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Estevan-based Stampede Drilling Ltd. has been purchased by MATRRIX Energy Technologies. At the same time, MATRRIX bought the assets, including three complete drilling rigs, of defunct Vortex Drilling Ltd. Together, they will continue under the Stampede name. Stampede Rig 2 was working for Astra Oil Corp. southeast of Hirsch on Nov. 19. See related story Page A11 Photo by Brian Zinchuk
Whitecap buys Cenovus’ Weyburn Unit A3
Husky to build new pipeline A5
Crescent Point announced Lodgepole play A9
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PIPELINE NEWS December 2017
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PIPELINE NEWS December 2017
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TOP NEWS
Whitecap buys Cenovus’ Weyburn Unit By Brian Zinchuk Weyburn, Calgary – It may have been prescient that Whitecap Resources Inc. CEO Grant Fagerheim was inducted into the Saskatchewan Oilpatch Hall of Fame at the 2017 Saskatchewan Oil & Gas Show. He’s liable to be spending a lot more time in Weyburn now, as Whitecap announced on Nov. 13 it had bought the Weyburn Unit from Cenovus Energy Inc. for $940 million cash. Whitecap plans on resuming drilling and expanding the operation. Cenovus took to selling off assets in a big way to finance its $17.7 billion purchase of ConocoPhillip’s 50 per cent interest in a jointly owned oilsands venture and deep basin conventional assets, announced March 29. Since then, it’s targeted $4 billion to $5 billion in asset sales to cover part of the purchase. The Weyburn Unit went on the block.
The Goodwater plant, seen here in this handout photo, is the heart of the Weyburn Unit. Photo courtesy Cenovus The Weyburn Unit is one of Saskatchewan’s most significant oilfields, producing for over 60 years. Their introduction of a carbon dioxide miscible flood enhanced oil recovery (EOR) scheme near the turn of the century dramatically enhanced the field’s
expected producing life, to the point where Cenovus stopped putting an estimate on its longevity. The field initially only took carbon dioxide from the 20-inch Souris Valley Pipeline running from the Dakota Gasification Company at Beulah, N.D. Since 2014, it has also
been receiving carbon dioxide from the SaskPower Boundary Dam Unit 3 Integrated Carbon Capture and Storage Project, near Estevan, a contract that has seven years of life remaining. The previously announced sale of Cenovus’s Pelican Lake assets
closed on Sept. 29 and the company still anticipates the previously announced sales of its Palliser and Suffield assets to close later this year. “We’re pleased with the progress we’ve made in delivering on our divestiture plan to optimize our portfolio and deleverage
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the company’s balance sheet,” said Alex Pourbaix, Cenovus president and CEO. “Net proceeds from the Weyburn asset sale, combined with the other three divestitures announced earlier this fall, will position us to retire the entire $3.6 ► Page A8
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PIPELINE NEWS December 2017
Whitecap CEO Grant Fagerheim on the Weyburn Unit acquisition By Brian Zinchuk Calgary, Weyburn – For the first time in its 63year history, the Weyburn Unit will have an entirely new operator, as Cenovus sells its 62.1 per cent operating interest in the field to Whitecap Resources Ltd. On Nov. 17, Whitecap president and CEO Grant Fagerheim spoke to Pipeline News by phone about their plans. Pipeline News: What does this mean for the community of Weyburn? Grant Fagerheim: We hope the city of Weyburn will be as excited to have Whitecap coming in to the community as we are about coming there. We expect to continue to have strong community involvement, from the exceptional staff that we have there that work in the Weyburn Unit, as well as from the Whitecap corporation. P.N.: Your press release noted an ambitious plan for drilling and expansion, and how the years of the downturn had basically lead to stagnation. Previously, Precision Drilling Rig 275 literally made a career, working decades in the Unit. Now it’s racked at Stoughton. Can you expand at all on your plans, in particular, what sort of timelines we’ll see? Fagerheim: We expect to work closely with the very experienced professional and support staff with a long history with the asset, to drive the most effective long-term capital plan possible. This will be done over coming weeks, once the personnel and corporate strategies emerge with our new direction. They have a very good team out there, as well as in Calgary. We’ve made some assumptions of a capital spending program, but we want to make sure we draw on their experience as well before we finalize that. P.N.: Do you think you’re going to be drilling this winter season? Fagerheim: Yes, we do. We don’t close this transaction before Dec. 14, so it will be some time in 2018.
Del Mondor, left, and then-Energy and Resources Minister Dustin Duncan, right, presented Grant Fagerheim with his plaque marking his induction into the Saskatchewan. File photo P.N.: The Weyburn Units saw a lot of cuts in its workforce and activity in the downturn. Will we be seeing some hiring now, both organically, and with contractors? Fagerheim: We expect to be more active on the asset, of course, then perhaps Cenovus was for various different reasons – whether it was downturn, pricing, or attention on the asset. This would obviously lead to the requirement of additional workers on the asset. P.N.: While the names have changed, historically the operator of the Weyburn Unit has been an evolution from the predecessor company. Is this the first complete change of ownership? What does this mean? And do you intend on maintaining 62.1 per cent ownership? Fagerheim: I think it’s a complete change of operatorship. It wouldn’t be a change of complete ownership, but operatorship. We believe this world-class asset is as a result of the exceptional
people. The work on the asset, we feel, along with the current staff and expertise, that we’re able to bring, along with additional capital, ideas and culture, that we will enhance the project even further. As for the ownership level, we are always interested in getting to the highest working interest possible in the assets that we operate. P.N.: The Weyburn Unit didn’t really fit in with Cenovus’ other operations, and wasn’t a big deal for them, in comparison to their oilsands operations. Proportionally, this is a big deal for Whitecap? Fagerheim: This is a significant transaction for Whitecap. It’s an important one for our longterm sustainability. It increases our oil weighting, which has always be a defined strategy of ours. It reduces our decline rate, which is, again, a defined strategy. It adds about 25 per cent to our base production. It improves our operating netback and cashflow slightly. Overall,
it improves our long-term growth and sustainability profile, along with our free cashflow. This takes us to approximately 73,000 to 74,000 barrels a day, for 2018. We’re currently 58,000 to 59,000 barrels a day. P.N.: For the past few years, we’ve consistently heard oil had to be over US$50 WTI for a few months to see things start to pick up. We’ve now seen that. How much was that a factor in this deal? Fagerheim: Crude oil pricing is an important factor, for sure. With crude oil prices looking to have a higher floor, compared to the last couple years, this provides a higher level of confidence for Whitecap to make substantial funding commitments, as we have just done when we bought this asset, as well as to the province of Saskatchewan. So you’ll look to see us to continue to put higher levels of commitment with strengthening prices, if they continue to strengthen.
P.N.: Will you maintain your contracts with SaskPower and Dakota Gasification for CO2 supply? Fagerheim: Yes, we will be maintaining both the Dakota Gasification Company CO2 contracts. P.N.: SaskPower has another seven years? Fagerheim: That’s correct. DGC is an annual renew, so we can renew it each and every year, so we’ll continue with that. The primary term of that contract is completed. So it’s just an annual renewal we’ve undertaken. P.N.: Carbon capture and storage has been a hot potato, politically speaking. Obviously, you like the concept, but can you explain why? Do you see Whitecap furthering this concept beyond Weyburn? Fagerheim: We do believe carbon capture technology is an important part for, not only now, but into the future. Therefore, (we are) wanting to continue to further our understanding of carbon capture and further develop and expand into
assets beyond Weyburn. This is not going to just stop at Weyburn. Because of what they have been able to do, Cenovus, with their very strong technical people, we think this can be furthered on a go-forward basis. P.N.: Are you talking about outside of this region, Alberta or western Saskatchewan? Fagerheim: Potentially. You have to look at where the CO2 sources are, of course. But for sure, we’re looking at different areas, not only in Saskatchewan. P.N.: Is there anything you would like to add? Fagerheim: We’re excited about taking on this world-class carbon capture project, with world-class technical personnel, in a great province of Canada. So we’re excited about it. P.N.: Have you gotten another invitation to move your head office yet? Fagerheim: (laughs) That’s always standing, that’s always out there, for sure.
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PIPELINE NEWS December 2017
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This map, provided by Husky Energy, shows the new pipeline right-of-way, in red.
Husky to build new pipelines, retire the one that leaked into North Saskatchewan River ASPHALT REFINERY DEFERRED DUE TO PURCHASE OF SUPERIOR REFINERY By Brian Zinchuk Lloydminster – Husky Energy is embarking on a substantial pipeline project in northwest Saskatchewan, one that, once completed, will see the decommissioning of the pipeline that caused a spill in the North Saskatchewan River on July 21, 2016. The company held two open houses in early November in Lloydminster and Maidstone where they outlined plans to construct a new crude and condensate pipeline to support it’s growing heavy oil thermal production in Saskatchewan. Husky spokesper-
son Mel Duvall said via email on Nov. 20, “The two pipelines are 52 kilometres in length, consisting of a 20-inch crude pipeline, which will transport crude produced from our thermal operations north of the North Saskatchewan River to our complex in Lloydminster, and an eight-inch condensate pipeline, which will transport condensate from Lloydminster to our thermal operations. “The North Leg pipeline is needed to support our growing heavy oil thermal production in the region. As you may be aware, we have four new thermal projects that are
currently under construction. Rush Lake 2 is scheduled to come online in early 2019 and Dee Valley, Spruce Lake North and Spruce Lake Central are expected to come online in 2020. Combined, the four projects will add about 40,000 barrels per day of production. Beyond those projects, we plan to bring on two additional thermals per year for the foreseeable future.” He said the North Leg project is expected to create 275 to 500 jobs during construction and will take about six months to complete, once it receives regulatory approval. “We are incorporat-
ing many of the same improvements in the new pipeline that were built into the repair of the 16 TAN line. The entire length will be outfitted with fibre optic monitoring, which will provide acoustic, thermal and strain monitoring and assist in detecting leaks, ground movement and other events in real time. Thicker pipes and higher grade steel will be used at the North Saskatchewan River crossing and additional measures are being taken to minimize the risk of ground movement. “We expect to decommission 16 TAN once the new pipeline is
in operation.” The 16 TAN pipeline was the one that spilled approximately 1,415 barrels of blended heavy crude oil and condensate onto the river valley and into the North Saskatchewan River. The projects also include a 20-inc, 9.5 kilometre raw water pipeline that will transport water to existing and future thermal projects north of the river. It originates south of the river at the Husky direct intake high lift station, and crosses the river to the northeast parallel to the new pipeline. Five kilometres of smaller replacement pipelines be-
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tween Sandall and Celtic junction will also be built. Refinery deferred Husky had been looking at building a new asphalt refinery at Lloydminster earlier in 2017, but that project has now been deferred, according to Duvall. “We decided to defer a decision on the Lloyd asphalt refinery, following our purchase of the Superior Refinery in Wisconsin. Superior provides us with additional asphalt capacity. We closed the acquisition on Nov. 8,” he said. “We’ll take another look at the Lloyd project down the road.”
A6
PIPELINE NEWS December 2017
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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.
The end of 2017 looks a lot more promising than the end of 2016 As 2017 comes to a close, it rounds out a year that started very bleakly, and now, going into 2018, is showing promise. Talking to people in the oilpatch in late 2016 and the first few months of 2017 was almost like going to a funeral. Next to no one had any sort of good news. Most oilfield services companies had laid off roughly half their staff compared to 2014. But drilling picked up in the first quarter, and we even got to 76 active drilling rigs before breakup took hold. Service rigs, their staffs plundered by the rising drilling rig count, were the first people to see a labour shortage. Step forward now to the end of the year. This month and next month we are focusing on Estevan. There have been a number of new ventures that have popped in Estevan in recent months, many of which are highlighted in this edition. They include Innovative Artificial Lift Solutions, Gryphon Artificial Lift Solutions, Apollo Electric and Controls and Prairie Hot Shot. Estevan-based Stampede Drilling Ltd. was purchased by MATRRIX Energy Technologies Inc. The announcement was made right after MATRRIX announced it had picked up the three rigs of defunct Vortex Drilling Ltd. from the receiver. The prices may have been depressed compared to the amount of money spent on building those six rigs between the two companies, but given the background of the people behind the deal, we can expect the new Stampede Drilling will be looking to grow. In the middle of this year, both carbon dioxide miscible flood projects, the Midale Unit and the Weyburn Unit, went up for sale by their respective operators, Apache Canada and Cenovus Energy. Cardinal Energy Ltd. announced it closed their acquisition of the Midale Unit on June 30, and Whitecap Resources Inc. did the same for the Weyburn Unit on Nov. 13. These two changeovers are significant news. The downturn had meant the previous operators substantially cut back on their capital expenditures in each unit. Both had stopped drilling for quite a while. We attended a safety awards lunch several years ago where Precision Drilling Rig 275 had been honored for decades – decades! – of safe work in the Weyburn Unit. That rig is
now parked at Stoughton. Those two companies didn’t buy these significant plays just to sit on their hands. We expect to see drilling resume in the new year with the Weyburn Unit, according to Whitecap president and CEO Grant Fagerheim. Drilling, of course, is the leading indicator for everything else. As for Cardinal, their Nov. 7 press release noted, “Our focus for 2018 will shift from a maintenance mode to one of more aggressively exploiting our properties while continuing to maintain the cost discipline developed through this downturn. We have managed to acquire several long life legacy assets at what we believe was the bottom of the commodity cycle. Our shareholders should see the rewards from these purchases in 2018 and beyond as it transforms Cardinal into a company that becomes sustainable without the need for further large scale acquisitions.” That sounds like they plan on doing something with the Midale Unit, breathing new life into it. All of this is good news, something the sector has been sorely lacking for a long time. This all has everything to do with the fact oil prices are now floating around the US$55 WTI mark, as opposed to US$42 or US$32 or US$26. It reminds us again of our conversation with Del Mondor, president, CEO and owner of Weyburn-based Aldon Oils Ltd. Back on Feb. 17, 2016 he spoke prophetically, saying, “To me, there’s opportunity in that, as well. To my other comment of this industry is full of innovators and entrepreneurs and people that stand up to challenges, whether it’s B.C., Alberta, Saskatchewan or Manitoba, we will get good at this. Whether that’s getting good at $35 or $75 or whatever, we will get good at this.” That week, oil was at US$29.64 WTI. We are getting good at this. Asking several of the entrepreneurs who have started up new operations in recent months if they were crazy like a fox, or just crazy, they responded by seeing opportunity where there are challenges. So they are crazy, like a fox, and getting good at this.
PIPELINE NEWS December 2017
Non-associated natural gas development in Saskatchewan is dead While drilling down, as it were, on the numbers in the annual Petroleum Services Association of Canada (PSAC) drilling forecast for 2018, one number leapt out at me: zero. That big, fat goose egg was sitting in the number of gas wells forecast for Saskatchewan for both the upcoming 2018 and this year. It’s like realizing someone you knew died, a
relative or school teacher, and you didn’t know about it until well after the fact. The Saskatchewan gas drilling business is officially dead. I’ve called it. A few years ago I had noticed Saskatchewan had drilled around 80 gas wells that year. That was a far, far cry from what we used to drill. I dug around on the Ministry of Economy website. It showed that we
Correction: In our November 2017 edition, regarding our editorial titled, “Basking in the balance of anti-oil journalism” Dr. Emily Eaton informed us that Simon Enoch is her partner, not husband. The original version said he was her husband. Additionally, the initial version of this editorial stated, "Her Facebook page used to have a photo of her standing on a pipeline right-of-way in Regina, protesting pipelines, but it has since disappeared, along with the numerous other pictures of her protesting everything from pipelines to boycotting Israel and said she had not removed the photos." That was incorrect. The photo of her standing on a pipeline right of way, protesting the Energy East pipeline, is indeed still online, as are photos of her protesting several other causes. We regret this error and any confusion it may have caused.
drilled our first gas well in 1933. For the next 40 years, we drilled between a handful and a few dozen per year, slowly ramping up in the late 1960s. In 1973, we drilled 114, a big year, as it dropped to 13 by 1982. Two years later, a whopping 419 gas wells were drilled. It fluctuated up and down until 1989, when it hit 931, then bounced up and down to around 179 twice before spiking again in 1999, when 911 wells were drilled. The following 10 years saw over 1,000 wells drilled each year, with 1,801 in 2002, 2,119 in 2003 and 1,734 in 2004. Those were good times if you were a shallow gas driller in southwest Saskatchewan. At that time, my biggest consideration about natural gas was how much I was paying for it, with monthly equalized bills hitting around $250 per month for our 1,100-square foot house. It was getting so expensive, we had to do something. So, with substantial help from a government grant, we re-
A7
OPINION FROM THE TOP OF THE PILE
By Brian Zinchuk
placed the three (yes, three) furnaces in our house – one for upstairs, one for downstairs, and an overhead one in the garage - with a 97.5 per cent efficient one in the house and a used, but much-better efficiency furnace in the garage. I even wrote a series of news stories which I freelanced to several papers. The interest was high, because gas bills seemed to be choking everyone. I figured, with the grant in hand, the upgrades would pay for themselves in a few years. They did, just in time for us to sell the house. In October 2005, gas was getting $11.38 per gigajoule, according to records kept by the Alberta government. By September 2007, it had dropped to $4.42 per gigajoule, only to rise to $9.84 per gigajoule in July of 2008. And that was the end of that. The recession of 2008-09 took gas prices down to $2.48 in September 2009. Since then, natural gas prices have hovered primarily in the $2
to $3 range per gigajoule, very briefly coming up to $5.20 in February 2014, and dropping to as low as 94 cents in May 2016. The most recent numbers, posted on Daily Oil Bulletin in early November, showed $2.22 per gigajoule. Basically the last decade saw natural gas, once a hot commodity (in more ways than one), lose nearly all its value. My gas bill this month, for a nearly identical house to the one I upgraded, is an equalized $40 per month, and that includes delivery charges. When natural gas is nearly worthless, no one is going to drill for it. And thus, an industry has died in Saskatchewan. With no new drilling, our gas production is now largely from associated production from oil wells. This brings up a few questions. Of those 13,209 gas wells drilled from 1999 to 2008, how many are still producing? How have been abandoned? Do their owners have enough money to abandon thousands of
wells as they eventually deplete out? Since natural gas hasn’t been much of a profitable venture in Saskatchewan for the better part of a decade, will anyone have the money for abandonments, or will the orphan well fund be stuck with them, down the road? And if that’s what happens, how will that affect liability ratings for oil drillers, especially the small ones? The impact on the province’s finances is quite noticeable. In the 2005 provincial budget, natural gas was estimated to bring in $191.4 million. Now, natural gas doesn’t even get its own line item on the revenue side of the budget. In 2017, it was lumped in with oil revenue. The last time it was its own line item, in 2016, revenue was expected to be $9.5 million. That’s a 95 per cent drop, from 2005 to 2016. It’s dead, Jim. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@ sasktel.net.
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PIPELINE NEWS December 2017
First Husky, then Cenovus sold to Whitecap ◄ Page A3 billion bridge facility associated with the ConocoPhillips asset purchase by the end of 2017.” For Whitecap Resources, it’s another significant addition in southern Saskatchewan in recent years, as other, larger players move out. In May 2016, Whitecap purchased 11,600 barrels of oil equivalent (boepd) assets from Husky in southwest Saskatchewan as that company, too, sought to divest itself of much of its widespread assets to have a more concentrated focus on thermal heavy oil projects. While the operator of the Weyburn Unit, Cenovus has many partners with minority shares in the unit. The agreement is for Cenovus’ interests. The acquisition includes a 62.1 per cent operated working interest in the Weyburn Unit (14,600 boepd) and 200 barrels of oil equivalent per day of production from minor assets in southeast Saskatchewan. Whitecap described the Weyburn Unit as a world class carbon dioxide en-
hanced oil recovery development with a low base decline rate of less than five per cent, high operating netback of $31.86/ boe, and significant short and long-term development and expansion opportunities. The assets also include extensive infrastructure in place to facilitate future development plans. Strategic rationale In a press release on Nov. 13, Whitecap said, “The acquisition is a continuation of Whitecap’s strategy to enhance our existing portfolio with assets that exhibit lower production declines, high operating netbacks and significant growth opportunities with strong capital efficiencies to further enhance our future free funds flow. The Unit is a self-sustaining operation that generates strong free funds flow even in a low commodity price environment and requires minimal capital investment to maintain production volumes and associated funds flow. “In 2018, our base case assumptions are to invest 35 per cent of
the net operating income from these assets to maintain production at 14,800 boepd which we anticipate will result in significant additional free funds flow of approximately $112 million. We estimate that over the next five years, the base assets have the potential to grow to approximately 17,700 boepd and generate cumulative free funds flow of $459 million using a flat operating netback of $31.86/boe.” Drilling to resume Whitecap noted there has been minimal development of this asset over the last few years with only 12 infill wells drilled in 2015 and one CO2 expansion phase added in 2014. Due to low commodity prices, capital spending has been limited to production maintenance over the last few years. A drilling rig that worked in the unit for decades was released during this time. Whitecap anticipates spending approximately $60 million in 2018 on the Unit, which represents 35 per cent of anticipated net operating
income from the assets, to maintain a flat and stable production profile. The Unit is anticipated to be a multi-decade source of self-funding growth and annual free funds flow with meaningful near and long-term growth opportunities. There are significant optimization and expansion opportunities within the Unit including: • 34 waterflood and EOR area infill drills; • Reservoir optimization of the mature EOR patterns to minimize decline and improve CO2 utilization; • Eight identified and planned CO2 expansion phases which include the drilling of 93 (57.8 net) production and 62 (38.5 net) injection wells; and • Recovery of hydrocarbons liquids from recycled CO2 stream prior to reservoir reinjection. Whitecap said the eight EOR expansion phases are conservatively booked to an ultimate recovery factor of 31 per cent compared to an average ultimate recov-
ery factor of 54 per cent booked on the existing 13 phases. To date, the 13 existing phases have recovered on average 42 per cent of the original oil in place (OOIP) with some of the more mature phases recovering over 60 per cent. The eight expansion phases will develop a significant portion of the remaining 44 per cent of the Unit area that has yet to benefit from the CO2 injection. The hydrocarbon liquid recovery from the CO2 stream, prior to re-injection, is also expected to provide an extremely stable and significant source of free funds flow. There are also material expansion opportunities identified immediately offsetting the existing CO2 scheme which are in the preliminary planning stage. These include vertical and lateral expansion of the existing CO2 EOR scheme of which the combined opportunity set is unbooked and could represent incremental gross reserves of 109 MMbbls and a peak incremental gross production increase of over
13,000 bopd. The field has had a long history Sixty-three years ago, the discovery well of what would eventually become known as the Weyburn field was drilled near Ralph by Central Leduc Oils Ltd., a company which became Central Del Rio Oils Ltd. in 1957 with the merger of Del Rio Oils. The discovery well at 14-7-7-13-W2 came in during the fall of 1954. According to PetroleumHistory.ca, “CentralDel Rio was purchased by Canadian Pacific Oil and Gas in 1969. However, the company continued to operate under the Central-Del Rio name until 1971 when its name changed to PanCanadian Petroleum Limited. “PanCanadian was purchased by Alberta Energy Company in 2002 and became EnCana. Later EnCana was split into EnCana and Cenovus.” That split took place in 2009, with EnCana at the time focusing on natural gas, and Cenovus focussing on oil.
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PIPELINE NEWS December 2017
A9
Crescent Point announces Lodgepole play THAT BIG LAND SALE IN OCTOBER IS NOW ACCOUNTED FOR By Brian Zinchuk Calgary – It’s not often in Saskatchewan that mineral rights on roughly 500 sections change hands, but the October Crown land sale shows that was roughly the scale of the exploratory licenses that were picked up – about 13.8 townships worth. A few weeks later, on Oct. 26, Crescent Point Energy Corp., in announcing its 2017 third quarter results, announced they had acquired a substantial amount of land – roughly 600 sections. Crescent Point president and CEO Scott Saxberg said, “In the Williston Basin, we continue to expand our multi-zone Flat Lake resource play through our step-out drilling program. Step-out drilling delivered strong results in our Torquay and Ratcliffe zones, and also helped identify new, large oil-inplace resource targeting the Lodgepole. During 2017, we drilled several Lodgepole wells which have proven oil productivity.
We are currently working towards improving the overall economics of this play, which remain at the early stage of development. “We believe the Lodgepole zone provides significant resource potential within our existing core area. With the recent land sales, and prior positions, held by the company, Crescent Point now owns a significant position of approximately 380,000 net acres, or 600 net sections, targeting the Lodgepole zone, at an average working interest of about 100 per cent. Saxberg went on, “Our cost of entry into this large resource play was less than $40 per acre. In addition to increasing our production guidance, we have also increased our 2017 capital expenditure budget by $100 million, to $1.55 billion. We have primarily allocated this capital to the new play development, and expansion in the Uinta and Williston Basins,” he said, adding the additional capital is being funded
by non-core dispositions of $190 million, totalling approximately 3,000 barrels of oil equivalent per day. The company is also looking at selling another $100 to $200 million of assets this year. Saxberg said there was great success in developing the Lodgepole. “We’ve been working on this play for a couple of years now. We saw, as we drilled through to the Torquay and Ratcliffe zones, that we were hitting this oil-charged zone in the Lodgepole, and we were getting oil over the shaker as we drilled through the rock,” he said. “A couple of years ago we started the process of collecting core data, mapping out that zone, testing the rock properties, comparing it to the other zones and the productivity. We were able to map out this resource effectively from the border all the way to the north part of the extension of the land sales we just acquired. This resource is well over 600
The green areas of the map indicate land Crescent Point has acquired in 2017 in its Flat Lake play. The map closely mirrors the Oct. 5 Crown land sale. Graphic courtesy Crescent Point. square miles in size, and stretches from the border to the extension of our land sales. “Our strategy this year was to drill four to five exploration wells all along the trend to prove up oil productivity all along the trend. So we did that, effectively from early this year. Our first well was just at the end of Q1 into Q2. We saw the productivity there and then followed it up with three more wells along that trend and got oil productivity across those three wells. We obviously
posted those lands back in April of this year, with that strategy. “Part of the reason, the rationale for posting such a large block was there’s TLE claims which are native Indigenous claims out there, under a Saskatchewan program. We wanted to prevent those claims from happening, and so we posted all those lands in a
large block, as well, strategically, to capture that land without any competition. So early in the middle of the year we had a small land sale that we purposely set up to target that land sale, then followed up with a second land sale. It was able, for us, to capture that land at $40 an acre, which, when you look at the full ► Page A10
Wishing our friends and neighbors a most harmonious and joyful season! Dwight G. Blomander, CFP, CLU, CH.F.C., CHS
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PIPELINE NEWS December 2017
Redvers Oil Showcase a go for 2018 By Brian Zinchuk Redvers – The Redvers & District Oil Showcase is on again for 2018. The bi-annual event will take place May 30-31. Matt Axten, chair of the showcase committee, said the group got together on Oct. 25 and decided to once again go ahead with the event. The showcase will
follow the same format as previous years, with indoor booths inside the rink and numerous outside booths for the larger iron. The Redvers & District Oil Showcase is held on opposite years of the Saskatchewan Oil and Gas Show, held in Weyburn on odd-numbered years. The showcase’s
Facebook page notes, “The focus of the show is to build networks and business opportunities for those involved in the oil industry. It is a great place to showcase upcoming trends and technological advancements in our industry, as well as to learn more about the many local businesses in our surrounding communities.” The first day ends in a
banquet. This year, instead of a speaker, Axten said they were looking to shake it up a bit and chill out a bit more, as opposed to a long presentation. “We’d like to do something fun this year,” he said. They are considering copying Weyburn’s example and licensing the whole grounds, but he added that could be tricky.
Large resource play ◄ Page A9 cycle of this large resource, if it works out the way we think, it will be a large, full cycle economics. It’s still early days. The completion techniques we used, we don’t think were perfect and proper. So we’re going to follow up in the new
year with some testing of new completions to optimize it. Basically we’re trying to target similar reserves, productivity, as the Torquay,” Saxberg said. Asked by an investor during the conference call if the Lodgepole was a large resource opportu-
nity, or smaller, discrete opportunities, Saxberg said it was full, mappable from the border to the northwest corner of the land sales. “It’s a large resource we would anticipate would have similar economics to our Torquay play. Definitely a consis-
tent trend,” he said. While the company announced an increase in its capital budget, by Nov. 20, it had drawn down its Canadian drilling program to just two drilling rigs, one near Stoughton and one near Dodsland, according to Rig Locator.
The Redvers & District Oil Showcase, seen here in 2016, will be coming again next May. File photo
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PIPELINE NEWS December 2017
A11
MATRRIX Energy Technologies Inc. buys out Stampede Drilling and defunct Vortex Drilling’s assets NEW ENTITY WILL OPERATE UNDER STAMPEDE DRILLING NAME
By Brian Zinchuk Estevan – The biggest shakeup in the southeast Saskatchewan drilling industry in years took place in the final days of October. MATRRIX Energy Technologies Inc. of Calgary announced that it has successfully completed its previously announced acquisition of assets from defunct Vortex Drilling Ltd. through Vortex’s court appointed receiver, Deloitte Restructuring Inc. for a purchase price of $6.1 million for three complete tele-double drilling rigs and related assets. That deal closed Oct. 30, having been approved by the Court of Queen’s Bench on Oct. 25. The next day, MATRRIX announced it had entered into an agreement to acquire all of the issued and outstanding shares of Stampede Drilling Ltd. The total consideration for Stampede was $7 million, plus assumption of approximately $2 million in debt, for a total of $9 million. It is an all-stock deal, consisting of the issu-
ance of common shares of MATRRIX for a total purchase price of approximately $9 million. Pursuant to the offer, holders of Stampede shares will receive 1.25448 MATRRIX shares for each Class A share and 1.25448 MATRRIX shares for each Class B share. Stampede, to that point, had been a similar three teledouble drilling rig company, and its Rig 3 is one of the newest in the drilling fleet. All six rigs are a similar design and have a high degree of commonality. Five were built by Do-All Industries in Estevan, with Stampede Rig 3 being one of the last two rigs completed before Do-All went bankrupt, as well as being one of the last rigs built before the downturn. The largest distinction between the rigs is the characteristic doghouse slideout in the Vortex units. All six rigs have been built since 2011, part of a wave of new rigs built during that time. The move comes after Lyle Whitmarsh, former
CEO of Trinidad Drilling Ltd., and Elson McDougald, former executive chairman of CanElson Drilling, joined MATRRIX in August. That was two years after Trinidad had closed its purchase of CanElson, in August of 2015. Both Whitmarh and McDougald have extensive biographies as executives and directors of drilling companies over the years. Whitmarsh’s history is largely with Trinidad. McDougald was CEO of CanElson from December 2008 to December 2010 and chairman of Savanna Energy Services Corp. from August 2006 to May 2008. He was the founding chairman, president and CEO of Western Lakota Energy Services Inc. from 2001 to 2006 and the founding chairman and CEO of Tetonka Drilling Inc., 1997 to 2000. Prior thereto, he was founder, chairman, president and CEO of Laredo Drilling Ltd.. MATRRIX is headed by Richard T. Ryan, president and CEO. He was the founder of Ryan
Stampede Drilling Rig 2 has been working for Astra Oil Corp. in the Hirsch and Lampman areas. Here, on Nov. 19, it was drilling southeast of Hirsch. From left are Derek Laurent, Kade Chadney and Cole MacCuish. Photo by Brian Zinchuk Energy Technologies Inc., a company focused on the provision of horizontal and directional drilling technology and services, and was its president, chairman and CEO from March 1994 until its sale to Nabors Industries Ltd. in October 2002. Ryan maintained his role of divisional president and CEO of Ryan until October 2010, according to
MATRRIX’s website. Ryan stated in a release, “Since announcing our intended entry into the contract drilling business in March of this year, we’ve been fortunate to attract very high quality drilling rig talent to our organization, beginning with the return of Elson McDougald to our board of directors in August. With Lyle Whitmarsh
as our rig division president, and now Jackie White and Bill Devins of Stampede Drilling, I couldn’t be more pleased with our positioning as a solid new entrant to the drilling rig industry in the Western Canadian Sedimentary Basin.” Founded in 2011, MATRRIX says it has “grown its concurrent ► Page A12
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PIPELINE NEWS December 2017
PFM is adding to its investment in Stampede ◄ Page A11 capacity of horizontal and directional drilling systems organically with the acquisition and assembly of 25 systems as at the date of this press release. MATRRIX has developed and implemented a proprietary software platform called D2ROX (pronounced DEE-ROCKS) to aid the corporation and its oil and gas clients to drive predictable, repeatable, cost effective, safe drilling operations at the rig site.” At the time of the deal, all three Stampede rigs were at work in southeast Saskatchewan for three different smaller producers, while Vortex’s rigs had been idle since the summer. Shortly thereafter, Vortex’s assets were being consolidated at Stampede’s Estevan shop. Stampede has had one of the highest utilization rates among drillers in
southeast Saskatchewan for the past several years. Bill Devins and Jackie White are described in documentation as “co-founders” of Stampede, although the pair typically eschews any sort of title. Devins said on Nov. 10 that the move was strategic. “Where will you ever get a change to merge with these quality people, Richard, Lyle and Elson? We’re thrilled with a capital ‘T,’” Devins said. Jason Geyson, one of the co-founders of Vortex, is now involved with the operation as field supervisor. Asked what he thought of the developments, Geyson said simply, “Great.” He will be bringing people from his former operation at Vortex, saying, “All the genuine people will be here.” Craig Cameron, rig manager, who has been with
Stampede from Day 1, sees adding three more rigs to their fleet as an opportunity, with lots of space for growth and staff to move up. “Vortex had a lot of good hands, too. It brings those hands to the table,” Cameron said. Devins said they will have the best of the best of both companies. Cameron added, “It’s still a small-company mentality. Local men like working for that – on a name basis, not a number basis.” Devins said he and White will be managing this division under Whitmarsh’s tutelage. Regarding the all-stock deal, Devins said he was very comfortable with it, “And I think our shareholders will benefit. It brings liquity and growth we could never do independently.” He added they were in
good shape financially. “It provides our shareholders good growth opportunity. We’ve been waiting,” Devins said, referring to an opportunity to come up. To that end, Reginabased PFM Funds Inc. lists a combined $3,739,000 investment in Stampede as part of its SaskWorks Resources and SaskWorks Diversified funds. (PFM also lists a $2,963,000 investment in similarly-sized, Yorkton-based Crusader Drilling Corp., an unrelated company.) Asked about the transaction, Jason Moser, partner, director-investments with PFM, said, “We think this transaction is positive for Stampede shareholders. We focus on achieving a positive risk adjusted return from today forward and that’s the lens that we viewed this transaction through. One has to focus on what the fair
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Season’s Greetings Here’s hoping your holiday is beautiful in every way.
Thanks for your business! Phone (306) 487-2525 Cell (306) 421-0528
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PFM will be taking part in the additional private placement. MATRRIX’s press release noted, “MATRRIX enters the contract drilling business with six modern telescopic double drilling rigs, all manufactured since 2011, with proven mind and management in place. With favorable acquisition costs for the Stampede rig business and the three drilling rigsw from Vortex, the corporation believes the transactions will add meaningfully to financial results and its base of horizontal and directional drilling services and technology in the Western Canadian Sedimentary Basin.” The corporation intends to operate its six-rig southeast Saskatchewan contract drilling business under the Stampede Drilling banner.
A Flurry of Pretty Little Wishes May your days be merry, blessed and bright, bringing you peace morning, noon and night.
May the kindness and friendship you generously give, come back to you in abundance as long as you live.
With our gratitude, Merry Christmas!
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market value is today and best probability of increasing that value and preserving capital while not fixating on what the expected value was several years ago. With MATRRIX, Stampede is merging into a company with a strong management team/board that has demonstrated the ability to grow and consolidate in past cycles while creating shareholder value. By merging early in this consolidation phase, we see considerable upside in their paper. Our funds under management had a very positive experience with CanElson, and we think many of the same attributes exist with MATRRIX. Bill and Jackie were obviously key in creating a solid brand and reputation, and they’ll continue to do that within MATRRIX while having more tools at their disposal.” Moser added that
VP OF SALES
Hope it’s merry. Hope it’s bright. Hope it’s filled with goodness and light. May this holiday season deliver much cheer to you and your loved ones straight through the New Year. Customers like you bring us joy at Christmas time and all year, and we thank you for dropping in on us in 2017. Your trust and support mean a great deal to us!
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PIPELINE NEWS December 2017
A13
Keystone XL gets Nebraska approval By Brian Zinchuk Lincoln, Neb. – True to his word, newly elected U.S. President Donald Trump approved the TransCanada Keystone XL pipeline, subject to new negotiations. He did it on Jan. 24, his fourth day in office. On March 24, the project was granted a Presidential Permit. At the time, in the Oval Office, Trump asked TransCanada president and CEO Russ Girling when construction would begin, to which Girling replied, “Well, we’ve got some work to do in Nebraska to get our permits there…” The president said he would call the governor of Nebraska that day. However, the permit
approval rested with another agency, the Nebraska Public Service Commission. It took until Nov. 20, eight months later, for those permits to finally be granted. In a split 3-2 decision, the Nebraska Public Service Commission ruled in favour of the pipeline application, albeit with a new route, shifted east, that varied roughly two-thirds of what TransCanada had been looking for. The “Keystone Mainline Alternative Route,” will now go through six new counties that were not part of the other two routes under consideration, meaning new landholder deals will need to be worked out and poten-
‘Tis the Season May the love and light of this special time fill you with enough peace, joy and contentment to last the whole year through. Merry Christmas, friends!
As we wrap up another year, we share our thanks and best wishes with all of you. Your trust and support fill us with gratitude, and we look forward to continuing to serve you in 2018.
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tially a whole new wave of litigation. The new route is along an existing transmission corridor, however. Tension was high in the final days, however, as the original Keystone pipeline sprung a leak on Nov. 16 in neighbouring South Dakota. The spill was estimated at 5,000 barrels, which other media reported as 795,000 litres (CBC) or 210,000 gallons (New York Times). The commission is not allowed to consider pipeline safety and spill risks under Nebraska law. In a brief statement following the release of the approval, TransCanada said it was evaluating the Public Service Commissions’ decision “As a ► Page A15
The yellow line indicates the route approved by the Nebraska Public Service Commission for the Keystone XL pipeline. It’s not what TransCanada was asking for, but it is an approval, nonetheless. Graphic courtesy Nebraska Public Service Commission.
WISHES MERRY & BRIGHT Glad tidings to you and your kin this holiday season with gratitude from all of us.
Merry Christmas, friends and thanks for your loyal patronage. We wish you all the best!
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A14
PIPELINE NEWS December 2017
Being Unconventional is What Set Us Apart. Summit ESP™ – A Halliburton Service offers a horizontal surface pumping system as an efficient alternative to positive-displacement, split-case, and other surface pumping options. Within 2 years; against poor oil prices in the Canadian market, Summit ESP has had substantial growth as operators are demanding more out of their equipment providers. With a consistent delivery record of 4 – 6 weeks on complete HPS systems, and Patented pump design allowing a wider operating range allowing more turndown capability and capable of running 5,000PSI for Jet Lift pumping fluid. Summit out paces and out delivers the competition, putting your production into motion. We also offer Retrofit solutions and PM services on all competitor equipment with direct replacement of Pump Barrels and Thrust Chambers within our Gold Standard delivery expectations. Getting your production active within a week, while the competition takes weeks to deliver. summithps.com
PIPELINE NEWS December 2017
A15
Greater energy security for North America ◄ Page A13 result of today’s decision, we will conduct a careful review of the Public Service Commission’s ruling while assessing how the decision would impact the cost and schedule of the project,” Girling. Saskatchewan Premier Brad Wall was unavailable for comment at press time. Alberta Premier Rachel Notley said in a statement, “As we stated in our submission to the Nebraska Public Service Commission, this pipeline will mean greater energy security for all North Americans by making sure people have access to Alberta’s responsibly developed energy resources. “This is another step in our broader effort to bring more Alberta oil to the world, diversify our markets and maximize the value we as Albertans get. Today, U.S. decision makers carefully considered a pipeline and granted an approval. “We continue to urge Canadian decision makers to follow this example so we can have access to global markets from Canadian ports, supporting good Cana-
dian jobs. While we are very pleased with Nebraska’s approval, it underscores that Canadian regulators need to keep pace if we are going to build a truly diversified set of markets.” The Keystone XL Pipeline project is a proposed 1,897 km, 36-inch-diameter crude oil pipeline, beginning in Hardisty, Alta., and extending south to Steele City, Neb. The project originally ran right to the Texas Gulf Coast, but it was split several years ago and the southern portion has been built and is in operation. While often overlooked in other media, the up to 15 per cent of the pipeline’s 830,000 bpd capacity is designated for North Dakota-produced Bakken oil, which would join the pipeline at Baker, Mont. The right-of-way cuts across the very southwest corner of Saskatchewan, running from Burstall, right past Shaunavon and crosses the American border at Monchy. Back in July 2011, TransCanada was stockpiling pipe south of Shaunavon.
May the Joys of the Season Be With You All Year We hope your season is merry, bright and filled with the blessings of friendship, love, peace, joy, health and good fortune.
Belt jack
Belt pumping units, sometimes called “strap jacks,” for their characteristic long belts, aren’t that common in southeast Saskatchewan outside of the Weyburn Unit and a few near Stoughton. But Villanova 4 Oil Corp. is trying out a few near Hirsch. Photo by Brian Zinchuk
Have A Ball… It’s Christmas! As we celebrate another holiday season, we thank you for giving us so much to celebrate this past year. HAPPY HOLIDAYS TO ALL!
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A16
PIPELINE NEWS December 2017
SaskPower CEO clarifies carbon capture and storage direction By Brian Zinchuk Regina – There was some kerfuffle after SaskPower president and CEO Mike Marsh spoke to an editorial panel with CBC Saskatchewan on Nov. 3, with one of the topics of discussion being the future of carbon capture and storage (CCS) with SaskPower’s coal-fired power plants. To clarify what he meant, Pipeline News spoke to Marsh by phone on Nov. 7. Marsh said he spoke to an editorial board with three CBC editorial reporters in Regina and another three, via conference call, in Saskatoon. “We talked about a number of things. Carbon capture was one of them,” he said, adding renewables, rate application and Global Transportation Hub land were also discussed. “In the conversation, talking about where things are, I was explaining when we built CCS, Boundary Dam 3, it was the right decision. We have worked hard to make that plant work. But I said the big thing that has changed in the business today, and you
know this very well, the price of natural gas is so low today, it makes the alternative, of course, much more attractive, just when you look at the generation cost perspective,” Marsh said. “Natural gas combined-cycle is displacing conventional coal across North America, and has been for the last five years. So, with that, my comment that it makes that more attractive, (it) makes carbon capture a more difficult business case to meet that hurdle. The comments came out that we were never recommending building CCS again, and I never said anything like that. We are working on the decision for 4 and 5. I was simply trying to put the shift in the natural gas industry today into perspective, to let them know that this is a very complex decision. “Just on generation cost alone, it’s going to be difficult. But there’s many layers of approval we have to go through before it reaches cabinet. We’ve got four layers of approvals, between the executive team at SaskPower, Sask-
Power’s board of directors, Crown Investment Corp.’s board of directors, and finally, ultimately, cabinet.” With many Saskatchewan party candidates speaking in support of CCS, what happens if the new premier wants to go ahead with it? “In saying they favour CCS, I favour CCS. But, simply looking at the business case, we have to be mindful of the economics, here. That’s all I’m saying here. As we compare the only two baseload options we have to look at, when we look at the retirement of BD4 and 5, which we’re doing because of the federal emissions regulations.” He said they have to make a decision before the end of 2019 on those units, as those units were built before 1974. “As we look at replacing baseload, we have two options. One is to retrofit BD4 and 5 with carbon capturea and storage. Option 2 is a combined-cycle gas plant. The economics of the fuel choice have a big factor in any final decision we’ll make, and we’re working through that analysis today. On the
plus side, CCS can give us two to three times the emissions reductions that a combined-cycle plant would be able to offer, so there’s certainly pluses there.” He noted it’s premature, because the decision process hasn’t worked its way through the various channels. Marsh pointed out the SaskPower and the province have been working, behind the scenes, on the equivalency agreement regarding carbon dioxide emissions, under federal regulations. This would allow SaskPower to apply emissions reduction targets across its fleet, instead of individual power generating units. “Getting an understanding of what that equivalency agreement is, and how it will allow us to operate that fleet differently going forward, because we still have to meet those emissions reduction targets by the federal government. An equivalency agreement will allow us potentially to operate those units, beyond their retirement dates, in a different mode, as long as we’re able to
SaskPower president and CEO Mike Marsh meet those emissions targets,” Marsh said. ‘That’s a fundamental piece that is not totally completed.” Discussions are underway between the
province and federal government, he noted. Options they are exploring include including leaging Units 4 and 5 ► Page A17
To all of our valued consignors and customers this 2017 season
Merry Christmas! from the Weaver Auction team
All signs point to a merry Christmas, and we can’t think of a better place to spend the season than here at home with all of you. We are truly grateful for your kindness and support, and we wish you all a happy holiday season.
Big thanks to all of the kind folks who have made our year so special. We’re very grateful for friends and neighbors like you. As we welcome the holiday season, we hope it finds you surrounded by abundant happiness and good fortune. Best wishes!
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Look for these upcoming auctions! March 14, 2018 - Rycroft, Alberta April 5, 2018 - Gordondale, Alberta April 18, 2018 - Rycroft, Alberta April 23, 2018 - Valhalla Centre, Alberta June 9, 2018 - Fourth Creek, Alberta weaverauctions.com
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Congratulations
As another holiday season comes together, we’d like to extend our best and brightest wishes to you, our valued customers, neighbors and friends. We hope your Christmas is crafted from all the comfort and joy that make this season so special! We’re proud to be a part of this close-knit community, and we value the fine folks who make us feel so at home here. Thank you for your support and friendship. We look forward to seeing you and serving you again soon in the coming year.
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ROKERS PIPELINE NEWS December 2017
A17
Two major options for baseload power – carbon capture storage coal and natural gas ◄ Page A16 operating as they are and putting carbon capture
plants at either Poplar River Power Station (Coronach), Shand Power
Station (Estevan) or Boundary Dam (Estevan). “Those are the op-
tions we’re exploring,” he said. “There’s pros and cons to each one.” Boundary Dam’s site is congested, but there’s lots of space at Poplar River and Shand, for instance. It may mean changing the operations profile. “We do not believe we would be able to operate it 24/7, 365 like we do today, because we would exceed our emissions targets,” he said of the Boundary Dam Units 4 and 5. One option would turn them into winter/ summer plants, for usage during peak seasons. Another option would be to use them during daylight hours, as a one-or twoshift operation instead of
a three-shift operation. “It’s important that no decisions have been made,” he stressed. Asked about carbon tax and carbon strategy, he responded that was a provincial government responsibility. “As a Crown, we would comply with any carbon tax or carbon strategy that is in place provincially. Those negotiations are ongoing between the provincial and federal government,” he said.
If SaskPower chooses to not go ahead with further CCS projects, would that make the BD3 project a white elephant? “Absolutely not. It was the right decision at the time. It continues to operate. We just came off a record October. We had the best production month in the last three years in the month of October. We continue to make that ► Page A18
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PIPELINE NEWS December 2017
The nitty gritty on the Lodgepole, from provincial geologists By Brian Zinchuk Regina – The map of exploratory licenses sold in the Oct. 5 land sale correlates to the Hummingbird-Roncott area. Not long after the sale, Crescent Point Energy Corp. declared they had acquired approximately 500 sections in the area for under $40 per acre, roughly equating the number of sections sold in the land sale under exploratory licenses.
Crescent Point CEO and president Scott Saxberg noted they were pursuing the Lodgepole formation. So what does this mean? On Nov. 10, Pipeline News spoke to Arden Marsh, senior petroleum research geologist; Dan Kohlruss, senior petroleum research geologist, and Melinda Yurkowski, assistant chief geologist; all with the Saskatchewan Geological Survey, Min-
istry of the Economy, to get the low-down on the Lodgepole Formation. First of all, the Lodgepole Formation is referred to as the Souris Valley Beds in Saskatchewan. Marsh said, “The neighbouring jurisdictions have a lot more drilling and production within the interval that we call the Souris Valley Beds, and are able to sub-divide this stratigraphic unit more
than we do, into different members.” “In general, in Saskatchewan, it’s a finegrained carbonate rock that is mostly dark grey in colour, with some lighter grey to buff colouration in some areas. It can vary from a lime-mudstone, to calcareous shales, and can also have some chert. There can also be a fair amount of fossiliferous and organic material, ooids
(a small spheroidal calcium carbonate grain that has concentric layers around a nucleus) and generally coarser material, especially when you move further east of the RoncottHummingbird area. This variability in the rock also controls the porosity and permeability within the unit,” Marsh said. Based on core analysis for Saskatchewan and Manitoba, to the edge of
the basin, in general, for the Souris Valley Beds as a whole, the average porosity is approximately 11 per cent, but can be up to 41 per cent, in certain wells, especially where you get more fossiliferous materials. The average permeability for Saskatchewan and Manitoba is 30 millidarcies, but that drops to 10 millidarcies for just ► Page A19
Converting coal plants to natural gas not a simple option ◄ Page A17 plant perform better, all the time. “The reality is it is more expensive than a conventional coal plant. We are going to continue to operate that unit over the next 30 years. That’s the plan. No, I wouldn’t call it a white elephant at all. The politicians may
have different words for it, as you well know. But it’s part of our fleet, and we’re going to continue to operate it and improve its performance and share that knowledge around the world,” Marsh said. With a new premier and new cabinet in the New Year, the next decision could be well into 2018.
Converting Units 4 and 5 to natural gas could be an option, but it’s not a simple thing to do. It is an option being considered in Alberta, but they burn sub-bituminous, not lignite, coal. They would be simple-cycle, not combined-cycle. Simple-cycle natural gas plants are not as efficient as combined cycle, and have higher emissions than combined cycle. One of the key elements that brought CCS into play in the first place was the federal require-
ments that coal plants meet or be lower than the emissions level of a combined-cycle natural gas plant. “The generator would remain the same, you would be just creating the steam using gas instead of coal, and the rest of the cycle would remain the same,” he said, if a coal plant were to be converted to natural gas. In recent years SaskPower has gone to new baseload combined-cycle natural gas plants at North
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Battleford (contracted) and, soon, Swift Current (SaskPower). By locating next to load centres, they reduce the loss of power via line loss. “If you can locate it next to your load centres, your economics look even better, because you don’t have that line loss,” he said. Right now, any decision made will just be for Boundary Dam Units 4 and 5. Unit 6 isn’t due to retire until 2027. Poplar River has two more years. Shand could operate until its retirement date until 2042. All the economic factors, gas and coal prices would all be considered at those times.
Without additional CCS, there would be no additional carbon dioxide for enhanced oil recovery. Additional royalties would not show up on SaskPower’s revenue, but would have an impact on the provincial government’s. These are things that would be part of the Crown Investment Corp.’s consideration, he explained. Fundamentally, any new baseload power generation for SaskPower comes down to either CCS-coal or natural gas combined cycle. While there are ongoing power purchases from Manitoba Hydro, the amount of power available is limited.
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PIPELINE NEWS December 2017
A19
What others call Lodgepole, we call Souris Valley Beds ◄ Page A18 Saskatchewan wells. As you move further west, into the Roncott-Hummingbird area that drops to an average of 1.6 millidarcies. However, there are also analyses from this area that can be up to 44 millidarcies. “So generally it can be a somewhat tight rock, but it’s also going to be fairly brittle, as it’s a carbonate,” he said. Some examples of core analysis in the area were from an extremely organic-rich zone within the Souris Valley Beds. “There can be an average of 69 per cent oil within the pore volume,” Marsh said. “That means 69 per cent of the porosity, through that zone is full of oil, and 11 per cent of the rock has porosity. So this means that you’re going to have a lot of oil in small pore spaces through this organic-rich interval.” “There is also another well in the area, that’s analyzed through the similar interval, with 71 per cent average pore oil volume. These core analyses have up to 92 and 98 per cent maximum pore oil volume for those two wells, through this particular interval, which is extremely high. In this situation where you have relatively low porosity, but
high oil volume, you need a large thickness for it to be useful.” For thicknesses, he said within those two wells, one had pore oil volume greater than 53 per cent for 15 metres. The other well, where you had greater than 40 per cent pore oil volume was 51 metres thick. “You’re probably looking at a resourcetype play,” he said. That echoed Saxberg’s comments, referring to their acquisitions as a “large resource play.” “To date, in the Souris Valley Beds, there is one producing well, but based on core analysis results, this area shows potential for additional production,” Marsh said. Asked if such large thicknesses were common, Marsh responded, “We don’t have that many wells drilled into the Souris Valley Beds, in that area, so we have a very small data set to work from.” “The Souris Valley Beds is made up of clinoforms that can vary greatly within one area. You can be dealing with one clinoform, and a few miles over, it can be something completely different.” Clinoforms could be compared to shingles on a house, each having different properties. Rich zones may be restricted to one of
The yellow area is the land that sold in the Oct. 5 land sale. A significant portion of it falls in the HummingbirdRoncott area, as seen in this graphic from the Ministry of the Economy Geological Survey. those shingles. “This is a really complex play and stratigraphic interval,” Marsh said. Stratigraphically the Souris Valley Beds are directly above the Bakken Formation, with the Torquay Formation directly below the Bakken. The Torquay and Bakken formations fall in the late Devonian- early Carboniferous periods, while the Souris Valley Beds were deposited during the early part of the Carboniferous period, and the Mississip-
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pian epoch. In southeast Saskatchewan, above the Souris Valley Beds are, in order, the Tilston, Alida, Kisbey, Frobisher, Midale and Ratcliffe beds, all of which are oil bearing and have oil production. “Basically, the Souris Valley, itself, is different than the Bakken (below it) and the rest of the Mississippian, above it,” Marsh said. “This is actually a deeper water-type deposit that would have formed on the slope, going down, towards the deeper basin.
Water depths for a lot of these deposits, based on some the literature, would be 75 to 155 metres deep, when it was being deposited.” According to sister publication CanOils, the Lodgepole (Souris Valley) in Manitoba has been the target for an increasing number of young wells in Manitoba. It’s also the formation that saw most of Manitoba’s production pre-1980, according to the Province of Manitoba. The location of these
organic rich deposits may be related to something underlying them in the stratigraphic column. Salt dissolution In the HummingbirdRoncott area, understanding the timing of salt dissolution of the deeper Prairie Evaporite could be key. Kohlruss said where salt dissolution occurred it’s going to be more of a conventional-type trap or play. “Will it contribute to the overall picture? ► Page A20
From my family to yours, wishing you joy, peace and hope this holiday season and throughout the New Year!
Merry Christmas!
Dr. Robert Kitchen Member of Parliament Souris-Moose Mountain
1-866-249-4697
www.drrobertkitchen.ca
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PIPELINE NEWS December 2017
What they call the Lodgepole, we call Souris Valley Beds ◄ Page A19 Maybe. I don’t know if it’s the main target. The way these work is you need multiple events of salt dissolution over time. For example, during the time of, Duperow formation deposition, if, during that time you had salt dissolution on a small scale, you’re creating an area like a bowl. That creates accommodation space in that bowl, and the Duperow will be thicker there. Fast forward to the Mississippian or Jurassic period, and more of that salt gets removed, but the morphology of the Duperow stays as that little bowl-shape. “More salt gets removed, and all the above beds that were deposited, will now drape over that Duperow thick. And that creates an anticline. “So will that affect the Souris Valley? Yes. Will it affect the Bakken? Yes. That play could have stacked reservoirs in that area, because you created something a little thicker, early on in the history. Now you have these kind of pop-up structures.” Kohlruss noted it’s a good area to look for structural traps, if oil migrated
through it. But it would be easy to miss small targets with individual wells or seismic. “It’s a very complex area,” Yurkowski said. Of the 47 Souris Valley wells drilled and fracked in Saskatchewan, 10 of the wells are in the Hummingbird-Roncott area, according to Marsh. “It’s a very heterogeneous carbonate with fairly low permeability, and it’s brittle.” “I think, in the big picture, this will more likely be something that is a stratigraphic trap, where it’s a bigger area we’re dealing with, as opposed to focusing on the small structures,” Kohlruss said. The Souris Valley rises as you go north, subcropping several townships north of Regina. The top of the Souris Valley, not the organicrich layer, is 2,291 meters below surface near the U.S. border. The overall thickness of the entire Souris Valley Beds ranges from 59 metres thick in Township 8, to 184 metres thick at the U.S. border. The oldest well in the region was spudded in 1920, drilled to a depth of
609 metres and completed in 1926. The first oilproducing well was drilling in 1952, drilled to the Interlake Formation. It’s
still producing today from the Ratcliffe Beds. It’s in the Hoffer pool at 5-30-115-W2. As noted previously,
there’s currently only one well in the area that has produced from the Souris Valley. This area is mostly known for Red River, Win-
nipegosis, Birdbear Torquay, Bakken, and Ratcliffe production. As you move northeast, it’s a Midaleproducing area.
Pool Support
On Nov. 8 Crescent Point Energy Corp. donated $10,000 to the town of Stoughton for new tarps for the town’s swimming pool. From left are Tyson Allan and Kyle Biko, both operators with Crescent Point. On the right is Bill Knous, mayor of Stoughton. Photo by Brian Zinchuk
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PIPELINE NEWS December 2017
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Prairie Hotshot launched in September By Brian Zinchuk Estevan – Prairie Hot Shot Ltd. started operations in Estevan on Sept. 1. The outfit is a three-way partnership of Alyshia Rae, Todd Adams and Dustin Mack. They have four trucks and five trailers. Rae said she handles the office, but also drives hotshot and pulls trailers when she has to. Hotshot services are “so competitive,” she noted on Oct. 31. When the downturn really took hold in December 2014, hotshots some of the hardest hits to the rates oil companies were willing to pay. There’s been a slight recovery in rates in the last year in the hotshot business, according to Rae. If oil hits US$60 per barrel,
she’s hoping those rates will recover some more. Asked if the time is right to launch a new business, she said, “I can’t say this is necessarily the right time to make money in the oilfield, but there’s still work out there. It’s a good time to get our name out.” There are four main hotshot operations in town, Rae explained, and a number of one-man, onetruck outfits. She’s worked several years with another hotshot company, managing it since 2014. This fall she decided to go on her own. She’s known Adams for many years. Adams once had his own trucking outfit, and he knew Mack, Rae explained. Adams and Rae are with it fulltime, while Mack helps out when he’s not work-
ing with another oilfield company. The work includes running items out to drilling rigs and service rigs, but they’ve also found work outside the oilpatch. That includes moving tractors for farmers or equipment for farm implement dealers. They have even picked up campers. “We’re going to Manitoba tomorrow,” she said in that regard. “In this economy, you can’t just be for the oilfield. You have to open all doors, and do what you can to get the work.” They started out with the trucks they had. “We all brought personal vehicles in,” she said. They added one used truck and picked up two new pintlehitch trailers, necessary for service rig work.
The partners in Prairie Hotshot are, from left, Alyshia Rae, Todd Adams and Dustin Mack, Photo by Brian Zinchuk Insurance, she said, is considerable, adding it was “more than I thought it would be.” For 2018, she said, “I’m forecasting drilling
will go up in January. We will hopefully be flat out with that.” Rae said, “We will be hiring before January. We’re hoping we’re going
to be busy.” They store drilling tools for customers at their shop, just east of Estevan. There’s always service rig work going on, as well.
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A22
PIPELINE NEWS December 2017
PSAC forecasts slight increase in Saskatchewan drilling for 2018 On Oct. 31 the Petroleum Services Association of Canada (PSAC) released its 2018 Canadian Drilling Activity Forecast in Calgary. PSAC expects a total of 7,900 wells (rig releases) to be drilled in Canada in 2018. For 2017, the association’s final revised forecast predicts a yearly total of 7,550 wells. PSAC bases its 2018 forecast on average natural gas prices of C$2.50 per mcf (AECO), crude oil prices of US$53 per barrel (WTI), and the Canadian dollar averaging US$0.82. PSAC president Mark Salkeld said, “The small uptick in activity we realized in Q1 (first quarter) of 2017 has carried on through the year. Budgets set with initial optimism for a gradual climb in prices by year-end continue with their plans as drilling and completion efficiencies improve. Due to pressure to stay low, costs for services continue to be suppressed affording better margins for producers. For 2018, confidence that oil will stay in the low-to-mid US$50 range as markets tighten and
inventories reduce, along with growing interest in Canada’s vast liquids rich natural gas, should support a 4 – 5 per cent increase in activity levels.” On a provincial basis for 2018, PSAC estimates 3,998 wells to be drilled in Alberta, and 2,931 wells for Saskatchewan, year-over-year increases of 152 and 84 wells, respectively. At 230 wells, drilling activity in Manitoba is expected to remain constant year-over-year whilst activity in British Columbia is projected to increase from 612 wells in 2017 to 730 wells in 2018. Although the Association expected 2018’s activity to be better than 2015, 2016 or 2017, the projected total of 7,900 wells is still 30 per cent lower than the number of wells drilled in 2014. Salkeld continued, “The cancellation of TransCanada’s Energy East pipeline is another blow to investor confidence in Canada and so PSAC will continue to advocate hard for market access and a competitive environment. The world’s energy needs are growing and polls show that
countries would prefer Canadian oil and gas that is responsibly-developed and working to reduce carbon emissions through innovation. Market access and development of our natural resources would not only help reduce global emissions and help lift third-world countries out of energy poverty, but would continue to benefit Canadians, too, by providing energy security, LNG for remote and northern communities, great high-tech jobs and world prices for our resources so that they can continue to provide economic benefits to all Canadians.” Digging into the details, the forecast predicts Saskatchewan will see 2,879 oil wells, nine dry wells, and 43 service wells for a total of 2,931. Notably, there is are no gas wells expected this year at all. In 2003, there were 2,113 gas wells completed in Saskatchewan, according to the Ministry of Economy. Broken down, southeast Saskatchewan had 751 oil wells, nine dry wells and five service wells. Northwest Saskatchewan (north of
PSAC is expecting 2,931 wells in Saskatchewan requiring casing like this in 2018. Photo by Brian Zinchuk Kerrobert) is expected to see 462 oil wells and 26 service wells. Southwest Saskatchewan, including the Kindersley area, is expected to have 166 oil wells and 12 service wells. Spud-to-release days for rigs has remained consistent for the last three years in southeast Saskatchewan at eight days. But northwest Saskatchewan has seen a substantial decline, from five days in 2015 Q3 (third quarter) to
four days in 2016 Q3 and three days in 2015 Q3. Operating days in Saskatchewan are expected to be up slightly in 2018, at 13,486 days. The forecast for 2017, rounding out the end of the year, is 13,101. That is a big improvement from 2016, which posted just 7,549 operating days. For 2017 up until Oct. 31, the top ten drillers in southeast Saskatchewan saw 285
wells drilled by Crescent Point Energy Corp., 80 by Spartan Energy Corp. 27 by Torc Oil & Gas Ltd., 17 by Astra Oil Corp, 16 by Ridgeback Resources Inc., 13 by Ridgeback Resources Corp, 13 by Villanova 4 Oil Corp., 12 by Pemoco Ltd., 11 by Steppe Petroleum Inc. and a tie for 10th positions, with Midale Petroleums Ltd. and Vermillion Energy Inc. each having 10 wells. info@cpenergy.ca
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PIPELINE NEWS December 2017
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Apollo Electric & Controls sees opportunity today By Brian Zinchuk Estevan – On Sept. 25, Apollo Electric & Controls, an new electrical company, has fired up in Estevan. The outfit is run by partners Trevor Dutka and Jim Schlamp, who have joined up with the partners behind Estevan Meter Services Ltd. to create a sister company. Apollo works out of Estevan Meter’s building on the east side of Estevan. Dutka said on Nov. 10, “This isn’t an Estevan Meter electrical company. This is our own electrical company. Apollo Electric is its own entity. It’s billing is all through us.” They have six employees, all electricians. “We’re basically 90 per cent oilfield, and a little bit commercial,” Dutka said. Their current work includes wellsites, single well batteries, a lot of programmable logic controller (PLC) programming, electrical controllers. “We’re doing some smaller projects. There aren’t really any of batteries for bid right now. We’re doing a lot of maintenance. Obviously, it’s that time of year where the change of seasons comes with a bit of work with it. The heaters
aren’t working, or heat trace and piping, stuff like that. Stuff that doesn’t like the cold is showing its horns right now.” He gave an example of a big rain storm earlier this year, after a long dry period, that resulted in a few service calls. They’ve got two trucks right now, and a third on the way. “Our goal is to expand. When we expand, I guess, will depend on opportunities we have in the oilfield around the Estevan area. We’re looking at more clients and talking to more and more people. People are excited about talking to us, because we really wanted to push this as a one-stop shopping kind of place. You can phone, you can get your instrumentation, your electrical, your basic electrical programming or electrical design – anything like that.” They are working side-by-side with Estevan Meter, he added. For instance, Estevan Meter might do the tank gauging while Apollo does the electrical work. The “controls” in their name refers to instrumentation or electrical, such
Jim Schlamp is one of the partners in Estevan-based Apollo Electric & Controls. as controls on variable frequency drives (VFDs) for pumpjacks. VFDs are becoming much more common on pumpjacks in recent years. “There are a lot VFDs going on to control pumpjacks, because with a VFD, it’s a lot easier to control how much fluid is being moved. You can slow it down, speed it up by turning a dial.” “A lot of the stuff we deal with is with downhole
pressure. They see how much fluid is being moved and how much fluid they do want to move, because you don’t want to pump off a well. So if there’s less pressure, less fluid at the bottom of a well, you slow the pumpjack down,” he said. “For starting up a month-and-a-half ago, I think we’ve gained the trust of a few clients right now. Jim and I have been knocking on a few doors. People
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are excited about the new venture, excited they can call one number and have electrical, instrumentation and programming all under one (call),” he said. Apollo’s work area is generally the southeast Saskatchewan oilpatch, within a two-hour radius of Estevan. They have done a little bit of work in Manitoba, as well. Dukta has his own company before, TSD Electric. Now he said
there’s more support Asked about the timing of launching a new venture while the downturn has still not yet fully reversed, he said, “We’re looking to the future. Things will turn around in the oilfield. “I think some things are turning around.” He added that companies are spending more now, with oil at US$57 a barrel than they were when oil was US$37.
Wishing you a Christmas as wonderful as you are! Thanks so much for dropping in on us this year. We look forward to your continued friendship!
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PIPELINE NEWS December 2017
Completion tools company Gryphon sets up in Estevan SOON TO BE TESTING A FRAC SYSTEM THAT COULD EVENTUALLY HANDLE HUNDREDS OF STAGES, SOMETHING OIL COMPANIES ARE SEEKING By Brian Zinchuk Estevan – Gryphon Oilfield Solutions is one of the newest entrants to the southeast Saskatchewan oilpatch, setting up shop in Estevan in the fall of 2017. “We’re fairly new. We secured property two months ago,” said Nick Boyle, vice president with Gryphon, by phone on Nov. 7. “We just started hiring people in the last month.”
Gryphon is born out of another company that was acquired by a private equity firm, he noted, and that’s when they became Gryphon Oilfield Solutions. They have a presence in Calgary and Kindersley. “We decided to open a shop in Estevan because we saw a need there, based on the activity and into Manitoba as well, actually,” he said. Boyle said their
products are basically downhole frac tools. “We have tools that run with coil tubing, ones that run with pipe, and tools that are rented. We have a full range of open hole and cased hole tools. They also carry tools for well servicing – plugs and cement retainers, and the like. “In Estevan, we expect that to be a fairly steady business, because a lot of the wells are worked over and maintained, so
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we think that’s going to be a core business – remedial completion tools,” He said. New technology coming A new technology Gryphon is soon going to employ involves dissolvable cartridges that work similar to a ball drop system. “This is the next big thing,” Boyle said. It’s a cased hole interventionless system where you run sleeves in the ground, but instead of running coil tubing to shift those sleeves, you drop dissolvable cartridges to open the sleeve and then the cartridges dissolve and disappear. “There’s no intervention required, and you end up with full-bore, which is the benefit of a coil tubing system, but you don’t have to use coil tubing,” he said. “We’re going to be field-testing that in January, or maybe sooner,” he said. The cartridge is keyed to match the sleeve it is meant to engage, and is launched similar to a ball. Once it catches in the appropriate sleeve, you pressure up, and it moves the sleeve open. “Depend-
katchewan, he noted. That covers western and eastern Saskatchewan, as well as Manitoba. “We design and build all our own tools. Our engineering team designs, tests, qualifies and patents the tools. We outsource the manufacturing. We don’t have production machining capability. We use machine shops in Calgary, Edmonton and even Lloydminster. Then we bring all the parts back to Calgary for 100 per cent quality control assembly and test, and then we dispatch the tools out from Calgary to the districts,” Boyle said. “Calgary’s our main distribution warehouse, if you will.” Gryphon expects to hire four to five people for Estevan, and then see where they go from there after breakup. In Kindersley they found success with a base of remedial and abandonment work, with additional frac work. Asked about setting up shop while the industry is still in a downturn, Boyle replied, “The business we’re in is highly competitive, obviously. Everybody’s looking for ► Page A25
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ing on the well conditions, it will dissolve in 24 hours to a few days,” Boyle said. They’re looking at around 40 stages. But he spoke of some areas like the Permian, where there are asking for significantly higher stage counts. Thus, he said they are eventually aiming for hundreds of stages in future generations, because that’s what the clients want; moreso in the U.S. than in Canada. “Don’t get me wrong, that’s not coming to Estevan. Forty stages is probably adequate for Estevan. But one client (elsewhere) has mentioned 700 stages. “It’s certainly been mentioned, more than once, hundreds of stages.” Other systems They have a ball-drop system for the open-hole market, and a shiftable sleeve system used with coil tubing. They also have an abrasive jet system to actually cut the pipe where there are no sleeves. “We go pump down through a jetting nozzle to cut through the pipe itself to do the frac path.” Coil tubing shiftable sleeve systems are the most popular in Sas-
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PIPELINE NEWS December 2017
A25
Evolution of fracking PST changes in last spring’s budget ◄ Page A24 differentiation in the products. But you have to go where the activity is. And quite frankly, when you look at the rig count, there’s a significant portion in Saskatchewan. “So I think what has happened in this downturn is the number of rigs has been cut by more than half, but the number of service companies hasn’t been cut in half. Maybe we lost 10, 15 per cent of those companies, because everybody’s hunkered down in size. Now you’ve got essentially the same volume of companies, fighting for a much smaller market. So people are being forced to go out to places they may have turned their back on in the past. They may have said Estevan was too expensive to work there, or it’s too far away. No, if you look at the rig count, and look at companies like Tundra and Crescent Point, I think companies are following those with the biggest rig count.” There’s been an evolution of fracking systems in southeast Saskatchewan over time, from open hole, ball-drop systems to cemented liners with abrasive jets to sliding sleeves systems now. Boyle said, “I think that’s the general shift in the market. When multistage stimulation became popular, open hole appeared to be the most efficient way to crack the rock. Now I would say it’s shifted over to cased hole being more prevalent. Part of that is, in this downturn, the cost of coil, the cost of cementing, has tumbled, right? The cost of cementing a well now, relative to seven years ago, is an order of magnitude cheaper. With open hole, you don’t have that cost, but you have packers, etc., that add up. Now, with the cost of those services coming down, cemented liner (with sliding sleeve) looks like a much more effective proposition.” “I think that’s a big part of it. This downturn forced everyone to be more competitive. For the customer, it sort of normalized open hole versus cased hole, from a cost perspective, so now they’ll pick a method that they believe that’s best for the rock they have, rather than one that’s cheaper or more expensive,” Boyle said.
are still a concern in oil sector By Brian Zinchuk Estevan – There was so much interest in MNP’s presentations on federal tax changes and provincial sales tax changes that they were bringing in extra tables and chairs to squeeze more people in at the Estevan Legion hall's on Nov. 8. Wayne Paproski led off with a talk on proposed changes for private corporations. Jeff Harrison spoke about the six month journey on the provincial sales tax (PST) since the 2017 provincial budget. Back in 2000, services were added to the PST, but since then, not much has changed. “The frustration with all these changes is they didn’t consult the industries they were going to affect ahead of time,” Harrison said. “They didn’t really make any changes you couldn’t really plan for, but you should have been able to understand.” “The oil and gas sector, itself, is going to have some challenges. We understand Sask Finance is willing to
Welcome to easy street!
Melissa Swayze, right, made the introductions during an MNP presentation on last spring’s provincial budget, which is still having impacts. By the time the presentations had started, much of the space in the centre of the room was filled with additional people interested in the presentation. Photo by Brian Zinchuk listen to some changes, but they want to see at least six months passed since their changes have come through, to more or less provide some information, some numbers to show them the cost. “In a way, it’s a bit of an unlevel playing field,” Harrison said. “The first impact is on capital goods. There used to be a remission order on very specialized equipment, referred to as permanentlymounted equipment. What it meant was, you would buy that equipment,
free of PST, used in your business. It was drilling rigs, rig components, very specialized equipment, and expensive as well. “Now that that’s been removed, every time you purchased new and used equipment like that, it used to be under a remission order, you paid PST on it. That will be involving bringing equipment in from out of province, or a contractor bringing in equipment from out of province, or you outright purchase it or rent it from within the province,” Har-
rison said. Items already in the province are grandfathered, until sold. Harrison said, “The non-resident contractor, bringing that exact same equipment in, has to pay tax as soon as they cross the border. It’s the temporary import rule, no different than bringing equipment or tools across the border. That’s always been inherit with PST, whether it’s Saskatchewan, Manitoba or B.C. They have to pay tax on it if it’s used in the province.” ► Page A26
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PIPELINE NEWS December 2017
PST now applies
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These two Precision Drilling rigs were racked in Stoughton in early November. Photo by Brian Zinchuk
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◄ Page A25 Using the example of a $10 million drilling rig, if owned in Saskatchewan, it’s grandfathered. It’s not until it’s sold to someone else or you go to replace it that PST will have to be paid. A drilling rig coming in from out of province, the same drilling rig, same value, has to have tax paid when it crosses the border. It can be appreciated method, or paid over time for the time it is here. That’s an additional cost for coming into the province, he explained. “When the rules came out, we were dealing with Sask Finance right away, specific to oil and gas,” he said. “They said, ‘This is taxable, this is taxable, this
would be exempt,’ and so forth. Then it was about two, three months later in June of 2017, they came out with a bulletin with a whole host of exemptions that came out.” The list is available from Sask Finance. It created a lot of confusion, because some items on which taxes were being collected was now except, and vice versa. “That’s creating a lot of confusion. You’re going to either collect tax that you shouldn’t have, or you’re not going to collect enough tax, and they’re going to deal with it at audit time,” Harrison said. Repairing real property has PST, for instance. But maintenance, like snow
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removal, is exempt. “Service to real property is taxable, unless it’s exempted,” Harrison said. For examples, he said construction of a well bore, including cementing services, is taxable, as are above ground construction, services and repair. Pipeline construction, service and repair, hydrovac service and well abandonments are also covered. Rentals are another matter. Providing equipment without an operator is treated as a rental, but if you’re providing service, then it’s not a rental, and taxed on the entire selling prices. Drilling the wellbore is exempt, as is downhole servicing is exempt, but not the materials supplied. If materials are not segregated on the invoice, then the full price of the invoice is taxable. “That was kind of a sleeper that came through when we read it,” Harrison said. Non-taxable items include snow removal, weed control, grass cutting, health and safety consulting, fracture mapping and reservoir monitoring, as just a few examples. The industry is still trying to find the cost of all these changes. Subcontractors have other items they need to deal with to ensure they are PST exempt. He suggested getting confirmation on what is taxable, and what is exempt, warning of audit risks. Harrison said to expect audits starting in a few years on the new changes. “You’re going to be in a world of change for a while that will settle down, and we’ll understand it more, going forward,” Harrison concluded.
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Getting the band back together: Innovative ALS Estevan – If you’ve ever seen The Blues Brothers, you get a similar vibe from Estevan’s Innovative Artificial Lift Solutions (ALS). After being dispersed for several years, they’re getting the band back together. Most of the people who had been involved with Independent Pump Co. (IPC) are now back, ironically, in the same shop they started out at in 2007. Independent Pump Co. was purchased in 2012 by Weatherford, and many of the players eventually dispersed. Now that five-year non-compete agreements are over, they’re back at it again. There are six partners in Innovative ALS. They include Cary Wock, president, technical sales; Shawn Quinlan, general manager; Jeremy Mack, general manager; Darren Olsen, shop supervisor, Chris Lesy, shop foreman and Tyler Debacker, Virden, Man. manager. Having started operations in Estevan June 1, it didn’t take them long to get an operation going in Virden, as well. That loca-
tion opened Sept. 5.Now the company has eight people in Estevan, and six in Virden. Wock had stayed on with Weatherford for Three years after the sale, while Mack stayed on for four. Wock had been putting in time farming, but he said, “Farming ain’t cutting ‘er. I missed the people, the sales. I decided to run an added in the paper to see what we got. We had great response, and opened it up to others to buy in.” So are they getting the band back together? Wock said, “Basically. “Shawn is new. We worked with him at Weatherford. He ran the Melita Weatherford store and the artifical lift stores in Estevan. Darren and Chris both worked with us at IPC. We picked the best guys we knew.” Wock likes being independent again, being able to work without the restraints of big business. The work they are doing is very much picking up where they left off with IPC, but with some
additions. Mack said, “We’re doing pumps, wellhead, and sucker rod, and are willing to go wherever the next opportunity takes us.” Quinlan brings a background in wellheads to the table. The primary focus is reciprocating rod pumps. They are using the same original supplier as they did with IPC. Wock said, “All our suppliers jumped back on with us.” Mack added there are no restrictions now on who they can use. Another key offering is what Lesy calls “groundbreaking tracking software.” That software is used to track pumps in the field and as they go through repair. The pump track system sees where individual pumps are in real time. It’s also useful for tracking and failure analysis. An example might be determining sand issues, noted Olsen, trending failures over time an ever-
The folks at Innovative Artificial Lift Solutions in Estevan are, from left, Angela Fornwald, Jon Orlowski, Kellan George, Brayden Delaurier, Jeremy Mack, Chris Lesy, Cary Wock, Darren Olsen and Shawn Quinlan. Photo by Brian Zinchuk changing well conditions to pick up trends, seeking to get the best pump life. Their inventory includes all API pump parts, with a fair amount of stock on hand. Additional items includes things like separators and screens. Asked about jumping into a new business venture during the biggest downturn in the oil business in decades, Wock replied, “It’s a tighter market out there.” Olsen added, “There’s
not as many producers as there were in the past. A lot of smaller companies were acquired. It’s a tighter playing field. Mack said, “We do know that there is risk involved, however, we are optimistic that we are going to see a turn in the market.”
“We believe there is room in our area for a local independent provider that has the flexibility to use a variety of manufacturers,” said Quinlan, adding, “We are not totally dependent on drilling, as a large amount of our work is service-related.”
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PIPELINE NEWS December 2017
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To our customers, suppliers and staff. Without you, the last 25 years would not be possible.
CELEBRATING TWENTY-FIVE YEARS HYDRAULICS - PNEUMATICS - INDUSTRIAL - RIG PRODUCTS Head Office: Box 1147 – 69 Escana St. Estevan, Sk. Canada S4A 2H7 p#: (306) 634-6743 f#: (306) 634-5871 web: www.WIL-TECH.ca Regina Branch: 259 MCDONALD ST. North REGINA, SK. CANADA S4N 5W3 p#: (306) 721-1559 f#: (306) 721-1554 web: www.WIL-TECH.ca