PIPELINE NEWS SASKATCHEWAN’S PETROLEUM MONTHLY Canada Post Publication No. 40069240
October 2018
www.pipelinenews.ca
Vol. 11/5
Lloydminster
Heavy Oil Show 2018
Cougar Wellhead Services Inc. started up during the downturn, and is now building wellhead drive units for the domestic and overseas market. Peter Neufeld, left, brought his family to Canada in 2000, initially as visitors, but then as immigrants from Germany. His son, Ronny, right, is a mechanical engineer who recently joined the company. The whole family is involved. Cougar Wellhead was one of the exhibitors at the Lloydminster Heavy Oil Show Sept. 12-13. See related story Page A2. Photo by Brian Zinchuk
Tremcar to manufacture trailers in Weyburn A2
Jason Kenney fills the room in Lloydminster
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Scott Moe reacts to Trans Mountain decision A7 - 9
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PIPELINE NEWS October 2018
Tremcar to produce semi propane tankers in Weyburn By Brian Zinchuk Weyburn – It’s not often you have a live band at an oilfield barbecue in Saskatchewan, but when Jacques Tremblay, owner of Tremcar, came out to Weyburn on Sept. 6 to celebrate the 10th anniversary of Tremcar West, he had a surprise for the crowd in addition to the music. Tremcar would be setting up an assembly line to build pressurized semi trailers to haul propane, and that assembly line would be in their existing Weyburn facilities, on the south side of the community. The announcement comes with 15 expected new jobs for Weyburn. “We were very successful the first six years. The last four years were terrible. But we are looking at the long term. We are thinking the business will come up, so we support our customers. Now, we have a new project, here in Weyburn. We are going to start a production line of propane tanks that we’re going to add to this area to support our organization here. Probably in the next few months we’ll go ahead with this project,” he told Pipeline News. The production line will serve their Western Canada markets. They will be built out of thick carbon steel. The existing paint booth at the Weyburn facility is a key component in the decision. Asked why, when they have several factories in Central Canada, they would set up in Weyburn, he replied that even though
it had been so bad here over the last three to four years, “Canada is a natural resources country, and nobody is going to change that. Of course, it was bad for a while, but the market is going to come back in the oilfield. But we know the oilfield also needs propane tanks, that we’ve decided to produce this kind of thing for the transportation industry out west.” They will build tanker trailers and truck-mount tanks as well. They will be mostly B-train units. “We’re probably going to add another 15-16 people more in the next year, year and a half,” he said. Tremcar West currently has 12 people working out of Weyburn. He doesn’t expect difficulties attracting workers, and pointed out that people are now more willing to move. Tremblay added, “We expect, by January, we should be ready to build that, building tanks right here and installing it on the truck and frame. We’re going to start to build that here because we have extra space. We decided to take a part of it and built tanks.” “Here in Weyburn, we have something we don’t have in other area. In Edmonton and Saskatoon, we don’t have sandblast equipment nor a paintbooth. Here we are well organized with all the technology for painting this kind of stuff. When you talk propane tanks, all tanks are painted. We have this equipment here, well organized for
Jacques Tremblay, owner of Tremcar, announced the company will soon start manufacturing propane trailers in Weyburn. Photo by Brian Zinchuk many years, but we don’t have this equipment in the other places. “It will probably be easier to get good workers here than it was five years ago,” he said. American tariffs on steel and aluminum are having an impact on the company. Tremblay said, “Of course, it’s affecting us, because the aluminum, what we use, the aluminum plate, is coming from the States. There is no production of aluminum plate, minus-quarter inch, that we use for petroleum. It’s coming from the States, mostly. We pay a 10 per cent tariff on it coming from the States.” The steel will probably come from the Regina, but they may buy directly from
the mill. “We are still thinking the market will be good and we should support our customers.” In his speech, Tremblay pointed out how, ten years ago, they were initially having difficulty getting three-face power put into their Weyburn facility, but by contacting local MLA Dustin Duncan, who is currently Minister of Environment, workers showed up right away and got the power installed. “Believe it or not, I met him on Thursday, and on Friday, he drove to Regina. On Monday morning, three workers from SaskPower were on the ground here,” Tremblay said. “I thank you very much.” “I was impressed by
that kind of service here,” he said. “We are committed to support our customers in this area in the long term,” Tremblay told the crowd. “Here, in Saskatchewan, we are here for the long term.” He thanked the customers, without whom they would not have been in Weyburn for 10 years. Duncan, said, “I can’t wait, later this evening, to phone Premier Moe and tell him about your expansion. That’s certainly very good news and we certainly welcome that here in Weyburn. We’re so honoured and pleased you decided 10 years ago to open here in Weyburn and even though it’s been a tough couple of years, you’ve hung in, here in Weyburn and are looking
at a new line here.” Tremcar produces stainless steel farm pickup tanks trailers, stainless steel chemical tank trailers, stainless steel food grade tank trailers, aluminum dry bulk tank trailers, aluminum petroleum truck mounts, aluminum petroleum trailer, stainless steel and aluminum crude oil/ethanol tank trailers, aluminum vacuum trailers or hot product/asphalt tank trailers among others. As Tremblay noted in a previous interview, the company has even made tankers to haul chocolate. Tremcar has six manufacturing facilities located in Saint-Jean-sur-Richelieu, Que., St Césaire, Que., Toronto, London, Ont., Strasburg, Ohio, and Haverhill, Mass.
Growing like crazy in tough times: Cougar Wellhead By Brian Zinchuk Lloydminster – Peter Neufeld, a German master machinist and master millwright, brought his family to Canada in 2000 to live here a few years to see if they liked it. Now, 18 years later, his second company, started during the oil downturn, was displaying new progressive cavity pump drive heads at the Lloydminster Heavy Oil Show. Neufeld heads up family-owned and operated Cougar Machine Ltd., which started in 2003, and its sister company Cougar
Wellhead Services Inc., which started three years ago. Cougar Machine is a custom machining shop, based in Edmonton. They do the manufacturing for Cougar Wellhead. The Cougar Wellhead drive unit is a hydraulic inline drive. That means there is no belt drive to an offset motor. On a conventional belt-drive unit, speeds are typically changed by changing the sheaves. The Cougar unit uses a variable frequency drive (VFD) allowing much greater variation in speed. “It’s a new innovation,” he said.
These hydraulic units are targeting for the Lloydminster market. They have a sales and service location in Lloydminster. The company has sales in Venezuela, Australia, Argentina and the United States. They have direct sales but most of their sales are done through various distributors. Most of their drive units are in heavy oil. Asked about Venezuela, whose economy is in tatters, he noted they are prepaid in U.S. funds. Neufeld’s background is as a master machin-
ist and master millwright, trades that he noted don’t have a direct equivalent in Canada. They had visited Canada before, and in 2000, they moved here with the intention of staying two years. “After one year, we decided to stay,” he said. His son, Ronny, is a mechanical engineer, and just the week before the oil show, joined the company fulltime. His wife, Lilia, is a nurse, who is also in the process of coming over to Cougar fulltime, where she handles the bookwork. Daughter Lea is in a para-
legal program in university and does human resources support for the company. “It’s growing like crazy,” Neufeld said, noting they’ve sold over 300 drives in Alberta, adding, “We have a 500-drive backlog on our books,” The company offers an exchange program for competitors drive units. “Instead of repairing an old drive, we give you a new one,” he said. On the wellhead side, they have 12 to 15 people working, and on the machine shop side, its 35 to 40. About one-quarter of
the machine shop work is dedicated to the wellhead drive unit manufacturing, the remainder is custom work for outside clients. While most companies in the oilpatch have shrunk substantially in this downturn as well as during previous downturns, Neufeld sees opportunity in tough times. “In 2009, when the first hit came, for Cougar Machine, it was our best year,” he said. That year they bought six new CNC (computer numerical control) machines. ► Page A6
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Kenney says we should pursue every export option By Brian Zinchuk Lloydminster – Alberta United Conservative Party Leader Jason Kenney attracted a sold out crowd of approximately 500 people to the opening ceremonies banquet of the Lloydminster Heavy Oil Show, and he didn’t disappoint. Kenney and federal Conservative Natural Resources critic Shannon Stubbs, MP for Lakeland, which includes the Alberta portion of Lloydminster, spoke to the media just prior to going on stage on Sept. 11. At the time of the interview, Saskatchewan Premier Scott Moe had been saying there was a $200 million direct impact to the coffers of Saskatchewan due to the Western Canadian Select (WCS) to West Texas Intermediate (WTI) price differential. (Moe has since revised that number to $300 million per year). Asked about the impact for Alberta, Kenney said, “It’s probably at least ten times that. The energy sector in Alberta is about 10 times the size of that in Saskatchewan, in terms of revenue. So we’re
talking tens of billions of dollars value that we’re losing, primarily to the United States, as we sell them oil at, on average, $35 a barrel, and they’re now selling their oil at $70 a barrel. So we’re taking something like a 50 per cent hair cut right now. According to the Toronto Dominion Bank, I think their estimate is we’re losing $50 billion a year in value to the Canadian economy.” With regards to the now-defunct Energy East pipeline project, and the idea of reviving it, Kenney said, “My attitude is we should pursue everything. But we need to clear out the regulatory barriers. That means getting Trudeau to stop Bill C-69, stop Bill C-48. Get Energy East back on the table. Folks down east want that to happen. There are proponents looking for potential oil and gas access to Hudson Bay, first through the renewal of the rail route to Churchill, and then a pipeline. There are proposals to get a pipeline built to Juneau, Alaska. Another to Port Angeles in the United States.
There are Aboriginal advocates of the Eagle Spirit Pipeline, which is basically an Aboriginal-owned Northern Gateway. “How about the feds start consulting with the pro-development First Nations? “We need not give up on Trans Mountain. We’re calling on the feds to declare the Trans Mountain as being for the common advantage, using a special constitutional power, Section 92.10c of the constitution. I’m calling on the federal government to impose sanctions on B.C. for standing in the way of that. They should appeal the Federal Court of Appeal decision to the Supreme Court of Canada immediately. “There are other possible developments, like technologies for the solidification of bitumen to allow it to move as a solid by rail, which would remove a lot of the opposition. There’s a lot of different strategies that should be all pursued.” Kenney said he and Premier Moe are of like mind on all of these questions, and, if elected, Alberta would join Sas-
katchewan and Ontario in their constitutional challenge of the federal carbon tax. “Alberta needs to catch up with Saskatchewan on deregulation. It is faster and easier to get permits to do exploration or production in Saskatchewan, whether it’s light, natural gas, heavy oil or bitumen, than it is in Alberta. I’ve given Scott fair warning that we’re going to catch up with him in terms of a lighter regulatory touch in Alberta.” Regarding carbon taxes, he said it would be an imposition of a de facto provincial tax by a federal government, which is unconstitutional. In terms of provincial revenues, if it was possible to bring investor confidence back, capital spending and employment, it would generate “a heck of a lot more revenue than the carbon tax does,” Kenney said. The Alberta NDP increased corporate and personal income tax rates, but revenue has declined for three straight years because of an overall decline in the economy, fueled partly by higher tax
Jason Kenney attracted 500 people to his speech in Lloydminster on Sept. 11. Photo by Brian Zinchuk rates, he added. Eliminating the carbon tax would be part of the UCP’s strategy for economic growth. “The best way to do that is to get pipelines to reduce the differential, get more value for our oil and gas, including higher royalties,” Kenney said. Asked if he would reverse the current Alberta government’s plans to shut down all coal-fired power plants, he said, “Bill No. 1 of a future Conservative government in Alberta would be the Carbon Tax Repeal Act, which would repeal the entire 2015 Carbon Lead-
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ership Plan Act, which includes the accelerated shutdown of the modern coal-fired plants. We will invite the power producers to continue operating those modern plants if they choose to do so. But we won’t compel them to. Some of them have made market decisions to convert from coal to natural gas production, which, in the long run, I think is a good thing. But in the medium term, coal is a reliable and inexpensive form of power. “What the NDP in Alberta is doing is trying ► Page A6
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PIPELINE NEWS October 2018
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Getting rid of the differential would pretty much wipe out the provincial budget deficit There is no end, ever, to the pipeline politics in this country. The federal government, on Sept. 21, announced it will require the National Energy Board to get all their ducks in a row within 22 weeks with regards to the Aug. 30 ruling by the Federal Court of Appeal’s decision to quash the Trans Mountain Expansion Project. So it’s going to be six months, at least, from the time work was halted before any action could possibly take place. Six months. Where have we heard that song before? Oh wait. Maybe it was the Keystone XL. This September marked the 10 year anniversary of the start of the Keystone XL pipeline project. While its southern portion has long been completed, the northern portion still has not seen work started, despite President Donald Trump, in his first week in office, inviting TransCanada to revive it and build it. There has been some recent positive news that maybe this will go ahead, but honestly, no one’s really holding their breath anymore. Maybe they will. But Keystone XL doesn’t get our product to overseas market and Brent pricing, either. It commits those barrels to America, who are currently paying us a little more than half of WTI for our oil. This is one of the reasons there is a rising chorus across Canada calling for the revival of the Energy East pipeline that TransCanada spent over $1 billion on before cancelling it. It was cancelled because the federal government moved the goalposts on the regulatory side, making it impossible to truly achieve. And now with Bill C-69 working its way through parliament, there may never be another pipeline built in this country until that bill is repealed. In the meantime, crude-by-rail is picking up. On Sept. 20, the federal government sped up the retirement of unjacketed CPC 1232 rail cars in the next few months. For hauling crude, this deadline has been moved up 17 months, and for carrying condensate, it comes years before the 2025 deadline that had been previously established. DOT 111 cars, the ones that destroyed the town of Lac Megantic, Quebec in 2013, were retired in Canada last November, and for good reason. Cumulatively, this means there will be less cars available in the fleet. However, since crude-by-rail is still quite a bit lower in North America than it was during the height of the oil
boom, when North Dakota had more oil than it knew what to do with, there should still be some cars floating around for our needs. The Dakota Access Pipeline (DAPL), which the protestors hated so much, dramatically reduced that state’s need for crude-by-rail to get to market. DAPL also mean North Dakota Bakken crude went from a regular discount on its price, compared to WTI, to a premium. Gee, imagine that. Look what the right pipeline can do. In June, Canada’s exports of crude-by-rail hit 204,588 bpd. This happens to be the highest amount since 2012, when the National Energy Board started keeping records that are publicly available. We got close in September 2014, at 178,989 bpd, when oil prices were still very high and the crash had not yet begun. This is almost exactly three unit trains, nation-wide, per day. You might think that’s a lot, but it’s not. The tremendous build-out of crude-by-rail facilities in Saskatchewan alone well exceeds that capacity, never mind the huge facilities built in Alberta. So we have a lot of latent, stagnant crude-by-rail capacity in loading infrastructure already in place. We just need the prices, the cars and the locomotives to make it happen. This is precisely what’s going to happen. Pipelines have not been getting built. They are not getting built anytime soon, except for the Enbridge Line 3 replacement, which will thankfully add some more capacity to the system. Our oil production is growing. According to the NEB, we’re producing about 4.58 million bpd nation-wide. (That’s roughly 4.5 per cent of global production, if you’re keeping track). In 2014, we averaged 3.75 million bpd. We need pipelines, or this stuff is going to run on rails. And surely someone’s got to find a way to make up that enormous C$33.75/bbl. differential by shipping heavy oil by rail, somewhere. In recent weeks the provincial government recalculated its numbers as to how much we are losing due to these ridiculous differentials. The old number was $200 million in revenue to the province, and $2.6 billion to the economy. The new September number comes in at $300 million in lost revenue to Saskatchewan, and $4.4 billion to the economy. That $300 million would essentially wipe out most, if not all, of Saskatchewan’s current budget deficit. How important are international export pipelines to you now?
PIPELINE NEWS October 2018
Paying three times on Trans Mountain. What else would you expect? How do you like paying for the same thing three times? Because that’s what we’re doing, if this Trans Mountain Expansion Project ever goes ahead. Now, to be clear, it’s not all of it – just a small portion. But we are most certainly paying for it. What I’m referring to is the preliminary work that was done on the project. Surveyors tromped all over hill and dale, marking the right of way, centre of ditch, the existing pipe, and any other lines crossing the planned route. They hammered in colour-coded stakes by the gazillion along the first construction phases of the route. Hydrovac trucks had gone out in earnest, finding all the other line crossings using a process sometimes referred to as daylighting. The hydrovac workers use a giant wash wand, similar to what you would see in a car wash, but much more powerful. They use it to liquify the dirt and wash it away while a giant vacuum mounted on a boom of a very large truck sucks away the mud. This is done to find the telephone, fibre optic, power, oil or gas pipelines whose precise position you really need to know before an excavator bucket does it the hard way. If you lived anywhere along the right-of-way, you would have surely seen the high numbers of wide loads going by as large semis pulling lowboy trailers first brought the heavy equipment like excavators, dozers, and forestry equipment, first to the marshalling yards, then to the right-of-way kickoff. Those marshalling yards would be chock-full of shacks, warehouse trailers, fueling stations, skids, and every sundry thing you can think of needed to build a pipeline. It is my understanding that when the Federal Court
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of Appeal quashed the permits to build the expansion project, not only did work stop, but it was reversed. Every one of those stakes had to be pulled. All the hydrovac holes had to be refilled. Access ramps had to be taken out. All equipment had to leave the right-ofway, not simply be parked for a rapid return to work. All the signage, much of it custom made, had to be removed. There’s to be no trace of this work that has taken place. I don’t think they’re going to be putting back the trees that were cleared, but I wouldn’t be surprised, either. But it gets better. The equipment didn’t just get sent back to the marshalling yards along the right-of-way. No sir. Those marshalling yards had to be fully demobilized by the end of September. Nothing left. So the pipeline construction contractors had to pull all their iron out and send it back to wherever it came from, i.e. Edmonton, Fort St. John, wherever. To be clear: Trans Mountain, when it was still Kinder Morgan, paid to have all the initial mobilization, surveying, hydrovacing, access and signage work to be done. We, the taxpayer, then paid an obscene amount for the Trans Mountain pipeline. That included the associated expansion project which has not been built, and whose permit has just been quashed. Thus, we have paid a very high price for the work Kinder Morgan had already done. Trans Mountain became a Crown corporation, meaning we now own it, and pay for everything it pays for. Trans Mountain then is paying for the full demobilization that took place in September, post-judgement, post-ownership change. The federal government then, on Sept. 21, sent the project back to the National Energy Board for consid-
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eration of the issues the court said were missed, namely tanker traffic’s impact on the southern resident orca (“killer whale”) population, and for consultation with First Nations. This is supposed to be completed within 22 weeks. Given it took the better part of a month do start this, it means a full six months will be lost, minimum. If, presumably, “This pipeline will be built,” as Prime Minister Justin Trudeau likes to say, that means that some time after six months has passed (and closer to a year, due to the timing of migratory birds movements, but that’s a whole other column), the project will go ahead. That means we will pay, again, for the surveying to be done, again. We will pay for the hydrovacing to be done, again. We will pay for the signage to be installed, again. We will pay for the mobilization of all the equipment from the contractors’ yards to the marshalling yards, and then the right-of-way, again. We will pay for all of this. Need I remind you that there was a private company willing to pay for all of this, on their own dime, just a few months ago? But due to the colossal screw up in the handling of this file by the federal government, to get back to where we were on Sept. 1, we will have paid for all this work three times instead of once. Put that in your pot pipe and smoke it, Prime Minister Trudeau. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net. Keep our environment looking
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PIPELINE NEWS October 2018
Energy is the number one economic issue for Canada ◄ Page A3 to replicate the failure in Ontario of massive subsidies for unreliable and hugely expensive forms of intermittent power, wind and solar, with the need for backup of the baseload through hydrocarbons like natural gas. That doesn’t make any sense, to force consumers to pay twice for their power. We will stop the NDP shutdown of the coal plants.” Stubbs said, “The crisis around the Trans Mountain Expansion is the direct result of the failures of Prime Minister Trudeau and the Liberals to exert federal jurisdiction and the rule of law to ensure the Trans Mountain Expansion, which they approved nearly two years ago, can actually go ahead. It is shocking they were unprepared for the court ruling, in either scenario, because they
claimed for two years this is a priority for them. “It’s doubly unconsciousable that they, as of yet, have no concrete plan for the expansion to go forward, she said, two weeks after the ruling. Nine days later, the federal government instructed the National Energy Board it had 22 weeks to review what was set out in the ruling. She has been working in a Parliamentary committee to look into what has been going on, but has been stymied by the federal Liberals. “So I’ve heard overwhelming frustration Shannon Stubbs has been and anger from people right fighting for pipelines in across my constituency. Of Parliament. course, they’re rightfully angry. Countless examples of jobs over the next one to men and women who either four years – totally out of were employed either right work, completely uncertain. now, to begin land clearing, I was talking to a woman or were counting on those from Vegreville not too long
ago. Her husband just lost his job immediately. He’s been told he may or may not be able to go to Ontario to work on a pipeline sometime in October or November,” Stubbs said. Asked why it takes so long to study pipelines, whose fundamental technology hasn’t changed in decades, Kenney framed it this way, “The original TransCanada pipeline, that went from Hardisty to Sarnia, that created a political crisis in Ottawa, was approved and built in 18 months. “This is why the Harper government actually brought in legislation to limit the NEB process on a pipeline application to two years, which is the longest in the world. But that was opposed by the Liberal Party and the NDP as being too
fast. So this is ridiculous. We are sending a message that Canada cannot function as a modern country, which is why we estimate some $90 billion in capital has been pulled out of Canada, or investments have been cancelled, in the past two years alone, because of the uncertainty created by this. This is becoming existential for our economy. It’s not just about oil and gas. It’s about the rule of law. It’s about whether we can build anything. These are extraordinary times and require extraordinary measures,” Kenney said. Stubbs added, “I would say this question around energy development in Canada is the most pressing domestic economic question I think facing public policy makers at both levels of government right now. I’ve made it my mission
over the past three years to talk about the importance of the energy sector to the entire country. It’s the number one private sector in the Canadian economy. It’s Canada’s second-biggest export. It makes an outsized contribution to a variety of different sectors in all provinces. The issues, I think, around timeliness, and competitiveness and certainty and predictability for approval process so this crucial, multi-billion dollar, long-term infrastructure can actually get built in Canada. That’s our priority focus for us.” Stubbs said that federal Conservative Leader Andrew Scheer would, immediately after being elected, invite TransCanada back to the table on Energy East and establish the conditions to make it possible.
◄ Page A2 Thus, in 2015, when this current downturn was hitting really hard, they launched Cougar Wellhead. “In 2015, when Wellhead came up, people told me, ‘You’re nuts. Save your money to survive,’” Neufeld
recounted. Instead, they developed more than 10 different drive unit models over the next three years, and typically have two to three in research and development. “We doubled since 2014,” he said. “As you get
pushed, you have to grow.” Indeed, he’s found they’re turning away work. Neufeld is a big fan of shows like the Lloydminster Heavy Oil Show. He frequents a show in Europe which happens every four years, highlighting the latest
in manufacturing technology. To that end, he finds that Europe is generally ahead of North America, so he’s looking for new things to stay on top, such as new CNC machines. They have a day shift and night shift, he noted,
but the CNC machines can run all night. With the lights off, the machines still make money. As the interview progressed, a woman came along to the booth and asked for a long metal shoehorn. Every trade show typically
has one or to items of swag giveaways that becomes the object of desire for that show, and arguably Cougar hit a home run. They made steel shoehorns, 72 centimetres long, with their name, Cougar, punched through in stencilled letters.
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PIPELINE NEWS October 2018
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Moe says feds should appeal TMX decision, consult and pass legislation
By Brian Zinchuk Regina – By Sept. 6, a week had passed since the Federal Court of Appeals quashed the permit to build the Trans Mountain Expansion Project, and the discourse on pipelines in this country had not settled down. Pipeline News spoke by phone to Premier Scott Moe about Saskatchewan’s take on the aftermath of the judgement. Pipeline News: A week after the judgment came down, where are we? What, specifically, does the Province of Saskatchewan expect the federal government to do on Trans Mountain, and have they done anything yet? Scott Moe: We’re going to need some action on it soon. There is a path forward. The federal government just needs to take it. There hasn’t been a lot done, I don’t think, to date, by the federal government. They talked about essentially digesting the judgment that came down from the federal court. I think, as we move forward, there’s a number of things the federal government should do, and they should act very quickly. They should understand
this is the leadership that people expect the federal government to act on, on projects of national interest such as the Trans Mountain pipeline. I would say they should file an appeal immediately with respect to the court decision. They could also start to take action on some of the outcomes of the court decision. For example: they could very quickly engage with consultation of some of those that have questions around this project of national interest. They could have committee hearings in Ottawa, for instance, and bring people there in very quick order, in a matter of weeks, to state their case. They can do this to ensure that the views of so many communities and so many groups that are supportive of this infrastructure. (They) could also have the opportunity to advocate for the economic opportunities for their communities. That would be two pieces – the appeal and the enhanced consultation in a short period of time. Then they should very quickly recall Parliament, and they should pass legislation with respect to
the environmental aspect of the court decision that reaffirms the federal government’s jurisdiction in this area. That the federal government does have this jurisdiction, we’ve always said, and they should pass legislation that they can reaffirm jurisdiction, so that construction can continue, can restart and ultimately finish so that as a nation we can ultimately realize the benefits of this project. P.N.: Is there any place for the notwithstanding clause? Moe: I don’t know if there’s a place for the notwithstanding clause on this particular project. This is within the federal jurisdiction. My feeling is they should pass legislation reaffirming that jurisdiction, and move on the project. P.N.: You’ve talked numerous times about the impact on Saskatchewan. That impact is not going away. What is this costing us? Moe: This is one piece to a larger conversation
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Saskatchewan Premier Scott Moe. File photo around the impact of a lack of access to our markets on the energy industry. Getting this project built would be a signal to the energy industry that, yes, we can get these transportation projects built in our nation. Yes, our sustainable product can be provided to markets all around the world. Right now, the cost
to Saskatchewan, by not having projects like TMX (Trans Mountain Expansion), Energy East, Northern Gateway, not having that ample access to world markets, is about $2.6 billion per year to the economy. Much of that is felt in the oil producing areas of our province, obviously. Directly to the government of Saskatchewan, it’s over
$200 million in royalties and fees that we would have an opportunity to acquire, through that increased economic activity. So the cost to Saskatchewan, not only to those communities involved directly in the extraction of our sustainable energy product, is also a cost, I would say, to all Saskatchewan people in the ► Page A8
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PIPELINE NEWS October 2018
$200 million the province foregoes annually is close to our current provincial budget deficit ◄ Page A7 fact that the government of Saskatchewan bears some of this burden. P.N.: Wouldn’t $200 million a year almost get rid of what we have left for our deficit? Moe: You are correct! And astute! It’s a large amount. In addition to that $200 million that would directly come to the government of Saskatchewan, the spinoff effects of $2.6 billion in a number of communities across the province, to our service industries, our hotels, our grocery stores, our
restaurants, in often more rural areas in the province. Never mind the service industry that services more directly the energy industry in the way of manufactured goods and servicing the parts and trucks. The spinoffs of $2.6 billion in increased economic activity we could obtain, not by producing more, but by getting a fair value for the product we are already producing, would be tremendous. That is what makes this pipeline, and other pipelines, so very important; not just to Saskatchewan,
but to the rest of Canada as well. We contribute to equalization to the nation of Canada. This project is in the national interest. I’ve said that. Our ministers have said that. Most in the federal government have said that. It’s time, now, for our federal government to step up and lead and to ensure it is actually completed, to ensure that we send the appropriate signal to the markets that we can get our product to market, and that we’re willing to provide the many, many countries that are looking for this sustainable product, in this case,
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I think it speaks to the importance of this project. I think it speaks to the reason the government of the previous premier in this province, and current premier, have been very vocal proponents, for any and all pipelines to get our product to market, to obtain a world price, a fair price, for Saskatchewan and Western Canadian energy products. P.N.: Should Energy East and Northern Gateway be revived? And can this happen with Bill C-69 Moe: Yes, they both should be revived. The conversation around the construction of those projectsshould be revived, in particular, Energy East, where we could displace imported energy products ► Page A9
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know, we don’t have active oilsands projects in Saskatchewan, at the moment, actively producing oilsands projects. But I think it’s a statement that holds true for much of the industry right now. If we are going to continue to take a discount for our product, which is as sustainable as any product in the world; if we are going to continue to take a discount simply because we aren’t able to build nation-building infrastructure that is in our national interest, to not to just allow us to produce more, or to export more, but to allow us to obtain a fair world price for our product, the question bodes for the industry. How do we expand our investment in Western Canada?
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Premier Moe holds out hope for the medium term that this, too, shall pass ◄ Page A8 from around the world, imported energy products that are produced with a much higher carbon footprint than Saskatchewan or Alberta products. Energy East is a project of importance to Saskatchewan because it would be our products actually in that particular pipeline. And we should have that conversation about the safe and efficient transportation of our sustainable to other Canadians, as well as the opportunity to move them to other areas and displace dirtier products from around the world. For certain, they should be revived. We didn’t sign on to the communique at the last energy ministers meeting, with respect to Bill C-69. We feel C-69 is a problematic bill for not just the energy industry, but (a) number of industrial opportunities we currently have and continue
to want to expand, here in Western Canada. It is a bill that essentially cantilevers the federal environmental assessment into areas of provincial jurisdiction. It should not move forward. I understand it is in the Senate right now and we’ll have more to say on Bill C-69 as the regulations come out. It’s a problematic bill for not just the energy industry, but a number of different industries in Western Canada. P.N.: A lot of people in the industry are highly disillusioned now. Can you offer any hope? Moe: Yes! I think we should be hopeful. We should be hopeful and fierce advocates for the industry because of what the industry has done in the way of sustainability, in the way of ensuring our performance standards, and efficiencies and sustainability are among the best in the world here in Saskatchewan and in
Western Canada. So I think there is an opportunity for us to be very optimistic for this industry in the medium term, at least, in Western Canada. We have a great product, that is among the best, extracted and produced in the very best methods, from an environmental perspective, from a labour prospective, when you compare it to anywhere in the world. We should continue to advocate for that, and I do feel positive. I feel very bullish. Over the medium term, we are going to come to resolution on ensuring that we’re able to solve some of our transportation issues, and solve some of our trade issues as well, to ensure we’re able to supply this product to customers that want it. Not just around the world, but also in Canada. We’ll continue to advocate on behalf of this industry and the Saskatchewan people employed in this industry.
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PIPELINE NEWS October 2018
Crescent Point tightens up, reducing workforce and areas of focus By Brian Zinchuk Calgary – After years of being on a continual growth path, Crescent Point Energy Corp., the largest oil producer in Saskatchewan, is making a dramatic change in direction. It’s reducing its areas of focus, cutting its staff by 17 per cent, and selling off up to 50,000 barrels of oil per day (boepd) in production, 28 per cent of its current production. There will be an emphasis on a $1 billion debt reduction by the end of 2019 as well as returning capital to shareholders, possibly through buybacks. The company appointed Craig Bryksa as the permanent president and CEO after he served those positions in an acting capacity. Under his direction, the company is placing greater emphasis on returns versus growth during its 12 to 24 month transition. Following that period, Crescent Point expects its organic growth rate to increase in priority, including strong debt-adjusted metrics, as a product of a more focused and efficient production base. The areas of focus will include the Viewfield, Flat Lake and Shaunavon areas, as well as the emerging plays in the East Duvernay in central Alberta and the Uinta in Utah. Up to 50,000 boepd of assets going up for sale include Swan Hills in Alberta, Viking play in west Central Saskatchewan, southeast Saskatchewan conventional (around 20,000
boepd), Battrum/Cantuar (5,000 boepd), and North Dakota. Since the North Dakota production is growing significantly, it is expected to be around 20,000 boepd. In a press release and conference call on Sept. 5, the company said it was an adoption of a new clearly defined transition plan with measurable deliverables. In addition to Bryksa as CEO, the company appointed Robert (Bob) Heinemann as the new chairman of the board. Regarding his appointment as permanent CEO, after a tenure as acting CEO, Bryksa said, “This is a great honour. I care deeply about this company, and I am looking forward to the opportunity to work with our current and prospective shareholders to re-establish Crescent Point within the investment community.” He was promoted from within, having most recently served as vice president, engineering west. Now the company will be focusing its asset base by pursuing significant upstream asset divestitures. They are targeting a net debt reduction of over $1.0 billion by year end 2019, at current strip commodity prices, through a disciplined return-focused budget and asset dispositions. This includes having identified certain midstream assets for potential monetization. Lastly the reduced workforce is expected to result in an annual total expense savings of over $50 million.
“Our transition plan is designed to ensure we become a more focused and efficient company with a stronger balance sheet,” said Bryksa. “After taking a refreshed approach in reviewing our business, we will look to refocus our asset base into fewer operating areas, follow a more disciplined capital allocation process and reduce our costs. We believe this new approach will enhance our company’s sustainability and returns for shareholders.” Crescent Point undertook a comprehensive review of its asset base, business strategy and organizational structure. The company’s objective in conducting the review was to identify measures to prioritize Crescent Point’s strategy based on key value drivers, which include balance sheet improvement, disciplined capital allocation and cost reductions. Bryksa noted this included a suite of assets with high returns, scalability and the ability to increase free cash flow generation, multiple high-quality assets of smaller scale that could be divested to enhance shareholder returns, and a strong technical and operations team with a proven track record and waterflood expertise. Crescent Point also identified several opportunities for improvement, which will be focal points over the next 12 to 24 months. ► Page A11
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Crescent Point Energy Corp is looking to shed up to 50,000 boepd in production. The Viewfield Bakken, seen here with Precision Drilling Rig 195 north of Stoughton on Aug. 28, will remain, but conventional southeast Saskatchewan production will be sold. Photo by Brian Zinchuk
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Up to 50,000 boepd will go up for sale, including southeast Saskatchewan conventional ◄ Page A10 Ryan Gritzfeldt, chief operating officer, noted the company will be increasing its deployment of field automation, which increases staff efficiency and reduces downtime and workovers. He pointed out the company will focus on riskadjusted returns instead of simple volume growth. He expects a 10 per cent improvement in capital efficiency. The company previously focused on volume growth which resulted in acquisitions, a high total payout model, and increased leverage. The transition plan is designed to create a “new Crescent Point,” with a focused asset base, stronger balance sheet, improved free cash
flow and lower debt. Once the company reaches its debt goals, that will free up money for returning capital to shareholders, including possible share repurchases, longer term capital projects, and net debt reduction. Focused asset base Crescent Point expects to optimize its capital allocation process and overall efficiencies by focusing its asset base. This approach is also expected to provide the company with opportunities to execute strategic dispositions to further strengthen its financial position. Crescent Point considered a number of value enhancing options as part of its streamlining process, ranging from
asset divestitures to more complex scenarios. The company currently believes a straightforward plan is the best approach to executing its transition. “We wanted to ensure the assets were high return, but also had scalability to allow for significant organic growing room,” Bryksa said. Other considerations included free cash flow potential and the ability to improve commodity market access. Based on these factors, Crescent Point has identified the Viewfield Bakken, Shaunavon and Flat Lake resource plays as key focus areas. “Average production from these areas in Q2, 2018, was approximately 102,000 boepd, or approximately 60 per cent
of the total production, with each asset currently generating free cash flow,” he said. The company also plans to continue advancing its emerging and earlier stage resource plays in the Uinta Basin and East Shale Duvernay in a paced and disciplined manner, which could provide significant opportunity over the long-term and garner increased capital over time. Average production from these assets over Q2, 2018 was approximately 23,000 boepd, or 13 per cent of the company’s total production.
“Our remaining areas, which currently represent approximately 50,000 boepd, are high quality assets that, in general, don’t provide significant scalability,” he said. To improve its balance sheet, the company is looking at several areas, including upstream asset dispositions and cost reductions. Crescent Point is also reviewing the sale of certain infrastructure assets, mostly gas infrastructure in Saskatchewan. In recent years the company built or expanded gas plants at Oungre and
Viewfield. The company believes such a transaction could unlock value, provide a near-term source of proceeds for net debt reduction and create a strategic partnership. Such a purchaser could also potentially fund key future infrastructure projects, further increasing Crescent Point’s financial flexibility, market access and overall returns. With asset sales being partially dependent on prevailing market conditions, the company plans to be flexible in its divestitures program. ► Page A12
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PIPELINE NEWS October 2018
Viewfield Bakken, Flat Lake and Shaunavon are Crescent Point’s focus going forward ◄ Page A11 Crescent Point is targeting a net debt reduction of more than $1 billion by year end 2019 at current strip commodity prices. The company’s debt reduction strategies include maximizing free cash flow through an efficient capital allocation process, cost reductions and disciplined asset sales. As at June 30, 2018, Crescent Point had a net debt to funds flow from operations of over
2.0 times and cash and unutilized credit capacity of approximately $1.5 billion, with no material near-term debt maturities. The company is targeting a net debt to funds flow from operations below 1.3 times in a commodity price environment of US$65/bbl WTI. Although this leverage target will vary based on commodity prices, Crescent Point’s long-term goal is to maintain a strong
financial position, protect against price volatility and generate strong debt-adjusted per share metrics for shareholders. Consistent with its focus on free cash flow generation, versus simple volume growth, the company expects to internally fund its development programs and further strengthen its balance sheet. Crescent Point expects to increase free cash
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flow generation through a combination of initiatives, including an improved cost structure, a more disciplined capital allocation process and advancing decline rate mitigation techniques, such as waterflood. The company will manage its capital allocation process in the context of each investment, including its waterflood programs, competing for capital based on risk-adjusted returns and long-term development goals. Restructuring As part of the company’s cost reduction initiatives, Crescent Point is finalizing an organizational restructuring that includes an immediate workforce reduction of approximately 17 per cent of employees. The company expects this realignment to provide annual savings of over $50 million through reductions in both operating and general and administrative expenses. These savings partly reflect the recent restructuring of the executive team, which is also expected to result in approximately 20 percent lower annual compensation for current named executive officers in 2018 compared to 2017.
“I want to thank all of our staff for their hard work and contributions over the years,” said Bryksa. “This restructuring is difficult, however we needed to adjust the organization to match our current business needs. We are all focused on executing our transition plan and are excited about Crescent Point’s future.” The company’s transition plan also includes an ongoing review of its operating and capital costs, including the implementation of field automation to further increase efficiencies. 2018 and preliminary 2019 guidance Crescent Point’s 2018 guidance remains unchanged, with an annual average production of 177,000 boepd and $1.775 billion of capital expenditures. This guidance implies second half 2018 capital spending of approximately $750 million and production averaging approximately 174,000 boepd, reflecting previously announced dispositions that closed toward the end of second quarter 2018. The company expects its 2019 capital expenditures to be approximately $1.55 billion to $1.60 billion, at
current strip commodity prices, with annual average production of approximately 176,000 to 180,000 boepd. This initial production range reflects various capital allocation scenarios and does not account for potential dispositions during the second half of 2018. Crescent Point intends to finalize its 2019 guidance upon the completion of its 2018 capital program. The company’s capital expenditures budget excludes capital expenditures on land, which are less predictable and partly dependent on land sale outcomes. Land expenditures in 2019 are expected to be modest at approximately one to two percent of incremental capital. Crescent Point’s cash flow sensitivity in 2019, inclusive of current hedging, is approximately $45 million for every US$1/ bbl change in WTI. “We would like to thank our shareholders for their patience during this time. We recognize that change will not happen overnight, however, we expect to deliver ongoing improvement in the company’s financial position, profitability and sustainability,” Bryksa concluded.
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Energy and Resources Minister talks to, and with, Estevan OTS By Brian Zinchuk Fresh off a three-day tour of the oilpatch in southeast Saskatchewan in the previous week, Energy and Resources Minister Bronwyn Eyre found herself in Estevan on Sept. 7, speaking to the Estevan Oilfield Technical Society at a luncheon at the Days Inn. Roughly 80 people came to hear her. The minister’s brief remarks were followed by a lively questions period. “You are the people who make the industry what it is, and you keep our economy growing,” Eyre said, adding. “I don’t have to tell you, when we’re talking about investment prospects in this province, we’re often talking about resource development. “Today, oil and gas production is responsible for an estimated 15 per cent of our provincial GDP (gross domestic product). In Canada, I read this the other day, the oil and gas sector accounts for seven per cent of Canada’s nominal GDP.
Energy stocks make up 20 per cent of the SMP TSX composite index. Eyre said, “So directly, and indirectly, and again, no news to you, the sector supports tens of thousands of jobs. “Recently, Saskatchewan’s petroleum sector has shown clear and continued signs of growth and of activity. The value of our oil production for 2017 was $9.2 billion, a significant increase from $6.9 billion in 2016. Last year there was an estimated $4 billion of investment in new exploration and development, which is an increase of 42 per cent, here in Saskatchewan, from the previous year. “The oil and gas industry will continue to represent a major source of economic strength in our province, and we can look forward to more success in what continues to be a very, very resilient sector.” She pointed out that Saskatchewan conventional oil production has
remained relatively stable since 2013, while Alberta’s conventional production has dropped 23 per cent. Eyre said that oil and gas workers tell her, every chance they get, “They’re tired of being seen by critics, by the federal government, as liabilities, because you are not that, and they are not that, to us, ever. It’s quite the opposite. We understand that resource development will always have a more meaningful place, and role, in the future of this province, and that our more, and innovative, and competitive resource companies and sector are wellpositioned to meet that future.” The province is committed to improve competitiveness and increase investment in Saskatchewan. A big threat to that is the continued lack of access to pipelines to tidewater. “We also face regulatory and policy resistance from the federal government on the carbon tax, on the proposed clean fuel standard,
Energy and Resources Minister Bronwyn Eyre spoke in Estevan on Sept. 7. Photo by Brian Zinchuk and on Bill C-69. And together, these three federal initiatives pose an unprecedented threat to competitiveness in this country, and this province,” she said. Bill C-69 could add years to environmental assessments, reduce transparency, and increase uncertainty to project development, she pointed out. In the question and answer period, one person
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who used to work in regulatory applications for big pipelines said the industry has an image problem, and asked what the government would do in regards to an education campaign. “If a lot of people actu-
ally understood what went into an (National Energy Board) environmental assessment, they’d be very surprised,” the questioner pointed out. ► Page A14
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PIPELINE NEWS October 2018
Energy East was a tragedy for Saskatchewan ◄ Page A13 Eyre responded that she’d had similar discussions with a local oil company earlier that day. Reflecting on what is taught in the education system, she said she is hearing that people they are often tired of hearing what they perceive to be a bias against energy and resources and how it is presented. She said there’s interest into what Alberta is doing with its curriculum. “It goes to perceptions out there that are really hard to knock if the media doesn’t report on certain things, and there are so many examples of that,” Eyre said, noting frustration. “I truly, in my heart, am a champion for this sector.”
There were plenty of questions from the floor from members of the Estevan Oilfield Technical Society for Energy and Resources Minister Bronwyn Eyre, left. Asked where the Saskatchewan government stands on getting the defunct Energy East pipeline project going again, Eyre said a hopeful sign is that things can change pretty quickly in politics, and there was a massive shift in Ontario with the election
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or new-premier Rob Ford, who is against the carbon tax. “In terms of the fate of Energy East, clearly, from Saskatchewan’s perspective, what happened was a tragedy, nothing short of, from an economic perspective,” she said. With an election coming up in Quebec, and a sea change in Ontario, she said, “Maybe there are never any
completely shut doors, and that’s the one hopeful thing we have in this.” With a question asking why Canada is using Saudi oil, she responded, “We can certainly agree Canadian oil is ethical, and there’s puzzlement on continuing to import from countries with less than stellar reputations. Some of that hypocrisy, even in terms of the debate over Bill C-69, people are say-
ing some of the things that will be considered under Bill C-69 are hypocritical in light of the standards that you would see in other countries, if a Bill C-69 were imposed there. It’s a double standard. Trying to do our best to shine a light is important.” Asked about the accessibility of additional carbon dioxide for more enhanced oil recovery, and the fact
North Dakota is aiming to do a lot of that in the future, but SaskPower has decided not to go ahead with it on Boundary Dam Units 4 and 5, she replied, “We look at North Dakota very carefully, in terms of what we’re doing. “All I can say is we’re looking at some of the things North Dakota has done, and is doing, and we’re working on some of that in terms of what we’ll be able to do.”
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Saturn pursuing aggressive drilling plan this fall and winter By Brian Zinchuk Saskatoon – At a time when the Financial Post is running stories about the death of the wildcatter and the great difficulty of raising capital for small producers, Saskatoon-based Saturn Oil + Gas Inc. appears to have pulled off a major coup, announcing on Sept. 14 they had secured $20 million in funding from the Prudential Capital Group out of Houston. That day, Pipeline News sat down with four of the five-person team that is Saturn – John Jeffrey, president and CEO; Scott Newman, chief operating officer; Justin Kaufmann, vice-president, exploration and Geoff Jones, chief financial officer. Stuart Houle, vicepresident, engineering, was not present at the time. “We’re really excited,” Jeffrey said in their Saskatoon north-end boardroom. First off, this Saturn is not the same operation of the Saturn Minerals this publication has reported on in the past. That company had started out as a gold then coal mining company before drilling and coring an oil well southwest of Hudson Bay, Sask. Not much came of that, and this team effectively took it over at that point. They changed the name to Saturn Oil + Gas, returned the exploration permits in eastern Saskatchewan to the province, and started anew in west central Saskatchewan. “It was a complete tear down,”
Jeffrey said. The main shareholder came to Jeffrey, Newman and Kaufmann and asked them to take over the company. In January 2017, they took over management, and by August 2017 the board was completely replaced. What they did retain was the public company listing, and the Saturn name. As for the well near Hudson Bay, Newman said, “There was no oil there to begin with.” Since November 2017, Saturn has drilled 14 wells in west central Saskatchewan, and they surely have found oil. “We still have another 15 wells we are planning on drilling Christmas of this year. Then there’s another five before breakup,” said Newman. The company is primarily concentrated on the Viking light oil play at Flaxcombe, but also works in the success heavy oil play at Coleville. Jeffrey noted that a lot of their land has stacked pay. “We can actually run and drill Viking on top, and then go deeper and pick up the heavy Success on the bottom.” They have rights to the base of the Bakken in that area. The Bakken has gas in that region, but no one is going after gas in Saskatchewan these days. In recent years, Saskatchewan’s natural gas drilling has flatlined to almost zero. The Viking is about 700 to 750 metres deep. Below that is Joli
Saturn Oil + Gas Inc. was essentially reborn in 2017. Four of the five members of the team are, from left, John Jeffrey, Justin Kaufmann, Scott Newman and Geoff Jones. Missing is Stuart Houle. Photo by Brian Zinchuk fou (shale) and approximately 40 metres of Mannville (sand) then Success (sand) formation, which is roughly 820 to 840 metres deep, according to Kaufmann. With the relatively shallow wells, he said, “That’s what makes the Viking one of the best formations to drill for shallow, uncon-
ventional production. You won’t find many formations shallower that you’re completing unconventionally.” The company started small. Jeffery noted they entered 2018 with 250 bpd production, and expect to exit this year with over 1,200 bpd, of which 85 to 90 per
cent is light oil. They have no saleable natural gas, and use whatever casing gas that is produced to power their facilities burners and generators. “That’s been our goal, and currently what we’re on track to do,” Jeffrey said. ► Page A16
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PIPELINE NEWS October 2018
Getting into the junior game while opportunity presents ◄ Page A15 There’s enough gas to run their facilities without having to pay for grid power. But the gas production level is low enough that they aren’t at levels where venting regulations come into play. This in part results in operating netbacks of $55 to $65 per barrel, Newman said. They’ve got one rig going steady until breakup, with a shutdown planned for Christmas. Newman said, “Primarily, our wells are going to be extended reach horizontals, all full-miles, in Prairiedale, Flaxcombe,
Coleville and Plato.” The company has 32.25 gross sections of land. Indeed, they’ve been acquiring land at a pace where they have to print new maps. The most recent Crown land sale showed the top price paid for a single lease in this area was $235,953, paid by Saturn Oil & Gas Inc. for a 259 hectare parcel situated within the Plato North Viking Sand Oil Pool, 5 kilometres north of Eston. Kaufmann noted, “It’s tough being a younger company, trying to explore for land in the Viking and Success plays.
Lots of the bigger players have the majority of the land in the area. We have to do a little bit more work, geology-wise, and prove some edges of these pools.” “They’re right offsetting the major producers as well.” Jeffrey said their competitive advantage is their geology team, led by Kaufmann. The company works closely with Axiom Exploration, now known as Axiom Group. They were all affiliated with Axiom before coming over to Saturn. “That relationship with them gives us full access to all their geologists.
I think between full-time and consultants, they have in excess of 10 geologists, and they’ve been largely focused on drilling in Saskatchewan. Axiom, itself has drilled over 1,000 wells in the province, and to have all that expertise in house is definitely to our benefit,” he said. “To have this much experience, in a concentrated area like this, we’re able to see and pick up the value of land that other companies miss,” he said. The company’s first two horizontals were drilled on land they acquired for “almost nothing,” Newman said. Those
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half-mile horizontals ended up being the third and fourth highest producing wells in the province that month. “We drilled two wells on fringe land that came out at 130 barrels each,” he said. The drilling plan between now and breakup is almost evenly spread out, with six wells planned each for Prairiedale, Flaxcombe and Coleville. Plato has two wells slated. Newman noted they started with one well in each location. Land availability is a driving factor, according to Jeffrey. The company is spreading out, building reserves. “We have a fairly decent-sized land base. We have plans to grow quite aggressively,” Newman said. They would like to have 60 sections by the end of 2019, if possible, double what they have now. A year ago, they had only one section. They raised $5.5 million in 2017. A good portion of their stock is held in Germany, from the Saturn Minerals days. Canaccord Genuity has been onboard on the equity side. Regarding how the market is treating junior producers, Jeffrey said, “There’s just no capital flowing into the space right now.” There are very few equity deals going on in Canada right now, he
pointed out. “There isn’t a large appetite on the oil and gas side.” Newman noted they wanted to start the company during this downturn, when land prices were more affordable. Jeffrey said the $20 million is an initial tranche from Prudential, implying there maybe be more in the future. “Now we have the runway to grow at the pace we need to,” he said. The company had 500 bpd production during the time of the interview, and they expected to have five more wells online by midOctober. They would like to add another 1,000 bpd by the end of 2019, aiming for 2,500 bpd. A typical mile-long horizontal well costs $900,000 to $950,000 to drill, equip and complete. A half-mile horizontal goes for about $750,000. The drilling pattern is three-well pads, doing a single well first, then the next two, skidding the rig over for the third well. The company has its own separators and treaters to clean their own oil. They’re looking at developing an old well into a disposal. Earlier in September, Crescent Point announced it would be selling approximately 50,000 boepd of assets, and that will include assets in the Viking. That may provide an opportunity for the growing company.
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Redhead Equipment in Lloydminster brought out the new Mack Anthem model of Class 8. Lloydminster – Much of the Saskatchewan oilpatch has held off on capital purchases since the oil downturn hit at the end of 2014, and there’s a pending need to recapitalize their iron. However, on the trucking side, the money hasn’t necessarily been there. “A lot know they need to get out of their truck, to buy a new one, but don’t have the money to,” said Dustin Gringell, who works in sales at Redhead Equipment in Lloydmin-
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Chad Anderson, who handles heavy equipment sales with Redhead, said it is similar on the construction side, with companies stretching things out. Gringell came in from working in the fluid hauling side of the industry. He noted, “Things are turning around, but it’s taking a long time. “You hear the whispers. The signs are there. They’re thinking about it,” he said.
PIPELINE NEWS October 2018
A17
Big skid and big plans to revive ALX pumping units By Brian Zinchuk Estevan – On Sept. 17, Waterflood Produc-
tion Systems (WPS) loaded out its largest skid package ever, a 27 foot by
55-foot skid heading west of Stoughton. David Heier, general
manager of WPS, said it was their largest skid ever, dimension-wise, if not weight-wise. It weighed in at 120,000 pounds. That necessitated a lot of axles under the Bert Baxter Transport truck that carried it. The lift was performed by Skylift Services’ 245-ton Terex hydraulic crane. Multiple spreader bars were used to get the slings away from the building as it was lifted. Heier said the skid
had a 400-horsepower multistage centrifugal pump, and provisions for the eventual installation of a second, identical pump. There were two 25-bag filter assemblies installed, with provisions for two more. Access panels were placed in the roof to allow those eventual additional filter assemblies to be lowered in. The project took about eight weeks to put together, Heier explained. It had a lot of four to 10-
inch pipe, all 316 stainless steel. There were 10 to 12 people working on it, he said. Pipe welders started first, and the same week saw work start on the skid. About three weeks before delivery, it all started coming together. Heier said that one out of three of their packages are typically wired in-house as well, by their sister company PS Electric. The project was ► Page A18
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PIPELINE NEWS October 2018
Pumping unit manufacturing coming to Estevan ◄ Page A17 welcome after a slower spring. Heier said WPS had been busy for most of the downturn. “From 2013 to March, 2018, we had a pretty good run,” he said. “We’re normally always full.” He said on Sept. 20 that they are working on another big skid and hopefully more jobs will come through. However, Heier is looking to breathe life into something he had on the go several years ago – reviving ALX, a pumpjack company. Heier had sold off ALX, but has since
bought back the drawings. The revival will be in conjunction with WPS. They will start with finishing off 30 jacks that were nearly complete, but have been sitting for the better part of a decade. They will be sandblasted and repainted, and then completed during downtime in the WPS schedule. “Some units were never finished,” Heier said. He intends on kickstarting new ALX pumping units in 2019, under the name Artificial Lift Werx Ltd. “I sold it and got it
back last fall,” he said. He also has new plans for future ALX pumping units. Heier was the former owner of WPS, then known as Waterflood Service & Sales. Since selling the company to Harvey King, Heier has acted as general manager of WPS. By taking advantage of slack times in WPS production, it will be beneficial for both WPS and ALX, he noted. Two years ago WPS moved to the former brickyard on the southeast corner of Estevan into a new, leased build-
ing. That’s where the work on the pumping units will take place. Heier said he has a partner in Vancouver to handle castings for new pumping units. He’s trying to bring in suppliers as partners. The net result will be the final units being manufactured in Estevan. “I put the puzzle together,” he said. Showing growing confidence in the industry, Heier said, “I think, going into 2019, we’ll see some real stability. It won’t be feast and famine.”
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Heavy truck sales picking up Lloydminster – Things are picking up for truck sales, according to Roger Deeks, works in sales with First Truck Centre in Lloydminster. They are the Western Star and Freightliner dealer for the region. “It’s definitely picking up. The thing that’s really holding us back from the numbers we did before is our customers just aren’t making the rates that they used to. They can barely afford to fix, let alone replace,” he said. “In 2015, 2016, there was no clarity and consistency of work. 2017 started to get better, a bit of an upturn. ’18 is better than ’17. But there’s still a lot of tired iron guys haven’t touched yet. “You’re starting to see some new startups. They’re buying a little bit of iron,” he said. The established fleets, they’re primarily fixing, he noted. He’s seen some hydrovac companies and a pumpjack outfit. “Basically, a lot of the things that are going are so that they can be diversified so they are not fully in the oilfield industry. So they can be oilfield or construction, utility work and stuff. They can do fibre optics,” he said. There’s a mix of re-
placement and new units going out, he said. Deeks noted that auctions often take precedence over buying new, and those deals are now over. “You can’t steal them anymore. It’s getting to the point now where there’s a lot less iron out there.” Freight Transportation Research Associates, Inc.’s website ftrintel.com noted noted that Industry-wide, the North American truck market for Class 8 trucks hit an all-time high in August, with approximately 52,400
trucks ordered. Those numbers are more than 2.5 time higher than the same month in 2017, a trend that has continued for all of 2018. Most months in 2018 have seen double the number of truck orders that were made in the same month in 2017. Optimism in America is a big factor, with low unemployment, business optimism high. Lead times from the factory, as a result, are extended beyond normal as a result.
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PIPELINE NEWS October 2018
MTM Energy adds hydraulic hose to its lineup By Brian Zinchuk Lloydminster – MTM Energy Service’s booth at the Lloydminster Heavy Oil Show featured a recent addition to their offerings- hydraulic hoses. Brett Fisher is the brand manager for MTM in Lloydminster, which opened in 2010. The company started in Provost in 2007. “Hardisty just opened in May,” Fisher said. “We’re always looking for opportunities. Our CEO and the shareholders are willing to jump at opportunities when they come up. We’ve got a good base. We’ve diversified quite a bit. We deal with mining, for-
estry, oilfield, ag. We try to spread a footprint as wide as we can, so when one sector slows down we don’t feel it as much as someone else who is solely a one trick pony.” MTM stands for “more than merchandise.” Fisher said they are an oilfield supply store, but they don’t limit themselves to just that. “We get into whatever the customer wants. We’re more about helping the customer get whatever they need, whether it comes from us or not. We find that leads to more customer satisfaction and retention, even if you don’t help them out with that initial contact. Then you
Brett Fisher holds up a hydraulic hose, a new offering for MTM Energy Services. will get that recall, because of helping them,” Fisher said. “It depends on the month, but I would say, for use, we’d be 60 to 70 per cent oilfield. That could change given the month, given the year. Pipes, valves, fittings,
that’s one of the mainstays. Rig supplies, we always say, ‘Soap, rope, dope,’ so all the rigs supplies that they need. Again, we look after the ag industry. We have a chemical division as well.” “Another line we brought on here recently is
our hydraulics division, also a new enterprise of MTM,” he said. The brand is Polyhose. “The quality is there. The price is there, and we are the Western Canadian distributor for Polyhose. That’s hose, fittings, we also do the adapters, hydraulic couplers, hose protection, everything. That’s out of all three branches, but it’s not limited to Lloyd, Provost and Hardisty, it’s Western Canadian,” Fisher said. “It goes to all those industries that we have. Every industry, there’s some kind of hydraulic component at some point in the industry.” Fisher said they are a
very divers group of people within their team, with knowledge in a number of backgrounds, from valves to hydraulics. “Everyone has their own expertise, and we draw on their expertise to allow us to maximize the customer’s potential.” Company-wide they have close to 20 people working for MTM, with eight fulltime and one parttime person in Lloyd. Fisher personally manages the hydraulic side of the company and has three people working in that area. All three locations build hose. “We wouldn’t be where we are without our team,” he concluded.
PWM Steel can bale that: aluminum, copper and stainless steel By Brian Zinchuk Lloydminster – There’s a lot of things you might expect to see at an oil show, but a bale of aluminum that used to be part of a tanker truck is not one of them. Yet that was precisely what Paul Klaasen had at his PWM Steel Services booth at the Lloydminster Heavy Oil Show on Sept. 12-13. Klaasen said they had put in a non-ferrous baler
in May of this year. It’s meant for copper, aluminum and stainless steel. “We can cut up the tankers the truckers use,” he said. “We can cut them up, bale and process them. “Codes have changed. Tankers that don’t meet code, we can process them. “We recently put in the baler to be more efficient, to produce a better product. Then our buyer doesn’t have to do any-
thing, he just takes it, verifies what it is, and ships it,” Klaasen said. The resultant bales end up going all over, into smelters in the U.S., and even offshore. Another bale in the booth was made up of insulated copper. A third was a bale of aluminum irrigation pipe. Klaasen said there was lots of interest at the oil show, with people seeing what they could do.
“We always do something different,” he said of their booths every two years. “It’s a cheap way of networking. To guys who don’t show up, I say, come say hello to you current customers. You might get a new customer.” Klaasen said he was a “huge” believer in the show. “You never know what you’ll attract, right?” “I’m a firm believer in this show, especially if you’re local,” he concluded.
Paul Klaasen stands behind a bale of insulated copper. PWM Steel Services now has a non-ferrous baler for just this sort of material. Photo by Brian Zinchuk