, he acknowledged, but provides a well trained base of employees and a consistent product to clients. “If you grow too fast, you deal with chaos and catastrophic failure. I don’t like doing that,” he said. He calls it “controlled growth.” In setting up their southeast Saskatchewan operations, Bristow Projects acquired the assets of a former Estevan company, as well as some of the people who worked with it. Kurtis Miller will be the operations superintendent in Estevan. They will have around 10 to 15 people in the southeast to start, and plan to build from there. “We’re looking

tors for pipelines, facilities and fabrication. “In most cases we can turn a bid around very quickly,” Bristow said. Developing skills The company fosters apprenticeship. Doug Bristow, the company’s president, is a pressure welder, while Ron Bristow holds trade certifications as a plumber/ gasfitter, steamfitter/ pipefitter and fourth class power engineer. “We’ve done every job we ask our employees to do,” Ron noted. “I can’t hazard to guess how many guys we’ve apprenticed. We want to focus on apprenticeship opportunities. We want them to grow. We strongly believe in organically growing your company,” he said. That means Bristow employ-

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June 1&2 2011 Nominations are now being accepted for the South East Saskatchewan Oilman of the Year Please download form off our website:

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Chairman: Ron Carson, Carson Energy Services Ltd. Vice Chairman: Dennis Krainyk, Apache Canada Ltd. Honourary Chairman: Hon. Bill Boyd, Minister of Industry and Resources

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to hire local,” he said, but added that several people from their Alberta operation will assist in establishing their business practice strategies in southeast

Saskatchewan. Initial projects started in December. In addition to office space in downtown Estevan, the company

is in the process of setting up a local marshalling yard. They started looking at southeast Saskatchewan a year ago, having been encouraged by local operators to set up shop in the region. It’s an operating area diversification strategy for the company. “We’re looking at this as a step-out to compliment our services. We’re in a growth mode,” he said.

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C18

PIPELINE NEWS January 2011

Staying on top of cash Àow “Probably the biggest impediment is, I can get the guys, but I can’t find a place for them to live,” - David Hammermeister

David D avid id H Hammermeister, ammermeiistter chartered ch harter t ed d accountant accountant t t and d business business i adviser ad dviiser with wit ith hM Meyers eyers Norris Norris i Penny, Penny stresses the importance of keeping on top of your cash Áow.

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sist you in growing your business and increasing your profitability. “Southeast Saskatchewan is unique in that we have a lot of privately owned producing companies,” said David Hammermeister, a partner with Meyers Norris Penny LLP (MNP). Hammermeister works out of MNP’s Estevan office and has focused on the oil and gas sector since 1992. In fact, he’s worked in the industry itself as an operator and in oilfield construction

as a summer student. With in-depth experience with one particular sector, Hammermeister understands the unique issues his clients face and is able to draw on his industry knowledge to develop solutions other accountants less familiar with the industry might not be able to provide. He also understands who he’s dealing with. His clients are primarily owner-managed entrepreneurs, not public companies. Their areas

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of expertise include exploration and production, trucking, drilling, completions, operations consultants, drilling muds, welding, geology, and equipment rentals. “By and large, they’ve built their businesses themselves,” said Hammermeister. “They know their business inside and out.” Hammermeister’s role isn’t to tell them what to do with their businesses. Instead, he delivers business advice, helping them proactively deal with their challenges so they are ready to embrace opportunities. “One of the most common issues two years ago wasn’t finding equipment or work, it was getting guys,” he said. Now, finding men or equipment isn’t as problematic, but housing is. “Probably the biggest impediment is, I can get the guys, but I can’t find a place for them to live,” Hammermeister said, illustrating just one way he’s able to help companies identify upcoming issues so they can work to solve them. Cash flow Cash flow can be a particularly challenging issue for companies. Again, an accountant understands how to effectively remedy the situation before it spirals out of control. ɸ Page C19

PIPELINE NEWS January 2011

C19

Charted accountant a trusted adviser ɺ Page C18 “The guys who are growing the fastest and doing the most work are the most likely to get in trouble,” said Hammermeister. For instance, if a company is selling a product, and sales double, they have to put out twice as much money to pay for the product, and are waiting on twice as much income. “Cash flow becomes a real problem for companies growing quickly,” he said. Addressing days receivable that are too high is one way people can tackle their cash flow issues. In the oil patch, it’s easy to run up to 120 days before a bill is paid. Another area to look at is inventory turnover; it’s often not high enough. On the receivables side, companies may be too understaffed to chase payments down, or too busy to get around to it. There’s also the embarrassment factor of asking people for money. An accountant can help you decide what needs to be addressed and develop a plan that allows you to achieve the results you want. Land For exploration and production companies, Hammermeister said that the big issue is trying to get land simply because land prices have gone up. “Their issue is going to be being able to find undeveloped land that’s got potential for a reasonable price,” he explained. Even if an E&P company does get land, the

problem of facilities looms. There’s also competition for equipment on the drilling side. Big operators tend to tie up equipment. That means that smaller companies might wish to use a particular rig, toolpush or geologist, but have to wait for the stars to align to get that to happen. Tax planning for mineral rights is another concern for Hammermeister. Successful, mature clients may need to do some planning work to ensure that they are minimizing taxes as much as possible. Buying or selling Accountants have an important role when clients want to buy into a business, or sell out. “The big need on the financing side are guys trying to buy out a partner, or buy out the boss,” Hammermeister said. When his clients are interested in such a transaction, he draws on the expertise of MNP’s Corporate Finance group to assist. “We have a lot of companies that want to buy firms in southeast Saskatchewan,” Hammermeister said. “Everybody’s for sale if the price is right.” Succession planning is another big issue. Hammermeister advises that owners think about what they want to do as an exit strategy. MNP’s accountants and business advisers can help companies make strong business decisions, such as putting a family trust in place to take advantage of another family member’s lower tax rates by splitting income. The key is to plan well ahead of time so that you are able

to get what you want out of the business. There’s lots of the traditional compliance work, such as filing taxes,” said Hammermeister of his job. “You become more of a trusted business adviser.” The client may ask for advice on bringing a key employee into the ownership, growth strategies, and the need to look at tax-planning opportunities. The MNP model has specialists in all areas of accounting and business advisory. “I’ve been the regional oilfield services niche leader for a year and a half now,” Hammermeister said. It helps to have someone with common contacts, who has dealt with similar problems within the industry.

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Painted Pony sets $95 million budget Painted Pony Petroleum Ltd. has set a capital budget of $95 million for next year which will be reviewed, and potentially revised, on a quarter by quarter basis. The company invested $88 million to the end of September this year. In the first quarter of 2011, planned operations will see expenditures of approximately $40 million with the drilling of 13 (9.9 net) wells. Of these, 10 (6.9 net) wells are planned for Saskatchewan and three (three net) wells are scheduled for British Columbia. Other key highlights for the third quarter include establishment of a $65 million demand revolving facility, an acquisition of 5.25 net sections of land contiguous to the company's existing lands at Midale, Sask., and a purchase of light oil assets producing 90 BOE a day and approximately 2,950 net acres in the Hastings and Ingoldsby areas of Saskatchewan. To date in the fourth quarter, Painted Pony has drilled four (two net) horizontal Bakken wells in the Huntoon areas, in various stages of completion. In the Huntoon and Midale areas, the installation of a battery and gathering system was completed in the

first half of the year. A second area battery and gathering system is currently under construction, with completion anticipated before the end of this year. In the Huntoon area, solution gas and liquids conservation commenced at the end of August with the battery being tied into an existing thirdparty gas plant. The balance of the wells in the area were expected to be

tied-in before the end of 2010. In October, the company acquired Mississippian oil assets for $10.6 million, primarily in the Hastings and Ingoldsby areas (nearby to Painted Pony's existing operations) from a private company. In November, Painted Pony acquired 3,349 net acres (5.25 sections) of 100 per cent working interest lands with

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Bakken rights for $1.8 million. These Crown lands are contiguous to Painted Pony's Midale core producing area and are expected to add significant development opportunities and synergies with the company's existing infrastructure. For the month of December, the company planned to drill up to seven (4.7 net) horizontal oil wells in Saskatchewan.

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Thanks!

For course dates and locations, please visit our new A-Z course listing at www.southeastcollege.org To register for a safety course, call toll-free 1-866-999-7372.

634-9550 Estevan

C20

PIPELINE NEWS January 2011

Of ice and oil Balancing work and recreation By Daniel Hendriksen For Pipeline News

For a lot of people in southeast Saskatchewan, life revolves around the oil play in the area. Another big part of the lives of residents here is the game of hockey. So it’s not uncommon for the two to intertwine, especially for those who have a career working in the oil industry and also have the large commitment of playing in the Big Six Senior A Hockey League. Of the 10 teams in the Big Six league, most are littered with men whose jobs are in some way directly connected to the oil play. Kyle Peterson plays for the Midale Mustangs. He says out of 25 players on their roster, at least 20 work in the oil industry. For a lot of those players, their jobs entail either shift-work or they’re on-call 24 hours per day, seven days per week. So how do these guys find the time to do both? Peterson, who is the South Saskatchewan manager of Palko Environmental – an oilfield waste processing company, says due to work and family commitments, it has been tough to make a lot of the Mustangs games in recent years. “I commit to about half the games per year, and last year I was only able to play at the provincials,” Peterson said. Chris Gould, who plays for the Lampman Imperials and is on-call at all times, says it’s not usually a problem for him to make games because NOV Brandt – the company that he works, for is quite flexible when it comes to him playing hockey. “They’re pretty good,” Gould said. “There are four of us that are on-call so I’ll just tell them that I have a game and not to call me from 6 to 11 p.m. tonight, and they’ll call someone else if something comes up.” With so many players on each team working shift-work and different schedules, one would think it might be tough for these teams to ice a competitive lineup for each and every game. However, according to Kyle Garagan of the Bienfait Coalers, most of the teams in the Big Six league have rosters of upwards of 25 players so it’s not usually a problem to have at least three lines. “No, but we have been missing guys due to work,” Garagan said. “We have 23 guys carded so we have enough guys even if we’re missing three. Lots of teams only have 20 players and then they have seven guys missing per night. “Pierson (Bruins) has a hard time because they have a lot of rig workers, and their shifts don’t work out right for hockey.” Garagan is a battery operator for PetroBakken Energy, and says it’s not uncommon for guys in his profession who play Big Six to get called to work right in the middle of a hockey game. When it comes to players missing games for work, most clubs have a system where players will let their team managers know their schedules as far in advance

Players in the Big Six Senior A Hockey League spend time stickhandling their work schedules so they can stickhandle the puck. Photo by Daniel Hendriksen.

as possible so they can work out a lineup a few days prior to game day. “Our coach gets rosters arranged at the beginning of every week to understand how many players we’re going to have for the weekend games,” said Peterson. “It’s basically just getting guys’ schedules and the coach handles that.” It’s not always that easy for guys who don’t know their schedules in advance, however. According to Garagan, players will sometimes phone ahead and say they can be there by the end of the first period, so the manager will put them on the game sheet, and that way they can still play even if they’re late. The Mustangs, Imperials and Coalers each practice once per week as well, and the players say these too, are well attended. For someone like Gould, who lives in Estevan and has to make the 40-minute drive to Lampman for both games and practices, it can get a little time consuming, but he says it doesn’t bother him. In fact, neither Peterson, Gould nor Garagan get compensated for fuel, and they all admit that when you’re playing for the love of the game, it doesn’t matter all that much. “In our situation, our Midale group is a great bunch of guys,” says Peterson. “It’s definitely a hockey thing, but also a social aspect to your life too.”

Career Opportunities Help Wanted Store Manager Must have good computer skills OilÀeld knowledge and tickets preferred

Fax: (780) 872-5239

Fax or e-mail resume Attn: Wayne or Kris 306-482-5213 candnkris@sasktel.net

Drivers Wanted 1A or G endorsement an asset but willing to train the right person. Send resume to: Mission Hot Shot Box 208 Estevan, SK S4A 2A3 or phone: 461-8471

3A & 1A Drivers/ Owner Operators/ Mechanics

Brady Oilfield Services LP. Weyburn, Halbrite and surrounding area. OilÀeld Safety CertiÀcates an asset but not necessary. BeneÀts package available.

Mail or Fax Resume and Drivers Abstract P.O. Box 271 Midale, Sask. S0C 1S0 Fax: (306) 458-2768

PIPELINE NEWS January 2011

Employment Opportunity

is an industry leader in Safety Services and is currently seeking

Safety Personnel to keep up with increasing customer demands.

If you are interested in becoming part of the Target Team and enjoying our growth with us, let us know!

Please forward resume with copies of tickets to: resumes@targetsafety.ca or fax to 780-870-5359

Career Opportunities Now Hiring for the following positions:

JOURNEYMEN ELECTRICIANS APPRENTICES

Dispatcher Required

Brady Oilfield Services LP. Specialized oilÀeld hauling company in Southeastern Sask.

Highly competitive salary, excellent medical beneÀts and vehicle allowance. Work Schedule: 5 on - 4 off / 5 on - 5 off / 4 on - 5 off. Base located in Halbrite, Sask. If you are a motivated team player; with previous oilÀeld experience, Please Fax Resume to: 306-458-2768 Attn: S. Juravie P.O. Box 271 Midale, Sask. S0C 1S0

(no experience required)

Energy Services

HSE COORDINATOR Require safety certiÀcates & valid drivers licence. Competitive wages and RRSP plan & full beneÀts package offered.

We are currently seeking applicants for the following positions in Estevan: • ELECTRICIANS (Apprentices/Journeyman) • PIPELINE LABOURERS • GRADER/HOE OPERATORS • LABOUR FOREMEN • SUPERVISORS

We are also accepting resumes for • Journeymen Electricians • 3rd or 4th year Apprentices for Carnduff and surrounding areas.

Fax resume to 637-2181 or deliver to: 62 Devonian Street, Estevan, Sk.

Flint offers a competitive and comprehensive pay and beneÀts package. If you are interested in one of the above positions, please call Nick Steinke at 634-6877. All inquiries will be kept conÀdential.

VACANCY

VACANCY

Heavy Duty Technicians

Heavy Duty Technicians Frontier Peterbilt Sales Ltd. is an enterprising dealership for large trucks and trailers based in Saskatoon, Regina, Lloydminster and Estevan. Due to continued growth and an expansion of our Lloydminster branch, we are looking for full-time 2nd year, 3rd year, or 4th year apprentices and Journeyman Service Technicians for our Lloydminster location. We require people that are meticulous, resultsdriven and customer service oriented. We offer an attractive remuneration that includes an excellent salary and an extensive employee beneÀt package.

C21

Essential Coil & Stimulation Services is a company recognized for safety and excellence with in the oil and gas industry. We strive to provide a good working relationship with our customers. Currently we provide services throughout Alberta and Southern Saskatchewan. Essential Coil offers competitive wages, scheduled days off, group beneÀt plan and employee savings plan. If you are an energetic team player with superb attention to detail and strong communication skills, we invite you to apply for the following positions at our Weyburn location:

Frontier Peterbilt Sales Ltd is looking for full-time Service Technicians in Estevan to work on the premier product in the industry and the newest dealership in the city. We have opportunities for Service Technicians, from 3rd year apprentices to Journeymen. Skilled Journeyman Technicians will earn the top dealership wage in Southern Saskatchewan ranging from $32.00 to $39.00 per hour. We require people that are meticulous, results-driven and customer service oriented. We offer excellent pay as well as an extensive employee beneÀt package and the opportunity to progress within the Company.

We thank all applicants for their interest. Please submit your resume by fax, email or in person to:

Coil Tubing Operators Coil Tubing Helpers

Mr. Bryan Bax, Service Manager Frontier Peterbilt Sales Ltd. 5201 40th Ave, Lloydminster, SK S9V 2B7 Fax: 825-6851 Email: bbax@frontierpeterbilt.com

Class 1 driver’s license is preferred, but all class of drivers are welcome to apply. Previous oil Àeld experience & valid tickets are an asset Email or fax your resume & a current driver’s abstract to: tschwab@essentialcoil.com Fax: 306-842-8906

We thank all applicants for their interest. Please submit your resume by fax, e-mail or in person to: Jerrod Tedford, Service Manager Box 1340 #1 Frontier Street Estevan, SK S4A 2K9 Fax: 636-6321 Email: jtedford@frontierpeterbilt.com

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for

Tank Truck Operators E-mail resumes to: dlesage@equaltransport.ca or fax them to

306-453-4404

29-tfn

C22

PIPELINE NEWS January 2011

Career Opportunities

Bulk Plant Personnel and Shop Hand Nitrogen Operators Heavy Duty Mechanics Heavy Duty Mechanics (2nd or 3rd year apprentice) Parts Person

PIPELINE NEWS January 2011

• 1 Day Incident Investigation Workshop • Industrial Supervisor Training We can customize these courses to the client’s needs. Visit us at: www.dbsafetysolutions.com

3D

Maintenance

Cell numbers: 483-8024, 483-7024, 483-8148 Home: 486-2143 • Fax: 486-4855

Box 12 Frobisher, SK. S0C 0Y0

D.B. Safety Solutions Inc. Don Beahm CRSP, CHSC Weyburn, Sask. Phone: 306-842-3584 • Cell: 306-861-7093 TERRY DODDS (24 hrs.) (306) 634-7599 Cell. (306) 421-0316

M.E.T. OILFIELD CONST. LTD. “All Your Construction and Maintenance Needs� SPECIALIZING IN: ENGINES, PUMP UNITS, UNIT INSPECTIONS, PIPE FITTING, TREATERS AND PRESSURE TICKET WELDING Box 1605, Estevan, Sk. S4A 2L7 Cell. (306) 421-3174, (306) 421-6410, (306) 421-2059 Fax: (306) 634-1273

merv_and_deb@xplornet.ca

Saskatchewan Owned & Operated

• Pressure Vessels • Well Testers • Frac Recovery • Wellbore Bleedoff • Ball Catchers • 400 bbl Tanks • Rig Matting • Complete Trucking Services

C23

Resources Guide OIL / INDUSTRIAL / AGRICULTURAL / AUTOMOTIVE

352-7668

TOLL FREE 1-877-778-7460 WEEKDAYS 7:30 A.M. - 5:30 P.M. SATURDAYS 9 A.M. - 1 P.M.

STOCKING ENGINE PARTS

1404 SCARTH ST., REGINA, SASK. website. www.continentalengine.ca FAX 525-8222

continentaleng@sasktel.net

Dale (306) 861-3635 • Lee (306) 577-7042 Lampman, Sask.

JUSTIN WAPPEL - Division Manager 401 Hwy. #4 S. Biggar, Saskatchewan PO Box 879 S0K 0M0 Ph (306) 948-5262 Fax (306) 948-5263 Cell (306) 441-4402 Toll Free 1-800-746-6646 Email: jwappel@envirotank.com www.envirotank.com

a l t u s g e o m a t i c s . c o m

Specializing in well site and pipeline surveys Yorkton 306.783.4100

Swift Current 306.773.7733

Edmonton 800.465.6233

Weyburn 306.842.6060

Lloydminster 780.875.6130

Calgary 866.234.7599

Regina 800.667.3546

Medicine Hat 403.528.4215

Grande Prairie 780.532.6793

Box 208

Estevan, SK

S4A 2A3

461-8471 • 461-8472 • 461-8473 Call: Clinton Gibbons

NorseStar Ventures Inc.

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Bulk Agency

Light OilÀeld Hot Shot Steam Truck Services

(306) 621-7621 (306) 792-2041

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912 6th Street, Estevan

634-7275 Toll Free: 1-866-457-3776

Lloyd Lavigne • Kirk Clarkson Owners/Managers 6506 - 50th Avenue Lloydminster, AB

Phone: (780) 875-6880

5315 - 37th Street Provost, AB T0B 3S0

RICK CORMIER

Phone: (780) 753-6449

Manager

Box 609 Carlyle, SK S0C 0R0 www.truetorq.com

Fax: (780) 875-7076

24 Hour Service Specializing in Industrial & Oilfield Motors

* Cement * Fracturing * N2 * Polybore

* Acid * Coil Tubing *CO2 * Industrial

Well Service Highway 39 East, Estevan Phone: 637-2060 Fax: 637-2065

Bus: (306) 634-8084 Cell: (306) 577-8833 Fax: (306) 453-6075 ttorq@hotmail.com 25-tfn

LECLAIR TRANSPORT Lyle Leclair - Cell: 306-421-7060 Larry - Cell: 306-421-7131 General Oilfield Hauling

C24

PIPELINE NEWS January 2011

From design to final pressure test, we’ll be there every step of the way! ®

®

Specify and install Red Thread II and Star Anhydride 8-rd line pipe from an authorized NOV Fiber Glass Systems distributor. You’ll be glad you did.

Fibreglass Solutions…. Because Rust Never Sleeps! Red Thread® II (2”-24”) pipe and fittings can be used for produced water, salt water, hydrocarbon and H2S vapours. ®

Star Fibreglass standard & API design high pressure anhydride cured epoxy line pipe, fittings, and flanges are on hand to meet the delivery requirements of any project, large or small.

Star® anhydride cured epoxy line pipe has the highest long term hydrostatic strength of any FRP product on the market. Call to discuss installer training (API / ASME B31.3), new taper tools, and general design or installation questions. Calgary Sales

Product data, support details, installation literature, and design software are all available for download at our website.

Tel: (403) 801-2009 John Kohlman

Field Service & QC Tel: (403) 861 9801 Allen Routh

Edmonton 14505—130 Ave Tel: (866) 243-2298 Jared MacKinnon Tony White

Regina 205 Hodsman Tel: (306) 525 8881 Justin MacMillan

Estevan 294 Kensington Tel: (306) 636 2002 Tim Beatty

®

Authorized Distributor

®

STAR • SMITH • FIBERCAST Please contact us for friendly service, fair pricing, and technical support & training that is beyond comparison!

www.frpsolutions.com

Check out the new Model 2306 electric taper tool. Get consistent tapers on 2”,3”,4”, & even 6” Red Thread® II pipe in seconds!!!

Woodstock Burlington Estevan Regina Calgary Edmonton

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