PIPELINE NEWS Saskatchewan’s Petroleum Monthly
February 2016
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Volume 8 Issue 9
A3 Husky selling conventional assets A4 Helium and wildcat wells A18 Alliance Drilling still making hole Colin Tajcnar, left, Jeremy Seitz and Abel Fradette glide down the ice at the Jan. 22-23 58th Annual Weyburn Oilfield Technical Society Bonspiel. The trio work for ARC Resources Ltd. See related story on Page A15. Photo by Brian Zinchuk Agricultural Equipment Technician
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PIPELINE NEWS February 2016
INSIDE SECTION A 4
Helium and wildcat wells highlight January drilling
5
20 years for Safe-Tee Management
15 Weyburn curling
6 Editorial 7 Opinion 9
16 Level Best awarded patent 18 Alliance Drilling still making hole 20 Husky puts Western Canada assets on the block
PTRC gets $2.5M in U.S. funding
22 IWS is hanging in there
10 Crescent Point leads nation in drilling
24 Safety stand down
13 The Derrick is closing
25 Fluid levels are key
14 Slow, slow, slow
26 B.C. rejects TMX
PIPELINE NEWS Saskatchewan’s Petroleum Monthly
JUNIOR PRODUCERS
March 2016 Focus Contact your Sales Rep to be a part of the focus edition
ESTEVAN OFFICE: SE & SW SASK. & SW Manitoba • Phone: 306.634.2654
Candace Wheeler
cwheeler@estevanmercury.ca
Alison Dunning
observer@sasktel.net
Deanna Tarnes
dtarnes@estevanmercury.ca
Northern Sask. Phone: 306.460.7416
Teresa Hrywkiw
thrywkiw@estevanmercury.ca
Editor Phone: 306.461.5599 EDITORIAL
CARLYLE
SE Sask. Phone: 306.453.2525
LLOYDMINSTER & KINDERSLEY
Cindy Beaulieu
cbeaulieu@estevanmercury.ca
Harland Lesyk labean@sasktel.net
Brian Zinchuk
brian.zinchuk@sasktel.net
PIPELINE NEWS February 2016
A3
TOP NEWS Panther Drilling Rig 3 spent most of its career, from the day it left the yard, drilling for Husky along the U.S. border. Here is could be seen in the fall of 2012 near Oungre. That land is now for sale, along with a large swath of the company’s conventional assets across the Western Canadian Sedimentary Basin. File photo
Husky selling 59,530 boepd of conventional assets By Brian Zinchuk Pipeline News Calgary – For a few years now, Husky Oil Operations Limited has been shifting towards thermal production of heavy oil. Now, with the lowest oil prices in 12 years, the company is selling off a large portion of its conventional assets, including a substantial portion in southern Saskatchewan. The estimated bid date is mid-March 2016, after having been announced on Jan. 20. There are three packages covering most of the western Canadian Sedimentary basin with the exclusion of the Lloydminster area, northern foothills and northeast Alberta. The “east package” includes all of southern Saskatchewan, divided up into Dodsland, southwest and southeast Saskatchewan. In this broader package, southwest Manitoba is included in the southeast Saskatchewan portion. Additionally, the region around Provost, Alta., is its own block with the east package. The entire offering includes 59,530 boepd with a 54 per cent liquids rating. There are 4.77 million acres gross and 3.95 million acres net. Of the gross land, 58 per cent is developed, and of the net land, 59 per cent is developed. The east package includes 23,500 boepd production for 2015. It is heavily weighted to liquids, at 88 per cent. The gross land is 1.1 million acres, net 970,000 acres. Of that, 52 per cent of the gross land is developed and 49 per cent of the net land is developed. Southwest Saskatchewan Up until a few years ago, Husky had been a regular driller in the southwest portion of Saskatchewan near Shaunavon. This area had production of approximately 13,230 boepd, of which 89 per cent is oil and liquids. The listing says there are several large original oil in place (OOIP) reservoirs (10 – 200 million bbls) under waterflood or polymer flood with opportunities for optimization and expansion. It is mainly operated assets with consolidated lands and infrastructure. There is a substantial inventory of infill, pool
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extension, and play extension horizontal drilling opportunities. The majority of lands are held by production. As well, there is 3D seismic coverage over large portion of the core land block. Southeast Saskatchewan Up until late 2014, Husky had been regularly drilling very close to the U.S. border in the Torquay and Oungre area, before laying down its rig when the downturn hit. Production in southeast Saskatchewan accounts for approximately 2,340 boepd. That is 100 per cent oil and liquids. The listing notes a substantial inventory of Bakken horizontal development drills with expanding inventory of Torquay horizontals. There are also additional drilling (Frobisher, Midale, Ratcliffe formations) and waterflood optimization opportunities. Dodsland In the Dodsland area, in the Viking play, Husky’s production for sale amounts to approximately 2,020 boepd, of which 58 per cent is oil and liquids Husky has high working interest, consolidated land positions in the Saskatchewan Viking play fairway. The drilling inventory of shallow, horizontal wells with favourable royalties, ranks among the most economic projects in Western Canada, according to the company. Provost Production of approximately 5,910 boepd, 93 per cent oil and liquids weighted, is up for sale in the Provost area of Alberta. This is a consolidated land and infrastructure position, on-trend with stacked and adjacent Mannville and Viking oil pools. The area is known for shallow wells (700 – 900 metres) with low capital costs (less than $900,000), strong initial rates and good overall recoveries deliver early project payouts and compelling rates of return. The package has a large inventory of horizontal and vertical drilling opportunities. The majority of lands are held by production. (See related story Page A20)
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PIPELINE NEWS February 2016
BRIEFS
This Saturn Minerals wildcat well is located near Porcupine Plain. Photo courtesy Saturn Minerals
Whitecap lowers capital spending again
Whitecap Resources Inc. has again lowered its capital guidance for 2016, this time by 53 per cent, to $70 million from the previous outlook. The deterioration in crude oil prices has dramatically affected project economics, and so reducing capital spending in this environment will maximize long-term value for shareholders as the company continues to focus on its return on capital employed. In response to the downward pressure on commodity prices, Whitecap first reduced its 2016 capital program in mid-December, by 27 per cent, to $150 million from the original $205 million previously announced in November. The latest revision to 23 (22.3 net) wells includes 15 (14.8 net) Viking light oil wells in west-central Saskatchewan, five (4.9 net) Cardium light oil wells in West Pembina and Ferrier, two (2.0 net) light oil horizontal wells in the Deep Basin and one (0.6 net) well in Boundary Lake. The corporate focus on waterfloods across the asset base creates a low base production decline rate of 20 per cent and provides a stable base level of production and funds flow which requires lower sustaining capital requirements. This revised capital program allows the company to generate sufficient funds flow to maintain a total payout ratio of less than 100 per cent at current strip pricing. Briefs courtesy Nickle’s Daily Oil Bulletin
Helium and wildcat wells highlight drilling Reflecting their recently announced efforts to sell large portions of their conventional production in Saskatchewan, Estevan – Drilling activity in Saskatchewan was down sub- Husky Oil Operations, currently the number 2 oil producer stantially for January 2016 compared to the same month in in the province, had just one active rig northeast of Lashburn. previous years, but not as low as might be expected at a time That was the only rig working in northwest Saskatchewan. The Viking play in the Kindersley area had nine rigs turnwhen oil kept dipping well below US$30/barrel WTI. Two things you don’t see every day showed up as well on ing to the right. Crescent Point had two rigs drilling sideby-side just northwest of Kindersley and a third northeast of sister publication Rig Locator (riglocator.ca) on Jan. 25. Northeast of Porcupine Plain, in northeast Saskatchewan, Eston. Whitecap Resources was drilling west of Kindersley. Savanna Drilling Rig 440 was drilling for Saturn Minerals Inc. Raging River Exploration had two rigs east of Kindersley. TeFor an 855 metre well, it had spudded on Jan. 6 and was still ine Energy Ltd. had two rigs, one near Dodsland, and the other being reported as active on Jan. 25. This is on Saturn Minerals’ near Eston. Also in the southwest, Crescent Point had all four of the Bannock Creek property, where their first wildcat well, drilled active rigs near Shaunavon. a few months previously, had failed. In the southeast corner, activity was, again, dominated by About as far as you get from Porcupine Plain to the southwest, and still stay in the province, another curiosity was be- Crescent Point. In the Oungre and Torquay area they had three ing drilled by North American Helium Inc. This well at Battle rigs, with one more at Tatagwa. All seven rigs working around Creek is in the extreme southwest corner of the province, ap- Stoughton and Kisbey were Crescent Point rigs. Three rigs in proximately 40 kilometres east of the Alberta border and 35 the North Portal/Roche Percee area were Crescent Point, as kilometres north of the U.S. border. Savanna Drilling Canada well. Finally, one rig northwest of Oxbow was Crescent Point. Of the remaining southeast rigs, Red River Oil was drilling Rig 410 got the privilege of working on that unique well. On Jan. 25 there were 44 active rigs in Saskatchewan, down north of Antler. Vermillion had one rig near Northgate. Spartwo from the day before, when Crescent Point Energy Corp. tan was drilling in the Pinto area north of North Portal. Torc had 26 active drilling rigs. On Jan. 25 that number dropped to Oil & Gas had one rig north of Alameda. Steppe Petroleum 24 active rigs, a count that still by far outshone the number 2 Inc. had one rig east of Torquay. Cenovus was back in play with driller, Tourmaline Oil Corp., at 12 rigs, and number 3 driller, a rig at Goodwater, as was Enerplus Corporation north of Lake Alma. Finally, Astra Oil Corp. was drilling south of Weyburn. Progress Energy Canada Ltd., at 12 rigs Five rigs were working for potash projects; one near Moose At the same time in 2015 there were 65 active rigs. In 2014, Jaw and four near Esterhazy. there were 103. By Brian Zinchuk
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PIPELINE NEWS February 2016
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20 years for BRIEFS Lashburn Safe-Tee man Management charged
Shirley Galloway’s Safe-Tee Management fired up 20 years ago. Photo submitted
By Brian Zinchuk Oxbow – This year marks 20 years in business for Safe-Tee Management of Oxbow. The safety specialty firm is owned by Shirley Galloway and her husband Jim. Over the years it’s grown to become a family business, with son Ryan now a construction safety officer through the Saskatchewan Construction Safety Association. “We really needed help,” Shirley said, and Ryan was brought in to do drug and alcohol testing. He’ since received a two year diploma from the University of New Brunswick in the field, as well as a Global ground disturbance instructor qualification. Daughter Jayne, who is studying at the University of Calgary with the intention of getting a law degree, worked two summers as their front desk receptionist. Shirley still remembers those kids on her knee as as infants while she worked getting the business going in its early years. “Jayne was 18 months old when I started. She grew up, literally, in the safety business.” Jim, vice-president of operations, was also brought into the business. He had grown up in Oxbow, where his father and grandfather were both physicians. (The hospital in Oxbow is called the Galloway Health Centre.) He came on board, took an audiometric course, and has looked after audio testing, fit testing, operations, the vehicles and the buildings. Shirley said she had been working as a nurse practitioner for 12 years with her own practice in a clinic in Winnipeg. They had intended to buy a family practice in Vancouver. They stopped in Oxbow on the way there and never left. For the first 10 years, Safe-Tee Management worked pri-
marily in the oilpatch. “As we grew and became more known, we were asked to do construction and mining,” she said. That included major mining firms like Vale and Rio Tinto, working in Ontario, Manitoba, and northern Saskatchewan. Now their work is about 40 per cent oilfield, 30 per cent mining, 10 per cent commercial agriculture, 10 per cent construction, and 10 per cent other. The diversification helps when its slow in the oilfield. Some clients in the patch are still busy, she noted. A year-and-a-half ago, they were getting three calls a week from new companies needing safety services. Now, it’s taken two months to get three calls, and those haven’t been from new companies, but existing ones. Safe-Tee Management has nine people on staff, and hires additional contractors, such as medics, as needed. Currently, they have five medics on contract until June. All their contract medics are active primary care paramedics, having taken at minimum a one year course plus practical experience. And she only hired people who have experience in the field. Their lead medic, Georgia Britt, has 20 years under her belt. “I would never hire an EMR (emergency medical responder), have them sit on lease, and that’s all they’ve ever done. Experience is invaluable. I have a specialty in trauma.” Her company has never had to deal with a mass trauma on one of their sites in 20 years. Traumas, yes, but not a mass one. She remembers one incident that occurred off their site. A driver, not wearing a seatbelt, went through the front window of their truck. “When the proverbial crap hits the fan, I want my 40-yearold medic, with 15 years-plus of experience, whose still working car (ambulance) in Moose Jaw, Regina, Saskatoon; whose knowledge is fresh and can respond to a major incident without batting an eyelash. That’s what I want, and that’s what we have. “It’s difficult when you have three-day fracs, 24 hours a day, getting everyone lined up, and on Sunday night the consultant phones up and says, ‘Oh, sorry, we couldn’t get the frac crew, we’ve got to push it back three days.” Among the high points of being in business for 20 years has been the really interesting and diverse people she’s met. “I have met some really nice people who are hard working, driven, want to do it right.” Watching the company grow, from just one person to, at times, 20 people, is another high point, as well as seeing their reputation spread. During the boom times, they could have grown more, but she said, “It wasn’t my interest. I really enjoy being small. ► Page A8
with oil thefts
Maidstone – The North Battleford Provincial General Investigation Section of the RCMP, in conjunction with the Maidstone RCMP Detachment, as well as several other RCMP Detachments were involved in a lengthy investigation into a series of large scale crude oil thefts in the Maidstone, Lloydminster, Cutknife, and Kitscoty, Alta., areas. This investigation spanned over the course of several months. On January 19, 2016, police arrested Bruce Russell Hardy, a sixty one year old male from Lashburn, Saskatchewan, in relation to these thefts. Bruce Russell Hardy has subsequently been charged with seven counts of theft over $5000, contrary to Section 334 of the Criminal Code. He is scheduled for his first appearance on February 23 in Lloydminster Provincial Court.
Briefs courtesy Nickle’s Daily Oil Bulletin
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PIPELINE NEWS February 2016
PIPELINE NEWS
EDITORIAL
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.
Publisher: Brant Kersey - Estevan Ph: 1.306.634.2654 Editorial Contributions: EDITOR Brian Zinchuk - Estevan 1.306.461.5599 Associate Advertising Consultants: SASKATCHEWAN & MANITOBA • Estevan 1.306.634.2654 Cindy Beaulieu Candace Wheeler Deanna Tarnes Teresa Hrywkiw • Carlyle 1.306.453.2525 Alison Dunning NORTHWEST SASK. & ALBERTA • 1.306.460.7416 Harland Lesyk
To submit a stories or ideas: Pipelines News is always looking for stories or ideas from our readers. To contribute please contact your local contributing reporter. Subscribing to Pipeline News: Pipeline News is a free distribution newspaper, and 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.
Published monthly by the Prairie Newspaper Group, a division of 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.
And now numbers that begin with “2” Last month our editorial was headlined “Numbers that begin with ‘3.’” The implication then was dealing with a world where oil is priced below $40 per barrel. Writing this on Jan. 19, those numbers now begin “2.” Oil today is trading in the US$28-$29 range. In mid-January it hit depths not seen since 2003. It may be lower by the time you read this. Two weeks before, Crescent Point had put out its capital expenditures forecast. Their press release noted, “Including the monetization of its 2017 and 2018 hedges, the company expects to live within cash flow at WTI prices down to US$40/bbl.” That’s a far cry from $28/bbl. If you follow the rest of their statement, you soon find they intend on squeezing another five to 10 per cent of price concessions out of their capital costs if low oil prices persist. Where vendors will find that additional savings is anyone’s guess. It’s not like they’re going to have much choice. At the same time, Iran’s sanctions on its oil shipments came off as part of a we-won’t-build-nukes deal on their part. They immediately announced they would be adding shipments of 500,000 bpd, which, by the way, was right around the total oil production of Saskatchewan in December 2014. Other numbers that involve two include the number of West Coast pipelines in dire trouble. The Trudeau government has effectively kneecapped the Enbridge Northern Gateway project to Kitimat by working to ban tanker traffic along the northern British Columbia coast. Then on Jan. 11, the province of British Columbia announced it was rejecting the Trans Mountain Expansion project by Kinder Morgan, tell-
ing the National Energy Board the pipeline didn’t meet their much-ballyhooed five conditions. It seems that there’s nowhere the industry can catch a break right now. We, as an industry, know an export pipeline approved today won’t put money in our bank accounts tomorrow. It will be years before any project is completed and has an impact. But at least it would provide some hope. We have not heard cries for government assistance like other sectors in the past have received. For the past decade or two, it has been rare to see a factory in the automaking sector without federal and provincial dollars. In the past, farmers have been bailed out, as have fishers. But the oil sector? Something tells us that would be “unpalatable” for those who sip their fair-trade imported coffee lattes from plastic foam cups while driving their SUVs on asphaltpaved streets. This industry does not want government handouts or involvement. PetroCanada, as a Crown corporation, wasn’t exactly welcome. But we would at least appreciate a chance, especially when it comes to export pipelines. With Keystone XL dead, Northern Gateway likely sunk, and not Trans Mountain Expansion in jeopardy, we’re in a serious bind. It becomes all-or-nothing on Energy East. We really do need a West Coast export pipeline. Be it Northern Gateway or Trans Mountain Expansion, this is crucial to future of the industry. We will suffer through the current pain, and will appreciate the rebound. Maybe, as the bumper sticker says, we won’t piss away the next oil boom. But at least give us a chance.
PIPELINE NEWS February 2016
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OPINION
From the Top of The Pile
By Brian Zinchuk
Montreal mayor’s audacious hypocrisy is jaw dropping Wow, that takes some really big body parts of an indelicate nature to be Montreal Mayor Denis Coderre, a former federal Liberal cabinet minister. Huge. About the size of the ball valves used to open up the city’s raw sewage to flow into the St. Lawrence River last fall. The mayor of a city which not only deliberately spilled billions of litres of raw sewage into a major river system (that I’m pretty sure other communities derive their fresh water from), but does so on a regular basis, is now lecturing the oilpatch on the safety of it pipelines. Those would be the pipelines that have fed oil and gas throughout the country for over 60 years in the safest manner possible. On Jan. 26, he wrote in the Montreal Gazette, “For three years now, the oil pipelines issue has mobilized the elected representatives and citizens of Greater Montreal. As president of the Montreal Metropolitan Community, I made known on several occasions our position of ‘zero tolerance’ toward the environmental risks of transporting petroleum products by pipeline. “I have repeatedly said that when it comes to transporting oil, we need a perfect score, and we cannot make mistakes.”
I guess that doesn’t count for sewage. So, he says, “We are not against oil pipelines; we gave our agreement to the project inverting Enbridge’s Line 9B. But today, we are saying ‘no’ to Energy East.” He’s so concerned about their drinking water supply, he then said, “Recall that the region of Montreal is a highly urbanized archipelago, comprising 4 million inhabitants. The environmental risks, in particular for the drinking water supply, are much larger than elsewhere.” Nothing like forcing others downstream to drink your own crap to show your concern for the drinking water supply. He’s concerned about pipelines, but doesn’t say much about tankers full of foreign oil coming up the river to deliver conflict oil to area refineries. Saskatchewan Premier Brad Wall responded on Facebook to Coderre’s earlier comments on Jan. 21, saying, “This is a sad day for our country when leaders from a province that benefits from being part of Canada can be this parochial about a project that would benefit all of Canada, including these Quebec municipalities. “Pipelines are a safe and environmentally-
The Mineral Corner
friendly way to transport oil – certainly safer and more environmentally-friendly than rail. “The constituents of Quebec municipalities will benefit to the tune of $10 billion in equalization payments this year. For the better part of the last decade the western Canadian energy sector and western Canadian taxpayers have supported a great portion of these transfer payments as well as the Canadian economy. “Is it too much to expect that these Quebec municipal leaders would respond to this reality with generous support for a pipeline that supports the very sector that has supported them?” Flaming train wrecks, foreign oil, and equalization payments cashed on the West’s accounts are all fine for Coderre and his group of mayors, but not our oil. We might have prevailing westerly winds in Saskatchewan, but Mayor Denis Coderre is so full of it, we can smell it from here. Or maybe that was just the smell of the St. Lawrence, after he’s done with it. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.
7 Lease negotiation tips
legal advice prior to signing a lease offer. There are several portions of a mineral lease that are extremely important and you are creating a contractual obligation that lasts forever. Please make sure that you understand the contractual relationship that you By Cameron C. Wyatt are entering into before you sign. If you need a lawyer, please call me and I will Negotiating oil and gas leases is indeed a big rerecommend you one. sponsibility. Across any part of the world, numerous Never say that you are not interested mineral owners are being offered with proposals to Even if you are the type of person who really lease their mineral interests. However, many mineral does not give a care in the world about economic rights owners do not take the time of day to research benefits, it would still be advisable for you to at least more regarding this matter, thus possibly missing out be aware of what is happening in your area. If you on the upside of lease negotiations. Here are a few manage your mineral rights correctly, you can generthings that I recommend you avoid. ate a significant amount of cash flow. As my grandpa Don’t jump at the first lease offer used to say, “Pennies from heaven!” Right after receiving an oil & gas lease proposal If you don’t care about your mineral rights, there via mail or maybe phone, due to overwhelming joy, are plenty of firms that would purchase them from the first thing you do is agree. Do not appear to be you. Do yourself a favor and don’t act uninterested. an early signer because if you do, you might not get Don’t instantly hire a lawyer the best terms available to you. Do not focus on only Fact – lawyers have high fees. Hiring a lawyer bonus payments and royalty rates; as there are other the same time you receive oil or gas lease starts his items in your lease that are just as important. Be pafees immediately. Prior to contacting legal representient, do not be impulsive and think things through tation, collect your thoughts on the matter, research before making a decision. If ever you own the surface the individual that submitted your offer and have rights with the mineral rights, that can be your upper your mineral file ready to access the important arm and should be treated with more importance information needed. Once you have a better underthan lease bonus and royalty percentage. Remember, standing of the offer and are prepared for an in depth everything is negotiable. discussion, then contact your lawyer. Trust me, your Don’t make a snap decision lawyer will thank you for being prepared to discuss Bear in mind that you are dealing with legal your options and the lease that was offered! documents so carefully go over proper oil, gas, and Don’t go buy anything! mineral lease negotiations. I recommend seeking Presence of a drilling rig does not equate to a
commercially viable well. There are absolutely no guarantees that an oil company drilling on your property is going to provide an economic benefit. If you ask anybody with extensive experience in the oil & gas sector they will explain to you that there are never guarantees! Do not spend money unless you are surely making money. Remember, in most cases, mineral right income is taxed as passive income. Make sure you save at least 50 per cent of the income that your mineral rights generate! Do not lease multiple quarters on one lease Within your lease agreement there are clauses that protect the mineral right owner and the resource company. When multiple quarter sections are held under one lease, there is a high probability that the oil company only requires to drill one well – to hold the entire lease. Signing one lease per quarter section, allows you the greatest economic benefit by promoting the resource company to drill a well, or multiple wells on each quarter. Do not spout off during negotiations If you are not willing to stand on your decision, better keep silent. Backing away from your statements will reflect your credibility, in this case – not credible. Losing credibility will ultimately minimize your negotiating ability. Giving absolute statements when negotiating are made by rookies and chances are they will hurt you in the end. If you are uncomfortable negotiating your lease agreement, get help. Cameron Wyatt is the founder of Homestead Energy Ltd and MineralRights.ca with 15 years’ experience in the industry. He can be reached at cameron@mineralrights.ca.
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 February 2016
Safe-Tee Management will weather this storm ◄ Page A5 “It’s a damn good question. I just didn’t t want to get that big. I didn’t want to have to be away from home. I didn’t want to have to branch out into different branches.” They did have a location in Estevan for quite a while. They are actually in the process of establishing a Regina office now. But spreading themselves too thin was not desirable. “Part of it, too, was the difficulty in these small towns of finding a manager who wants to stay.” “Taking a slow and steady pace has allowed us to weather the other slowdowns we’ve seen, and allowed us to weather this one.” They have had to lay off two people; one in the field, one in administration. “That’s just the nature of the beast. With the people we have now, we’re all busy,” she said. Their two mobile treatment centres work up north, not on frac spreads, where staffing issues can be fickle and difficult when the timing of a frac can change at a moment’s notice. Safe-Tee Management’s offerings are broad and diverse. While they do have two mobile treatment centres, a more significant part of the business is their safety consulting and safety programs. They provide training in numerous courses, from H2S Alive to pre-employment and Department of Transport drug testing and driver’s medicals. More intense offerings include Certificate of Recognition (COR) and Small Employer Certificate of Recognition (SECOR) consulting. Safety consultancy is a major part of their business. “I would say it is half. I do a lot of consulting. We now have, probably under our belt, 20 to 25 companies we’ve successfully helped get their COR.
All of our clients have gotten their COR or SECOR successfully on their first go, and have gotten a good score. They can build on that as their safety program progresses.” “That’s what differentiates us, our diversity,” she said. Shirley is completing a masters degree (her second), this one in occupational health and safety. “I have a solid background in occupational health, a solid background in occupational hygiene; and so the safety part, through study and learning, and mentorship has just come along. I decided to back that up with academic. “I have field people who can do the field work, who’ve worked the rigs, driving tank truck, treaters… I don’t need to do that. I have staff to do that. But when it comes to the program management, the writing, the practices, that comes from my extensive knowledge of the law and the legislation, and of course, the academic portion of occupational health and safety, it’s integral. You can’t have one without the other,” she said. That extensive safety programming has also unfortunately led to some of the low points of the business: other companies and individuals blatantly plagiarizing their product, essentially stealing copyrighted material. “Like any business, we’ve had some legal challenges. One of the biggest ones is copyright infringement. Over the years, it has been an issue where I’ll receive a safety manual from somebody because the oil company wants me to do a review. I’ll open it up, and sure as hell, it’s my manual, word-for-word, change the name. Probably out there there’s got to be at least 30 to 50 of my manuals that the invoicing has not come from me.”
One case is in court, and two more are under investigation by police. “That’s probably the lowest point,” she said. It’s a lot more than ripping off someone’s MP3. These are 300-500 page safety manuals, her representation of her work for the last 20 years. “It would be like someone taking a Harry Potter book, changing the name, and selling it as Sherry Potter.” She doesn’t like taking the legal route, saying it’s “negative energy,” but there are points where a cease-and-desist letter doesn’t cut it. Many people in the oilpatch have told Pipeline News that this slowdown has been the worst they’ve seen. She remembers that 1998 was a pretty bad slowdown too. The 2009 slowdown was hardly noticeable for their business, but she did notice an influx of Alberta companies seeking work in Saskatchewan in 2009. “For us, because we’ve been around, we have a steady and loyal customer base. Our reputation really helps us. The other day I got a call because of word-of-mouth, a client I have in Weyburn recommended me to someone who wanted help with their safety. “Just being around, having a good reputation, we never extended ourselves, slow and steady.” The Regina expansion was planned before the slowdown, but they’re ready now to progress. It’s more in the occupational health area than safety. That expansion is planned for this year. It will clue in on Regina’s larger industrial base. “Just like anything, we’ll weather this storm,” she concluded. “We’ll see how much longer it’s going to be. We’re not near closing our doors, that’s for sure. We’ve been prudent and conservative.”
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PIPELINE NEWS February 2016
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PTRC and EERC $2.5M in US DOE funding This is the fluid recovery system put in place when the Aquistore project officially opened. American money will help fund automation of the monitoring. File photo
Regina – The Petroleum Technology Research Centre (PTRC) and the Energy & Environmental Research Center (EERC) at the University of North Dakota announced on Jan. 7 $2.5 million in U.S. Department of Energy (US DOE) funding awarded through the National Energy Technology Laboratory (NETL). The project will develop an ‘intelligent monitoring system’ (IMS) utilizing data acquired through PTRC’s Aquistore project. The newly developed IMS will allow future CO2 storage site operators to more efficiently manage operations, data management, and monitoring. The EERC will work to develop the IMS through real-time, data-capable workflows, algorithms, and a user interface to automate the integration of carbon dioxide (CO2) monitoring and simulation data from Aquistore. Current monitoring technologies require various project teams to acquire and process data to manually combine multiple forms of data in order to manage the program. The IMS will automate many of these steps and substantially streamline the process. By providing a more efficient and cost-effective measurement, monitoring, and verification system, Aquistore and other CO2 storage projects will optimize storage efficiency and costs while minimizing risk. Managed by the Regina-based PTRC, Aquistore is the storage component of SaskPower’s firstin-the-world Boundary Dam Carbon Capture and Storage (CCS) Integrated Demonstration project, and is one of a handful of active CO2 storage projects in the world. The EERC is recognized as one of the world’s leading developers of cleaner, more efficient energy and environmental technologies. A high-tech, nonprofit division of the University of North Dakota, EERC has a long history of collaboration with PTRC. “Aquistore is a working example of a dedicated CO2 storage project,” said Ken From, PTRC’s chief executive officer. “This bi-lateral research initiative strengthens the relationship between PTRC and North Dakota’s EERC and our North American efforts to develop cost-effective technologies to reduce greenhouse gas emissions.” “The EERC is very honored to receive this
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PIPELINE NEWS February 2016
Crescent Point leads nation in drilling, announces 2016 capital plan If low prices persist, Crescent Point will look for another 5-10% cut in capital costs (Daily Oil Bulletin) Calgary –Crescent Point Energy Corp. announce its capital expenditures plans for 2016 on Jan. 7. While the company plans to continue spending, it will also seek to cut capital expenditure costs even further n if low oil prices persist. Crescent Point expects to spend be-
tween $950 million and $1.3 billion to target an annual average production range of 165,000 boepd to 172,000 boepd in 2016. This represents an average production increase of approximately one to five per cent compared to 2015 guidance and a decrease in planned capital expenditures of approximately
16 to 39 per cent versus 2015 estimates. “With oil prices near multi-year lows, our 2016 plans are conservative and disciplined,” said Scott Saxberg, president and CEO of Crescent Point. “We are reducing our capital expenditures significantly from 2015 and expect to live within
cash flow to protect our balance sheet. We are starting the year strong and are well positioned to achieve our 2016 targets. We have a healthy balance sheet, a solid December 2015 exit production rate in excess of 175,000 boepd and approximately 34 percent of our 2016 crude oil production hedged at an average price of C$83 per barrel.” To that end, as of Jan. 18 Crescent Point again led the nation by a wide margin in the number of active drilling rigs. While the number two operator, Progress Energy Canada Ltd., had 13 rigs going, Crescent Point was back
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to their high number of 2015, running 24 rigs. Of those, 22 were in Saskatchewan, and one was within a mile from the Saskatchewan border, near Sinclair, Man. The last rig was working west of Swan Hills, Alta. The company noted in a press release it is flexible in how it manages its business and will protect its balance sheet. First quarter spending is consistent in all capital scenarios with spending flexibility planned for after spring breakup. Crescent Point is able to add or reduce capital toward the end of the second quarter, depending on the price environment at that time. Crescent Point has a high rate of return, lowrisk drilling inventory that provides additional flexibility when allocating capital. The company’s 2016 plans currently include at least $150 million of long-term growth capital related to strategic projects such as waterflood initiatives, new completions technologies and step-out drilling. Such long-term growth expenditures could be re-allocated to a higher rate of return drilling in order to optimize short-term capital efficiencies, which could add approximately 3,000 boepd to the company’s annual average production guidance, depending on timing. Crescent Point could also shift an estimated $130 million of 2017 and 2018 hedging gains into 2016 in a US$40/bbl WTI oil price environment. Crescent Point was successful in decreasing average drilling and development capital costs by more than 30 per cent over the course of 2015. If low oil prices persist, the company expects an additional five to 10 per cent reduction in its capital costs beyond those reductions achieved during 2015.
Based on drilling and development capital, which represents approximately 84 per cent of the capital budget, Crescent Point estimates it will add production in 2016 at a capital efficiency of approximately $21,000 per flowing boe, or approximately $19,000 per flowing boe excluding long-term growth capital. The company’s 2016 production guidance includes approximately 1,700 boepd of shutin production, on an annualized basis, which assumes normal spring break-up conditions. In addition, the company also plans to shut-in approximately 1,600 boepd of production by the end of the year as part of its strategic waterflood programs. Crescent Point’s waterflood program is expected to lower decline rates and improve the company’s long-term sustainability. The company’s 2016 base corporate decline rate is budgeted to be approximately 28 percent. “Over the past several years, we have continually increased our focus on waterflood projects, implementation of new technology and cost-saving initiatives,” said Saxberg. “These long-term initiatives have improved our capital efficiencies and substantially lowered our corporate decline rate from 35 per cent to 28 per cent. We will potentially spend less than we did in 2011, when we were a much smaller company and averaged production of 74,000 boepd.” Investments in infrastructure, land and seismic represent approximately 16 per cent of the budget. Planned infrastructure investments include gas plant expansions, new crude oil batteries, and pipeline infrastructure to provide for long-term growth. ► Page A11
PIPELINE NEWS February 2016
This Excel Well Servicing Rig could be seen working west of Stoughton on Dec. 7, 2015, in an area dominated by Crescent Point. Photo by Brian Zinchuk
◄ Page A10 “Our 2016 drilling program is very similar to 2015,” said Saxberg. “We are positioned in high-netback, light and medium gravity oil-weighted plays that continue to generate top-quartile returns. We have reduced capital costs across our entire asset base and at a US$50/bbl WTI oil price, approximately twothirds of our 2016 drilling program is expected to generate payouts of two years or less. This excludes any additional benefit from our ongoing cost savings and waterflood initiatives.” The capital budget is expected to see 23 per cent in the Viewfield Bakken, 18 per cent in the Shaunavon, 16 per cent in the Flat Lake/Midale areas along the U.S. border, 10 per cent in southeast Saskatchewan conventional, 11 per cent in the Viking, 7 per cent in the Uinta basin (U.S.) and 15 per cent in other properties. Most of these numbers are very close to las year’s, except that spending in the Uinta will drop while other properties will rise. “Other properties” includes properties in Alberta, Saskatchewan, North Dakota and Manitoba. By the end of 2016, Crescent Point expects to have waterfloods initiated in each of its core resource plays. The company plans to accelerate the conversion of producing wells to water injection wells, targeting the conversion of more than 120 wells, an increase of more than 70 per cent compared to 2015. These conversions will primarily take place in the Viewfield Bakken and Shaunavon oil resource plays. In addition, Crescent Point plans to expand waterfloods in the unconventional Midale and Swan Hills plays. Waterflood pilots have also been budgeted for the Viking, Uinta Basin and Flat Lake plays. A successful waterflood pilot in Flat Lake would open up an additional opportunity for future waterflood development in the Three Forks zone, south of the Canada/U.S. border. The high-quality, shallow nature of the company’s Saskatchewan plays provides the opportunity to outperform with lower cost and higher recovery factors relative to other plays in North America. The company has plans for additional long-term projects to test new completions technologies and drill several step-out wells within each play. Crescent Point’s long-term capital component of its 2016 budget targets expanding pool boundaries in its Viewfield Bakken and Shaunavon plays, as well as its earlierstage Flat Lake, unconventional Midale and Uinta Basin plays. Crescent Point’s 2016 step-out drilling plans in the Uinta Basin are expected to build on the company’s horizontal and vertical drilling success in 2015 and recent 3D seismic program. Crescent Point also has a large inventory of low-cost, highreturn drilling opportunities within its conventional asset base across southeast Saskatchewan that forms a strong base for the company’s 2016 capital program. ► Page A12
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PIPELINE NEWS February 2016
Only 8% of Crescent Point's 2016 CAPEX is in AB ◄ Page A11 Only eight per cent of Crescent Point’s 2016 capital expenditures and approximately 10 percent of the company’s estimated production is based in Alberta, reducing uncertainty associated with the ongoing Alberta royalty review. 2016 guidance Crescent Point is well positioned to generate strong operating and financial results through 2016, it said, noting it is disciplined in its capital spending plans and expects to live within cash flow to protect its balance sheet, production and dividend. Including the monetization of its 2017 and 2018 hedges, the company expects to live within cash flow at WTI prices down to US$40/bbl. Approximately 34 per cent of the company’s 2016 oil production, net of royalty interest, is hedged at a weighted average price of approximately C$83/bbl. During fourth quarter 2015, Crescent Point increased its capital by approximately $100 million in order to enhance its capital spending flexibility during 2016 and to enter the year with strong production levels. The company plans to have an active drilling program during first quarter 2016 and will target production growth near the upper-end of its guidance range in a higher commodity price environment. If spot oil prices remain depressed, the company expects its 2016 capital expenditures will be at the lower end of its range. “It is key to point out that we’re not planning to just drill our best inventory
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in this budget,” said Saxberg. “We have approximately 7,500 locations in inventory with plans to drill fewer than 630 wells in 2016, which gives us a tremendous amount of flexibility in our capital allocation. For example, we could reallocate our long-term capital projects, which would result in an increase to our 2016 production guidance by approximately 3,000 boepd if we so choose. However, we believe we still need to focus on both short- and long-term objectives in this environment.”
Curling, curling everywhere Estevan – Sweep! Sweep! Hurray hard! Those words will ring out loud from the mouths of oilpatch people, men and women alike, at the various oilpatch bonspiels taking place this winter. While they used to be “oilmen’s” bonspiels, most these days are open to both genders. Here’s a roundup of some of the events taking place. If you do hold an event, email your photos of the winners to brian. zinchuk@sasktel.net and we’ll get them in the next edition of Pipeline News. Oxbow Oxbow Oilmen’s 55th Annual Open Bonspiel will be held Feb. 12-14. There will be a redeye breakfast on the Saturday morning and a Calcutta that evening following the supper at the Lion’s Den. For more information contact maycowell@sasktel.net, but do so by Feb. 5. Up to 32 paid rinks will be accepted. Unity Unity will host its oilmen’s bonspiel on March 3-6. The event will include a banquet and dance on the Saturday, included in the price of registration. That price had not been set yet as of early January. For more information, call the rink at 306-228-2212. Carnduff
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Last year Carnduff cut its registration fees in half and doubled its attendance, so this year it is keeping those low rates from last year and only charging $160 per team. Their bonspiel will run March 11-13. Appetizers will be offered on Friday and a banquet and dance will take place on Saturday. If you’ve heard of glow bowling, Carnduff will offer glow curling after the banquet for anyone interested. Kelly Thompson at 306-485-7171 is the contact. Lloydminster The Lloydminster Heavy Oil Bonspiel will run March 17-20. There is a banquet with entertainment and dance on Friday Night. Opening ceremonies are Thursdays night. The oilman of the year this year is Arnie Lund. For information contact geoff.regnier@ pyramidcorporation.com. Estevan The final event of the bonspiel season is the Estevan OTS takes place March 17-19 this year. The supper will be held Friday March 18 at the Beefeater Plaza. There will be a presentation of a lifetime achievement award at that time. Entry fees prior to Jan. 31 is $280 per team, and $320 per team until March 12. Banquet tickets are $30 a pop. For more information go to www.estevanots.com.
DUSTIN DUNCAN, MLA Weyburn - Big Muddy 35-5th Street NE, Weyburn, SK S4H 0Y9 (Tel) 306-842-4810 (Fax) 306-842-4811 (Toll Free) 1-877-842-4810
PIPELINE NEWS February 2016
Derrick Motor Hotel closing
If the bar was detached, it would be kept open. Smitty’s, too, has been affected. For instance, the Derrick’s website lists free hot breakfast at Smitty’s during your stay at the hotel, likely a response to other hotels in Estevan including breakfast with your stay. “It’s a dead town now, pretty much,” Kim said. “On the weekends, there’s hardly any traffic.” There’s also a lot
more competition. Since the Bakken boom took hold in 2008, Motel 6, Best Western, Microtel, Suburban Extended Stay (and a subsequent expansion), Atco Lodge (now closed), Civeo Boundary Lodge (formerly PTI) and Western Star Signature Hotel have all opened. A foundation was poured for a Holiday Inn that was never completed. That’s in addition to the existing hotels, like the Derrick, that had been in place for decades.
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With the completion of the Boundary Dam Integrated Carbon Capture Project, then the oil shock, demand for accommodations has dissipated. “The demand is reduced but the supply has increased. Everyone’s lowering their prices like crazy. There’s no workers. What can you do?” Kim said. “I had to lay off 23 employees, and some casual people. It’s totally beyond our control,” he concluded.
Crude Oil & Saltwater Transfers Hot Fresh Water Access To Fresh Water Available The Derrick Motor Hotel, long a fixture for both accommodations and its bar, is going out of business. Photo by Brian Zinchuk
By Brian Zinchuk Estevan – Over five years ago, Bryant Ko saw a newspaper story about how things were happening in the Bakken and and that Estevan was the place to be. Having done well in his business of providing tutoring to AsianCanadian families who sought to send their children to the best Ivy League schools, he was looking for a place to invest his money. He decided to buy the Derrick Motor Hotel, a long-time fixture in the Estevan accommodations and bar scene. Along with the hotel came the new, nearly-complete Smitty’s restaurant, but one which was tied up in city hall red tape and would not open for a year until after the purchase. Now the hotel, along with its bar, are closing. Smitty’s will remain in operation. “We’re closing down the hotel and bar Feb. 13,” said Grant
Kim, general manager of the hotel, bar and restaurant. He has rotated back and forth from Vancouver to Estevan for those five years, but spent most of his time in Estevan since last summer, filling in for the reduced staff. “We cannot incur any more debt. It’s been very slow since the oil shock,” he said. That slow period has now been almost one-and-ahalf years, during which time the owners have been injecting capital into the operation. “We can’t be doing that anymore,” Kim said on Jan. 21. The “for sale” sign went up in early January. Asked if it’s been a struggle, Kim replied, “Big time. “I’m sure the other hotels are not happy about the situation. “I’ve been working the front desk myself.” In a way the owner dodge a metaphorical bullet, as there had been plans in place to expand the hotel. Kim said, “We
were just about to start expanding. We were finalizing the drawings.” He’s glad they didn’t go ahead with the project. “It would have only made it worse,” he said. In the bar, a longtime popular haunt in Estevan, sales were reduced a bit. “If it was separate, alone, we wouldn’t have to shut it down. But it’s the same building,” Kim said.
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PIPELINE NEWS February 2016
Slow, slow slow By Brian Zinchuk
Trevor Spearing grew up in the oilpatch, and has worked in it since the 1980s. This is the worst slowdown the head of Extreme Excavating Inc. has seen. Photo by Brian Zinchuk
Oxbow – Asked how things are going, Trevor Spearing, of Extreme Excavating summed it up in one word: “Sucks.” He then followed up with, “Slow, slow, slow.” The Oxbow-based hydrovac company had built its fleet up to 12 trucks for a while. They’re now down to eight. “It would be four if we could get some money for them,” Spearing said. They traded in three old units for one new one, downsizing but updating the fleet at the same time. Being a hydrovac company, it’s very important to keep your fleet in a heated building. But now there are fewer trucks in it. In 2015, he said they were alright. “We were alright until late November. It wasn’t busy. We had been busy until the end of April. But In June and July, no one does anything here in the patch anymore.” That’s been a longstanding issues, with many oil companies shutting down operations in the early summer because of wet ground conditions that had persisted ever since the flood year of 2011. But 2015 was no flood year, and in fact it was one of the best years in recent memory for doing dirt work and drilling. The problem is, no one was spending much money due to the oil shock. So the company started to downsize. Spearing explained, “Most of the East Coast folks went home. One Newfie has stuck it out. We had six to eight, from Ontario to Newfoundland. One Nova Scotian moved his family here, so I consider him local now.” He’s also still working. Lots of people in the business went home, he said. As for 2015, he said on Jan. 21, “So far, it doesn’t sound very good, not from the people I’ve spoken with. There will still be die-hard stuff like integrity digs. “With the price of oil, I don’t think you’ll be doing a lot of flowlining for anybody else.” There’s been a “big-time drop-off,” he noted, adding that most of what he’s seen has been from prior commitments. That sort of work – pipelines – is the bread and butter of hydrovac companies, since all underground lines must be “daylighted,” before any excavation can begin. Fifty to 60 per cent of their work is pipeline related. “We needed a price correction in the oilpatch to get rid of the riff raff, but not a year-and-a-half. Who knows how long it’s going to last?” he questioned, adding this has been going on since 2014. Even their utlity work has dropped off. “SaskPower is probably as caught up as they’ve ever been,” he noted. Spearing has seen slowdowns before. He grew up in the business, finally taking over trucking company Spearing Service Ltd. before eventually selling it. As for this slowdown, he said, “It’s the worse I’ve seen for a shutdown or slowdown. I’ve never seen it as slow or as cutthroat as it is. Oil companies are asking for 35 to 40 per cent discounts. If I was making a 40 per cent profit, I wouldn’t be here!” For those younger people who may have overspent and racked up a lot of debt, Spearing said, “I feel sorry for some young people maxed out to the nines, thinking it’s never going to stop.” It will be hard to find a workforce to come back when things do turn around, he added. “It took nine years to get to this point, and (we) let a lot of it go. “In April 2015, I had 30 employees. I’m down to eight right now,” Spearing said.
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PIPELINE NEWS February 2016
(Above) A-Event winners: The Caprice Resources Team, from left, are Darren Moore, Pamela Haupstein, Tyler Radcliffe and skip Michael Mainil. Photo submitted
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Darren Woodard, left, Steve Hanson and Sharia Moore were part of the Danette Tracey C-event winning team.
(Right) Glenn Willens had, by far, the best mustache on the ice.
Weyburn bonspiel will move to February or March next year
Jonas Fenn carried on Matrix Solutions' tradition of colourful curling attire.
Story and photos by Brian Zinchuk Weyburn – The Weyburn Oilfield Technical Society Curling Bonspiel took place Jan. 22 and 23 in their usual skins format. “We had a good turnout,” said Michael Mainil, one of the event’s organizers and also the winning skip. “ Because of the down turn we did cut back the number of rinks which left a few teams on the waiting list.” The event was limited to 16 rinks. Mainil said, “Next year we are looking to move it late February or early March to give us more time and to help curlers to organize their teams. We fully expect to host a 24 team bonspiel next year. We always get a positive feedback from our curlers and continue to thank our sponsors for their support.” The winners of the A event were the Caprice Resources Team, skipped by Michael Mainil. It included Tyler Radcliffe, Pamela Haupstein and Darren Moore. Winning the B event was Jerry Mainil Ltd., made up of Kim Brady, Jeff Mosley, Calvin Tracey and Darcy Cretin. In the C event, the Clariant Canada Inc. team took the honours. The team was skipped by Danette Tracey and included Charla Moore, Darren Woodard and Steven Hansen.
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PIPELINE NEWS February 2016
Level Best granted patent Dave Gallaway is president of Level Best Technologies Ltd. File photo
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By Brian Zinchuk Estevan – Dave Gallaway, president of Level Best Technologies Ltd., got some good news in mid-January. His patent for a new compressor design had just been approved. Now he’s going to develop the prototype, and eventually seek to commercialize the design. Compressors have been a bright spot for the firm, which specializes in well optimization. “In our business, different parts pick up when it slows down,” Gallaway said. Thus, there has been more interest in their electrically-driven, skid-mounted compressors. Those units lower annulus gas pressure, pumping the gas into the flowline. The reduction in pressure downhole makes it easier for fluid to flow into the well. When it comes to increasing efficiency with limited dollars to spend, well optimization
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is definitely an option. “It costs money to drill new wells. If you’ve got a well with a pumpjack on it, a flow line to it, and a guy checking it, adding another barrel per day makes you money,” Gallaway said. “It also has a cost, and their cutting all their costs,” he said of oil companies. Thus, some are having their own operators do fluid levels instead of contracting third party companies, like Level Best, to do the work. But that in turn has resulted in more equipment sales and repairing equipment the oil companies already had. “I’d rather have my guys do the work. When things get busy again, their operators won’t have time to do optimization work. Mine will. “For us, we’re cruising along, a little slower, but business as usual,” he said. That includes keeping all their staff, but one part-time person has had reduced hours. Conversely, they added a part-time –person in Manitoba which allows for a reduction in mileage charged to the client. “He was a casualty of the slowdown. He was previously a foreman,” Gallaway noted. Level Best has two full-time field staff, two part-time field staff, and one part-time office person in addition to Gallaway himself. “With a well, it all
comes to economics. If they can optimize the well to keep it economical, they will,” he said. “Part of the economics of the well is the cost. If you can decrease your costs, you can run it longer. It’s not always to get another barrel.” For instance, slowing a pumpjack by one stroke per minute reduces the wear and tear of that pumping unit by 500,000 cycles per year. “Less wear is a huge one,” he said. As well, there can be lower electrical costs. Companies that are planning on hanging around might find shutting in wells is a perfect time to do reservoir well data collection. “Shut-in the well, do a pressure build up, and it gives you reservoir data – bottom hole pressure, permeability and skin,” Gallaway said. “When they want to drill another well, they have all the data from the area. Or they can fine-tune a flood – water or CO2.” “There’s been a lot of wells not being repaired,” Gallaway said. That means more service rigs are parked. Now that a lot of wells are shut-in, it’s also an opportunity to get static pressure readings, he added. Some companies are looking at abandoning old vertical well, i.e. stripper wells with less than five barrels per day production. ► Page A17
PIPELINE NEWS February 2016 ◄ Page A16
Dave Gallaway has been issued a new patent for a casing gas compressor. This is a current model. File photo
Their phone isn’t ringing off the hook but it is ringing. They still have their regular customers they go out for every week, but they’ve cut back on the amount. Compressor packages have been a pleasant surprise, but some of their parts are sourced out the United States, and with the Canadian dollar’s value against the Greenback in freefall, there’s an impact. With oil trading in the US$28 range that day, Gallaway said, “I’m hoping we’ve reached the bottom. It’s got to be affecting production.” For 2016 he expects to see more of the same, including cost-cutting by everyone. Will they be able to survive? “I have pretty low overhead. It would be a good time to expand, if I were inclined,” Gallaway responded. His peers in Alberta are hurting, Gallaway noted. “They don’t know what they’re going to do.” One company there shut down their optimization division. Despite all the turmoil in the industry, Gallaway is pumped, as it were, with new developments for his business. “I have a line of downhole gauges now,” he said, adding they can be rented out. His son works as a programmer for the company that makes the gauges. It’s not a huge revenue-generator, but something to add to the toolbox, he noted. There is the aforementioned patent application going through, and Level Best is now look-
Raging River closes $126-million acquisition (Daily Oil Bulletin) On Dec. 18 Raging River Exploration Inc. closed its acquisition of Anegada Energy Corp. The aggregate consideration for the acquisition is comprised of the issuance of approximately 11.7 million common shares of Raging River and the assumption of approximately $30 million of net debt. The aggregate consideration for the acquisition is comprised of the issuance of approximately 11.7 million common shares of Raging River and the assumption of approximately $30 million of net debt. The acquisition includes 2,750 boepd (58 per cent light oil) of expected average 2016 production and 50 net sections of highly prospective land targeting Viking oil in areas complementary to Raging River’s existing Viking production.
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ing at expanding its offerings in another area. “I’m negotiating with a large automation company to offer pump-off controllers, variable frequency drives and other automation products.” Those are other ways to optimize wells, he explained. Gallaway’s had his eye on this sort of product line for a while now. “I’ve been looking at something like this since I started my company,” he concluded.
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PIPELINE NEWS February 2016
Alliance Drilling still making hole
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assistant manager of Alliance, where here’s been for three years now. Prior to that he worked for oil producers as a consultant for drillings, construction and completions. One of the early companies he worked with was Grandbow Petroleum, but most recently, he had been with Spectrum Resource Group. Skjonsby spoke to Pipeline News on Jan. 21. Alliance has eight drilling rigs, making it one of the larger outfits among the small drilling contractors based in southeast Saskatchewan. All eight of its rigs were once Advance rigs, and they are slowly being changed over from Advance’s trademark
burgundy colour to Alliance’s blue. Skjonsby said in 2014, before the oil shock, Alliance was running five to six rigs regularly. But in 2015 that slowed down quite a bit. “We probably ran an average of three or four,” he said. Road bans, in recent years, have tended to run a long time as well, affecting activity levels. As for 2016, so far, he said, “We plan on having four rigs working until road ban. “Things have changed a lot. I see we’re going back into the 80s – a big slowdown. You have to watch your pennies. One’s going to make a fast buck like in the boom. ► Page A19
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Estevan – Alliance Drilling of Estevan has kept drilling, albeit at a reduced pace, through the downturn. Four years ago Advance Drilling Ltd.’s ownership divided the company, resulting in two companies, Advance and Alliance Drilling and Oilfield Services Ltd., which are now totally separate entities. Alliance is owned by Paul Chueng, who was also a partner in Grimes Sales & Service prior to the company being purchased by Schlumberger. Ron Mowberry is the general manager and a partowner in Alliance, as well. Brian Skjonsby is
Estevan – When it comes to seeking more efficiency, sometimes that means consolidation. That was the path Estevan Meter Ltd. took in late 2015 when it purchased Acutec Systems Ltd. of Lampman. “Some of the things we’re trying to offer is consolidated service. We can provide a suite of instrumentation that will, hopefully, save
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their overall cost,” said Doug Martens, president. Now, Estevan Meter has the ability to do tank gauging, controls, alarms, and the like. Sometimes equipment can be offered to significantly reduce cost over time. That can be in capital expenditures and in reducing the overall cost of ownership, Martens explained. “Most E&P companies are in a mode (where they’re) doing only absolutely required maintenance,” he said. That might include drilling to hold land or where they are fairly certain of the target.
“With our acquisition we have reduced some overhead costs and will be able to deliver some services at a lower cost because of it,” he said. “Now customers have access to one service provider instead of two or three. The efficiency in that is huge, I believe.” Martens noted that despite the slump, “There are still some guys working. There was always an industry in Estevan, even when it wasn’t a high level of drilling activity.” “We’re in this downturn for a little while longer yet” Martens reckons.
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PIPELINE NEWS February 2016
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Alliance Drilling had just finished rebuilding its Rig 4, giving it a new derrick and substructure, before the effects of the slowdown hit. It hasn’t moved since. Brian Skjonsby is assistant manager of Alliance. Photo by Brian Zinchuk
◄ Page A18 “Paul predicted before the slowdown started (there would be) $28 oil. A lot of people didn’t believe him. He was right,” Skjonsby said. Of those four rigs working, he said, “Today we have three working for Crescent Point and one that works for a few other companies, but mostly Elcano. The rest are parked, but ready to go. We put in bids and maybe we’ll get lucky.” Where are the workers? “Believe it or not, as slow as it is, it’s still tough to find men,” Skjonsby said. “I don’t know where everyone’s going. Housing in Regina? Or they don’t want to work? “I have no idea what’s going on. I think a lot of people are leaving and not coming back, looking for steady work. You get paid good money, but it’s not a steady cheque,” Skjonsby said of rig work. “That’s the
reality. It has always been. “In today’s world, you have so many rigs laid down, and you have a core of people. When it comes to slow times, you try to get the most experienced people you can. Skjonsby said, “We’re starting to see the phone calls come now. This week, we noticed it. I think a lot of guys think this will be a short slowdown. We believe it’s an eight-year slowdown, to get to what it was. “The only thing that will change that is a war.” Strategies So, what strategies are Alliance following, given they thing low prices are long term? “Keep out of debt. Cash is king,” he said. While Cheung has numerous investments, Skjonsby said companies have to support themselves. Alliance is in a good capital position. “In these times, you don’t want to go into debt,”
Skjonsby said. “Manage properly. Don’t overspend. No thrills. No more swag. It’s time to buckle down.” For instance, instead of fancy give-aways that have been common in the industry for years, he’s suggesting pens might be a less expensive alternative. “We cut wages a little bit, but we brought them back up. We found other ways to cut costs. “The biggest thing is we want to keep the men working. They’re paying their bills. He added, “It’s getting quieter and quieter. I think it’s going to be a quiet summer.” “Thirty-two years in the oilfield, it went really fast. I still enjoy it a lot. I’m still learning a lot,” he said. In all that time, the number of people he’s interacted with in the oilpatch that he didn’t like he could count on one hand. The vast, vast majority of people he’s found quite pleasant. “That’s what keeps me in it – people. It’s a lot of fun. Sure, some hours are late. Some are short.”
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PIPELINE NEWS February 2016
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Husky officially puts Western Canada assets on the block; making progress on midstream deal By Paul Wells Daily Oil Bulletin
(Daily Oil Bulletin) Whistler, B.C. – Husky Energy Ltd. has officially initiated a process to divest of a large swath of producing and infrastructure assets in Western Canada and says it’s making strides in efforts to sell a portion of its midstream assets in the Lloydminster area. On Jan. 20, the company made public an overview of the western Canadian assets on the block, separating them into east, south and north blocks. In total, the company has put 59,530 boe and 4.77 million acres of total land (3.95 million net) on the market. “These aren’t necessarily bad assets, but within our portfolio they’re assets that we cannot invest in going forward. We would invest in other assets first,” Rob Peabody, chief operating officer, told the CIBC 19th
Annual Whistler Institutional Investor Conference on Jan. 20. “And the early feedback we’re getting is that people are pretty impressed by the quality of the assets that are on offer and eager to talk to us. Now in this environment, we’ll see how it goes over the next six months to a year or so.” He added that the sale of royalty interests in Western Canada, representing approximately 2,000 boepd of production, “is attracting strong interest from the companies that are involved in that field.” Peabody said that the company is hopeful that it can complete its planned midstream divestiture by this summer, if not sooner. “We’re making great progress on the midstream deal—I think we’ll have something to say on that in the first half,” he said. Husky intends to retain operatorship of its midstream assets, which
include 1,900 kilometres of pipelines and 900,000 bbls of storage at Hardisty, Alta., in order to maintain the tight integration between upstream production and downstream facilities. The company has not publicly disclosed what is included in its midstream divestiture package. Peabody added that the unique structure of the deal hasn’t dissuaded interested suitors. “Now we haven’t made it easier on ourselves on one level because we put a bunch of conditions around
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very positive.” Peabody said that proceeds from the deal will be used exclusively to pay down debt. “That is to get towards our target, or even exceed our target down the road, of two-times debt to cash flow, which is where we want to be even in this environment,” he said. More on spending cuts, suspension of dividend On Jan. 19, Husky announced it was reducing its 2016 capital budget by $800 million and that its dividend had been suspended.
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And Peabody said the decision was made in order to maintain strength in the balance sheet during the current downturn, which has seen West Texas Intermediate (WTI) prices sink below $30 per bbl, Canadian heavy even lower and natural gas prices still languish. “We adjusted our 2016 plan to be reflective of the current market environment. Our business continues to be anchored on realistic pricing assumptions … fundamentally, we’re looking to maintain a strong balance sheet going forward,” he said, adding the company plans on matching its capital program with its operating cash flow rather than incur new debt. “We have the flexibility in the portfolio to dial back the spending like that with little effect on 2016 production.” If prices do begin to improve later this year, Peabody said the company can “rapidly” increase both spending and production. However, Husky isn’t banking on that scenario coming Get ready to work. to fruition. ► Page A21
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PIPELINE NEWS February 2016 ◄ Page A20 “Fundamentally, it really is how can you call this cycle at the moment? I think you can construct a very passable scenario that says that if the world economy is on a nice and stable course then sometime towards the end of the year, maybe next year, we might see some recovery
in the oil price,” he said. “But that assumes stability in the global economy and no other strange, unpredictable things. And what the last few years have shown us is that unpredictable is almost the new normal. “Ultimately to take advantage of the upturn in the cycle when it fi-
nally comes, you have to be there. And we believe that unless you’re extremely prudent through this, if you get the call wrong you might put your company in danger. We’re not going to do that.” And that prudency extends to the dividend. “We know (a dividend) is important
to our shareholders, all of our shareholders, but in the end with a cold towel on our head, we said, ‘You just can’t go on funding a dividend out of debt in an environment where it’s just not clear when the price environment is going to turn,’” he said. “In the end, after looking at the dividend,
we just decided that wasn’t a sustainable approach to take.” Although he wouldn’t offer a timeframe for when the company might reinstate its monthly payment to shareholders, Peabody said it will happen once the dust settles and market conditions improve in terms of a longer-
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term outlook. “The board will continue to look at the dividend quarter-onquarter and when we get to the point where we think we can reinstate a sustainable dividend—we realize it’s a continued priority for our shareholders—that’s what we’d be looking to do,” he said
TransCanada files Keystone XL claim under NAFTA (Daily Oil Bulletin) Calgary – Exit the pipeliners, enter the lawyers. Denied its application to build the proposed Keystone XL pipeline by President Barrack Obama on Nov. 6, TransCanada is taking the matter to NAFTA. TransCanada Corporation announced Jan. 6 it has filed a Notice of Intent to initiate a claim under Chapter 11 of the North American Free Trade Agreement (NAFTA) in response to the U.S. Administration’s decision to deny a Presidential Permit for the Keystone XL Pipeline on the basis that the denial was arbitrary and unjustified. TransCanada also has filed a lawsuit in the U.S. Federal Court in Houston, Texas, asserting that President Barack Obama’s decision to deny construction of Keystone XL exceeded his power under the U.S. Constitution. Further, as a result of the permit denial, TransCanada is reviewing the approximate $4.3 billion (US$3.1 billion) carrying value invested in the project and related assets and expects that an estimated $2.5 to $2.9 billion after-tax write-down will be recorded in the
company’s fourth quarter results. The non-cash charge will reflect anticipated asset recoveries as well as the recognition of certain income tax benefits and will not impact the company’s ‘A’ grade credit ratings. Additional tax benefits of up to $0.4 billion may be realized in the future under certain circumstances. TransCanada also intends to stop capitalizing interest on the project effective Nov. 6, 2015, being the date of the permit denial. The company continues to expect its common share dividend to grow at an average annual rate of eight to 10 per cent through 2020. TransCanada’s legal actions challenge the foundation of the U.S. Administration’s decision to deny a Presidential border crossing permit for the project. In its decision, the U.S. State Department acknowledged the denial was not based on the merits of the project. Rather, it was a symbolic gesture based on speculation about the perceptions of the international community regarding the administration’s leadership on climate change and the President’s assertion of unprecedented, independent powers.
The State Department concluded Keystone XL would not significantly increase global greenhouse gas (GHG) emissions and that, in fact, alternative methods of oil transportation were more GHG intensive. Through the NAFTA claim, TransCanada will be seeking to recover more than US$15 billion in costs and damages that it has suffered as a result of the U.S. administration’s breach of its NAFTA obligations. The NAFTA claim asserts that TransCanada had every reason to expect its application would be granted as the application met the same criteria the U.S. State Department applied when approving applications to construct other similar cross-border pipelines - including the existing Keystone pipeline, which was approved in under two years, in contrast with the seven years the administration
took to make a decision on Keystone XL. The Keystone Pipeline System has now safely transported more than 1.1 billion barrels of Canadian and American oil through Canada and the United States. Furthermore, in the federal court filing, TransCanada asserts
the administration’s action was contrary to Congress’ power under the U.S. Constitution to regulate interstate and international commerce. While the President has traditionally granted permits on narrow, established grounds, any such power does not exist when Congress has acted
to the contrary or when the decision is based on the unprecedented and symbolic grounds that are the foundation of the denial in this case. In early 2015, both houses of Congress passed a bipartisan bill approving the construction of Keystone XL, which the President later vetoed.
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PIPELINE NEWS February 2016
Hanging in there: IWS Estevan – Independent Well Serving of Estevan is hanging in there, with a substantial amount of its staff compared to peak levels. While they’re toughing it out through the downtimes, the company is also investing in the future, in its equipment, and more importantly, its people. Brian Crossman is the field supervisor and a partner in Independent Well Servicing. Tim Huber is general manager and also a partner. Crossman said, “We’re fortunate we have a lot of work with Crescent Point. We worked with everyone on price.” They have had sporadic work with other oil companies. “We have 10 rigs. Currently three are parked. We could run eight if we had to. We did a Level 4 inspection on Rig 3 in the past year.” It’s been painted and is being reassembled. But Huber noted, “We’re not building
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be doing the same,” Huber said. “Overall the amount of work has slowed down. Everyone’s chasing a smaller pie – production and completions.” Those workovers are mostly repairs to keep good wells pumping. “Every oil company has its payout schedule,” Crossman said, referring to how long it will take for a repair to pay for itself. Will some wells be shut-in? Crossman thinks so. However, when the industry gets its footing again and things start picking up, he predicts some of the boom issues again. “When it does come back, it will be mayhem,” he said. “It’ll get busier.” With that in mind, IWS’ safety stand-down on Jan. 12 wasn’t just for their staff, but other companies’, too. And instead of it being an event for safety professionals, it was the line staff – the floorhands and derrickhands, operators and rig managers – that filled the Royal Canadian Legion in Estevan. “We want to invest in our guys, even when times are slow. Not just for our guys, but for the other companies, too.” “We want to keep investing in our core group. Hopefully, they’ll be in place when things come back. They will be the leaders in safety and on the job,” Crossman said. “They are our future, the future of the industry, whether we’re here or not. You want to leave a bit of a legacy. ► Page A23
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anything new.” Staff numbers at IWS are around 45 to 50 now. At peak, they were in the 60 range. “We’re hanging in there. We’re not running the wheels off or making big money,” he said. “Anybody can make money at $100 a barrel. It’s when it gets down, then you find out how good you are at your business. “We’re still in business.” Crossman said they are keeping their core group of highly experience, trained individuals in place. To that end, he noted, “It will pick up again. “It’s always painful when you have to cut prices. But everyone is in the same boat.” “I’ve been at it 31 years. This reminds me a lot of 1997-98.” Crossman started on the rigs in 1985, just before the big slowdown of 1986. “In 1986, we came in for road bans and didn’t go back out, just sporadic jobs here and there.” Some companies are still drilling, he noted, but since there isn’t as much drilling as before, it’s mean a change in the type of work service rig companies are doing. Whereas IWS’ work used to be about half completions of new wells and half workovers, now workovers make up about two-thirds of the work. “We’re doing more workover and production work due to the slowdown in the industry. Anybody else would
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PIPELINE NEWS February 2016 ◄ Page A22 With all the cuts in prices vendors have been asked to make, there’s some concern out there that safety may find itself on the chopping block. Crossman doesn’t buy that, though, saying he hasn’t heard of an axe being taken to safety programs. “We already have safety equipment in place, and have to do the training, regardless. Crescent Point and other oil companies want to get the job done without an incident in a reasonable amount of time.” Surviving in the tough times has a lot to do with prudence in the good times. Crossman noted paying down debt during those good times and not wasting money. If a company’s iron is paid for and there’s no large debt load, it makes it easier in the slow times. Huber noted fuel costs are down. “We obviously had to adjust wages” Additionally, they’ve turned to their supplies for cost adjustments. Three service rig companies have pulled out of southeast Saskatchewan, Crossman noted. Asked about 2016, Crossman thinks, “It’s going to be quiet, but there will be work to do. I think this summer will be quiet, but I hope I’m wrong.” Huber smiled, “If I had an answer for that (2016), do you think I’d be sitting behind this desk?” “Unless we see a stabilization, it will be a tough, but interesting, year, with a different set of challenges – to keep people, maintain customers and market share.
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“We ran into this in the late 1980s and 1990s. We’re in survival mode right now.” Will there be consolidation? They don’t really think so. “There’s a lot of iron around the country. At the end of the day, there’s more iron than work,” Huber said. “Unless it’s a one rig operation, no one’s running 100 per cent. “Some bigger guys might be looking around to pick up market share. Nobody’s in a position to put out a capital purchase. We’re still on a downward swing.” Huber noted the Level 4 inspection was completed on Rig 3 so that when it does turn around, the rig will be ready to go. Additionally, their rigs are relatively new, and if a service rig is looked after, it can last a very long time.
Brian Crossman is field supervisor with Independent Well Servicing.
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PIPELINE NEWS February 2016 Ken Burns, a safety motivational speaker, was invited by Independent Well Servicing to speak at their safety stand down.
Hundreds of service rig workers attended on Jan.12.
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Estevan – It was just about a full house in the Estevan Royal Canadian Legion Hall on Jan. 12 when Independent Well Servicing hosted its safety stand down event. And somewhat unusually, the company invited many of its competitors, as well. Thus the room was packed with not just safety specialists, but line personnel who work the service rigs every day. The event was part of an annual safety stand down that takes place throughout the industry, a day for administration and field personnel alike to take a break from the everyday and focus on safety. Kevin Burns, author of Running With Scissors: 10 Reasons to Invest in Safety in Slow Times, was the invited speaker. He focused on 10 safety attitude leadership strategies. Burns spent several years as a professional mascot, getting crowds pumped up during games in various sports. “It’s important because the market is changing. Compliance is no longer enough. Those whose asses get chewed get left behind,” he said. Burns repeatedly emphasised, “Trust the Process,” saying that every
decision has put you here today. “Trolls say zero is not possible. Zero not a goal or target. It’s how you start your day. If you make the right decisions, you’re at zero at the end of the day.” No matter what the circumstances, or how tough the business is, he noted, “Somebody, somewhere, loves who you are and wants you to come home safely at the end of the day.” He pointed out that we do most of our jobs robotically, on instinct, not consciously. “If your not conscious of what you’re doing, you’re not conscious of doing it safely,” he said. “Don’t be afraid of the consequences of standing up,” Burns said. “When we do speak up, we fix is for the people behind us. “We’re all on this earth for a purpose. We’re just not told wat is is.” Safety is a team sport, he added. “Safety is not a process problem, it’s a people problem. Safety is not paperwork. It’s a choice you make every moment, every day – safely or unsafely. We’re rolling the dice every day.” He ended by saying safety is a process. “They choices we make every day determine if we move forward.”
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Fluid levels are key By Brian Zinchuk Midale – With drilling over the past year at less than half the pace it had been prior to the crash in oil prices, fewer oil companies are turning to the drill bit to increase production. One thing they can do to improve their barrels of oil per day is look at well optimization. That’s where 24-7 Enterprises Ltd. of Midale comes in, with 23 years in the business. “Now is a critical time for it. With oil prices down, you’ve got to optimize production,” said Scott Brown, president.” Thus during slowdowns optimization companies might see a little more business. Not so this time around. “This is a quieter slowdown than before,” Brown said. “We usually pick up or stay the same. We’ve been through slowdowns before. What used to keep us going with slowdowns were the little companies, but they’re all gone.” With the continual consolidation of junior producer in the southeast Saskatchewan oilpatch, there are fewer customers to turn now. “Bigger companies do their own (optimization) work. We get the equipment repair out of it. It helps the shop, if not the field,” he said. Thus oil producers’ own field operators are now doing their own fluid-level checking. The impact has been felt. 24-7 Enterprises is now running at effectively 50 per cent of the man-hours they were before the crash. They laid off one position, and reduced two fulltime positions to two days a week. Now only, Scott and his son, Ryan, are full-time. It wasn’t for lack of trying, however. Brown first noticed the slowdown in October 2014. He decided to tough it out for a year before
making any changes – that came in September 2015. “I don’t like doing it. In order for the business to survive, you have to do something,” he said. There are two other divisions within 24-7 Enterprises, one providing 19 housing units and a store in Weyburn. “Everything was full,” Brown said of the rental suite, prior to the crash. That’s why they had a three-man crew doing renovations and repairs, because, as he noted, “We needed it.” They still have that three-man crew, but occupancy is down to about 50 per cent. The store in Weyburn, however, is a bright spot. “The store’s doing very well, as good as 2014 and 2015. No complaints,” Brown said. Being broadly diversified like that does work, he noted. Back on the well optimization side of the business, the phone is still ringing, if not frequently. “The main thing is production. You start with fluid levels,” he said. From there you can optimize the jack, speed it up, slow it down, run dynamometers. “If you’re pumping the well down, you could slow it down, run it on a time clock, or a pump off controller. Or you can use casing compressors to reduce casing pressure, which allows better inflow into the wellbore,” he said. “The other thing you can do is build-ups; pressure surveys. With that we rig up automated equipment, taking fluid levels and pressure, monitoring inflows and skin damage. It could indicate stimulation is required. “If they are going to shut-in the well anyway, it’s a good time to do a pressure survey. It gives answers for down the road.” This is important in waterfloods, he noted. There are times
PIPELINE NEWS February 2016
A25
Scott Brown solders a recorder circuit board in the 24-7 Enterprises Ltd. shop. To the left is an Optimizer gas gun of his own design for shooting fluid levels in a well.
when a customer can shoot a fluid level and be totally wrong. Brown recommends going in and shooting levels in all the wells in a field, regardless. “At least we have a shut-in point, a reference point. When you do want to start them up, say, in six months, you get a reservoir pressure from that, as well. It’s a good future reference.” Also, if a company is planning to sell either itself or individual assets, doing this sort of work gives you a good idea of future production. “It all comes back to fluid,” Brown said. “Do you call in a service rig to pull the pump? Before, it was (a case of ) just get it done.” Now, oil companies are more cautious before spending money on maintenance. As for the industry overall, Brown said, “It’s a wreck, plain and simple. Everybody’s in survival mode, for sure. This slowdown hasn’t left out anybody. At the end of it, I think on the strong will survive.”
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PIPELINE NEWS February 2016
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B.C. rejects Trans Mountain Expansion Third major pipeline project to suffer serious blow By Brian Zinchuk Victoria, B.C. – The third of four major export pipeline projects hit a major snag on Jan. 11, as the British Columbia government told the National Energy Board (NEB) it rejects Kinder Morgan’s Trans Mountain Expansion (TMX) pipeline project. This comes on the heels of the U.S. government formally rejecting the TransCanada Keystone XL project on Nov. 6, and the newly-elected Justin Trudeau Liberal government’s placing a moratorium on tanker traffic on the northern British Columbia coast, a likely death knell to Enbridge’s Northern Gateway project. British Columbia Minister of the Environment Mary Polak said the province’s stated five conditions are the basis for their “basis for defending British Columbia’s interests, in terms of the environment, but also First Nations and benefits to British Columbia.” “We have reaffirmed that in this submission. We have said, insofar as the evidence before the NEB, we have not seen evidence that, at this time, those five conditions have been met.” Specifically within
the NEB process, she referred to Conditions 2 and 3, around marine oil spill response, and land oil spill response. “We have been encouraged by the number of government and industry leaders who have also taken up the challenge and accepted the need for us to proceed along our five conditions, but we have not, at this time, within the NEB process, seen those five conditions can yet be met. The other conditions include successful completion of the environmental review process, addressing Aboriginal issues and ensuring “British Columbia receives a fair share of the fiscal and economic benefits of a proposed heavy-oil project that reflect the level, degree and nature of the risk borne by the province, the environment and taxpayers.” Kinder Morgan, the pipeline’s proponent, said in a release the same day, “Trans Mountain has been working closely with the Province of B.C. to discuss and demonstrate its commitment to meeting B.C.’s 5 Conditions, and believes much progress has been made. “Trans Mountain is confident that through
continued discussions with the Province, along with the final steps of the NEB process that already include 150 Draft Conditions that the company must meet, it will be able to satisfy British Columbia’s 5 Conditions by the time the regulatory process is complete.” They pointed out Kinder Morgan cannot meet all these requirements by itself, but needs cooperation with other players. The release said, “The Province’s 5 Conditions include several requirements that Trans Mountain alone cannot satisfy. The conditions related to world-leading marine oil spill response, recovery and prevention, addressing Aboriginal treaty rights and B.C. receiving its ‘fair share’ are all conditions that require multiple parties to come to the table and work together. “If approved by the NEB, Trans Mountain is confident that the construction and longterm operation of the project will be done to the highest standards of environmental performance, support Aboriginal communities and provide lasting benefits for British Columbians, Albertans and Canadians.”
PIPELINE NEWS February 2016
Touchstone selling Kerrobert property to Quattro
CAREER Guıde
(Daily Oil Bulletin) Kerrobert - Touchstone Exploration Inc. is selling its Kerrobert facility, infrastructure and the associated petroleum and natural gas (P&NG) rights to Quattro Exploration and Production Ltd. for $4.15 million. The consideration includes $650,000 in cash and $3.5 million in securities through the issuance of 35,000 non-voting Quattro Class C, Series 3 preferred shares. The preferred shares have a face value of $100 per share and pay an annual preferred dividend of $3.50 per share. The cash consideration consists of $100,000 to be paid upon signing of the Purchase and Sale Agreement with the balance payable no later than Feb. 15, 2016. Non-payment of the final cash installment will result in Quattro forfeiting the initial cash deposit. The disposition is effective Dec. 31, 2015 and is expected to close on or before Feb. 15, 2016, subject to satisfaction of closing conditions customary in transactions of this nature. “The Kerrobert property was our final producing asset in Canada,” said James Shipka, chief operating officer of Touchstone, adding that the disposition of the property will eliminate operating losses and allow its team to focus on its core onshore Trinidad producing assets.
The property contributed an average of 100 bbls of heavy oil per day during the three months ended Sept. 30, 2015 and was a legacy Petrobank combustion project. Associated future capital costs were $1.02 million under both the proved and proved plus probable cases. The property incurred unaudited operating losses of approximately $1.35 million during the 11 months ended Nov. 30, 2015. Through this disposition, the company will eliminate an internally estimated $3.33 million in future abandonment liabilities associated with the assets. “Upon the closing of this acquisition of oil production, at a discount to current oil and natural gas pricing, the additional prospective lands, and the extensive operated facilities in west-central Saskatchewan, positions Quattro with the potential to collectively reach its initial target of 1,000 boe per day from its combination of exploratory and producing properties in Saskatchewan,” said Leonard Van Betuw, president and CEO of Quattro. Following the disposition, Touchstone has an interest in 32,723 acres of undeveloped land in Saskatchewan focusing mainly on the Viking formation.
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PIPELINE NEWS February 2016
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