Category Archives: oil
Province responds to federal report on modernization of the National Energy Board
Published on: June 13, 2017 | Last Updated: June 13, 2017 11:46 AM CST
Energy Minister Dustin Duncan TROY FLEECE / REGINA LEADER-POST
In response to a federal report on modernizing the National Energy Board (NEB), the provincial government suggests a Saskatchewan location for a new board of governors.
Late last year, federal Minister of Natural Resources Jim Carr established an expert panel to review the structure, role and mandate of the NEB. Following widespread consultations, it submitted its final report, Forward, Together: Enabling Canada’s Clean, Safe, and Secure Energy Future, in May 2017.
During the review, the Saskatchewan government shared three main interests with the panel — to gain greater access to tidewater for Canadian-produced crude oil, to prioritize moving toward pan-Canadian crude oil self-sufficiency, and to repair the global image of Canadian crude oil through promotion of the facts at home and abroad.
“Our government welcomes changes that will result in the approval of sound energy projects,” said Dustin Duncan, provincial energy and resources minister, in a news release issued Tuesday. “But those projects must be built in a timely manner for the benefit of all Canadians, including those who live and work in Saskatchewan.”
The provincial government maintains the NEB needs to separate broad policy concerns from the technical review process, while avoiding lengthy approval timelines for project proponents. One of the panel’s specific recommendations is to abolish the NEB and establish two separate bodies: the Canadian Energy Transmission Commission (CETC), to perform the technical review of pipeline projects within the federal jurisdiction; and the Canadian Energy Information Agency (CEIA), to provide data, information and analysis to both decision makers and the public.
The panel also recommends that the CETC be comprised of an independent board of governors located in Ottawa and hearing commissioners located anywhere in Canada.
“Our government supports the creation of two separate bodies, but we strongly disagree with the panel’s recommendation to situate a potential board of governors in Ottawa,” Duncan said.
“Saskatoon is the ideal location. Most major oil and gas pipelines pass through Saskatchewan and many companies have a major presence in our province, although none have headquarters in Saskatoon,” he added in the release. He suggested a Saskatoon location would allow close proximity to the energy expertise in this province and Alberta and contended that “locating the board in Saskatoon guards against concerns of partisanship and influence from lobby groups.”
The provincial government has submitted multiple comments primarily focusing on the ability of the NEB, or its successor, to approve energy projects using a non-partisan, science-based approach.
Growth in oilsands projects drives need for more pipelines to 2030: CAPP
By JWN staff
June 13, 2017, 7:27 a.m.
Christina Lake. Image: Cenovus
Canada will need more pipelines built through to 2030 to transport an additional 1.3 million bbls per day of oilsands production to markets across North America and around the world, the Canadian Association of Petroleum Producers (CAPP) announced today in its 2017 Crude Oil Forecast, Markets and Transportation report.
Overall Canadian oil production will grow to 5.1 million bbls per day in 2030, up from 3.85 million bbls per day in 2016.
This 1.3 million bbl-per-day growth will be driven by a 53-per-cent increase in forecasted oilsands production of up to 3.7 million bbls per day in 2030 from 2.4 million bbls per day in 2016.
Conventional oil production is expected to remain flat, producing 884,000 bbls per day on average throughout the outlook.
New offshore production from the Hebron project in Newfoundland and Labrador, expected at the end of 2017, will contribute to a rise in eastern Canadian output to 307,000 bbls per day by 2024, but thereafter, due to natural declines, forecasted production will drop to 186,000 bbls per day by 2030.
The projected growth will exceed the existing pipeline transportation capacity, highlighting the urgent need for pipelines heading east, west, and south. Today, the pipeline network can transport four million bbls per day of oil and oil products but by 2030 it will need to move more than 5.5 million bbls per day. Increased pipeline capacity to reach more Canadians and new, growing markets around the world will ensure Canada remains globally competitive.
Capital spending in the oilsands is expected to decline for the third consecutive year to $15 billion in 2017 from $34 billion in 2014. Drilling by conventional crude oil producers is forecast to increase 70 per cent compared to 2016 levels, but will still be 40 per cent lower than in 2014.
At present, Canada’s oil industry faces a number of challenges tempering long-term growth prospects, including uncertainty related to provincial and federal climate change policies in Canada, potential protectionist policies in the U.S., and diverging regulatory efficiencies between Canada and the U.S.
Among its biggest challenges continues to be pipeline constraints, CAPP says. In the past year pipelines such as the Trans Mountain Expansion Project, Enbridge Line 3, and Keystone XL have been approved and, when built, will provide much-needed pipeline capacity to access North American and Asian markets. However, Energy East—a portal connecting Canada to Europe and beyond—is still needed to further connect Canada’s growing supplies to diverse markets.
“The urgent need for new pipelines to increase our competitiveness continues to be one of the biggest challenges facing our industry. Without access to emerging new markets we’re putting our economy at risk,” said Tim McMillan, president and CEO of CAPP.
“It is imperative we get our oil to markets in all directions to ensure fair market value for our natural resources, and provide the world with a source of safe, reliable, and secure energy from Canada.”
The 2017 Crude Oil Forecast, Markets and Transportation report can be downloaded here .
National Energy Board plans new rules for pipeline parts
CALGARY — Reuters
Published Monday, Jun. 12, 2017 4:37PM EDT
Last updated Monday, Jun. 12, 2017 4:38PM EDT
Canada’s National Energy Board (NEB) will push for a shift in standards for pipeline parts after TransCanada Corp and Enbridge Inc discovered some that they were using had been substandard, a senior regulatory official told Reuters.
The NEB’s changes must pass external standards committees that include the pipeline industry and would change the way manufacturers have been designing parts, making production more complicated, NEB chief engineer Iain Colquhoun said.
The NEB will set out precise measures after a multi-party workshop in June, Colquhoun said in an interview in late May.
“They’re big changes in philosophy because the standards that we are (currently) using evolved over many decades,”
The changes are unlikely to significantly affect pipeline operators, although parts manufacturers may see some increased costs as they try to meet new requirements.
The NEB in April warned about parts from Tecnoforge, a subsidiary of Italy’s Valvitalia SpA, and South Korea’s TK Corp, but did not name the companies using them.
An internal NEB memo seen by Reuters under access-to-information laws named TransCanada as the company using Tecnoforge fittings and noted it had two similar cases with other manufacturers.
Colquhoun, who spoke to Reuters after it had seen the memo, identified Enbridge as the company using TK Corp fittings.
TransCanada and Enbridge said in separate statements they acted immediately and proactively after discovering the issues and that all their pipes were safe. Valvitalia and TK Corp declined to comment, with the latter calling the issue “sensitive.”
Both firms discovered the substandard parts prior to putting them into operation, and the companies were not penalized.
Pipe parts are usually made stronger than needed, and the substandard ones had not caused safety issues, but the “repeated occurrence” of the matter demands broad action, according to the NEB memo, dated October 2016.
Colquhoun said the NEB would push for manufacturing processes in which strength was determined at the design level through more calculations in coming up with attributes such as thickness and diameter.
The NEB may also push for other changes to production processes, including in heat treatment, he said.
According to the NEB, TransCanada discovered a substandard Tecnoforge fitting in 2016 on a compressor station on its Nova Gas Transmission Ltd network, which spans the provinces of Alberta and British Columbia. The company has since removed at least 44 of its “several hundred” fittings from the maker installed since 2011, the NEB said.
According to the NEB, Enbridge discovered a substandard TK Corp part in 2012 on a minor pipeline system under the authority of the province of Alberta.
Enbridge said that it has replaced more than 400 fittings, although it did not name the pipeline system they had been on.
Sask. government optimistic of oil recovery as price stays low
D.C. FRASER, REGINA LEADER-POST, REGINA LEADER~POST 06.09.2017
Energy Minister Dustin Duncan
Saskatchewan Energy Minister Dustin Duncan is looking on the bright side of the province’s oil industry.
After attending the annual Saskatchewan Oil & Gas Show in Weyburn this week, Duncan said exhibitors and people within the oil industry are in a more positive mood than in the past two years.
“Just by and large, the amount of drilling that’s going on around here in the last couple of months is a pretty positive sign,” he said.
In 2007, there were 3,453 oil and gas wells drilled in Saskatchewan. In 2016, with natural resource prices dropping, there were only 1,664, according to the Ministry of Economy.
Duncan says drilling projections for 2017 show the numbers are going to be much better than last year.
The number of wells drilled in Saskatchewan in the first three months of 2017 is 856, compared to 399 wells drilled during the same period in 2016.
“I think cautious optimism would certainly be a good way to describe the mood around the show,” said Duncan.
The minister says he is more optimistic than cautious, even though the price of oil has not yet reached the level the province predicted when the budget was released March 22.
At that time, the province projected that over the 2017-2018 fiscal year, the average U.S. price per barrel of oil would be $56.25. The closest oil has gotten to that was in April, when the price hit $53.38. Since the budget was released, the average cost has been $49.37.
A barrel of oil hasn’t risen above $55 since June 2015.
Still, Duncan is remaining positive.
“I’m hopeful that at the end of the fiscal year (March 31, 2018) we’ll be in a positive position based on, compared to even the forecast we gave at budget time,” he said.
Duncan pointed to recently released land sale numbers as one source of his optimism.
The province’s public offering for petroleum and natural gas rights raised $22.8 million on Tuesday, which is the most earned for a single public offering in almost three years, according to the province.
Duncan says land sales are a “leading indicator for the industry” and the revenue generated is a good sign companies are expanding drilling operations in the province.
He says that if land sales are up, it shows companies are busy. He added one of the current struggles of oil and gas operators in the Weyburn area is finding people to work.
Enbridge sets out oil pipeline growth plan to cover Western Canada for a decade
By The Canadian Press
June 8, 2017, 2:49 p.m
Enbridge Inc. has outlined a pipeline expansion plan it says can cover the expected oil production increase from Western Canada for the next decade.
The company’s executive vice-president of liquids pipelines says the replacement and restoration of its Line 3 pipeline, combined with upgrades and adjustments to other pipelines on its mainline system, could add about 875,000 bbls a day of capacity.
“These solutions can be staged to meet industry’s needs through to about 2028,” Guy Jarvis said Thursday at an investor day meeting in Toronto.
The capacity increases would include 375,000 bbls a day from restoring the full capacity of Line 3, plus about 500,000 bbls a day of capacity elsewhere on the mainline system that Jarvis said would require little to no regulatory permitting.
Jarvis said that shippers want Enbridge to continue with plans to expand the mainline system that runs from near Edmonton to Superior, Wis., due to uncertainty about other projects.
“There is still concern amongst our shippers about the viability of the competing pipelines getting approved, and if approved, getting built,”’ he said.
His comments come as the future of Kinder Morgan’s Trans Mountain project remains cloudy. The alliance between the B.C. Green and NDP parties has vowed to use all means available to stop the project despite it being fully permitted with a scheduled September construction start.
Enbridge’s growth plan is dependent on it replacing the Line 3 pipeline, which still requires regulatory approval in Minnesota where it faces a determined opposition.
The company said it could start construction on the Canadian portion of Line 3 as early as this summer and expects U.S. regulatory approvals sometime in mid-2018.
June’s Public Offering Generates Largest Revenue Since 2014
Released on June 8, 2017
Driven by strong interest in an area prospective for heavy oil northeast of Lloydminster, June’s public offering of Crown petroleum and natural gas rights raised $22.8 million dollars on Tuesday—the largest revenue for a single public offering in almost three years.
The total for the 2017 fiscal year to date is $24 million after two sales. The fiscal year’s current average price per hectare for Saskatchewan parcels is $828.81, almost double Alberta’s average of $470.71 for conventional oil and gas parcels, and comes in the wake of recent upward trends in provincial drilling activity.
“This is a significant revenue increase and the highest for any of Saskatchewan’s past public offerings since August 2014,” Energy and Resources Minister Dustin Duncan said. “Some of the most dynamic opportunities in Saskatchewan are those in our oil and gas sector, backed up by a world-class supply chain and a global reputation among the industry for low-risk investment.”
Millennium Land Ltd. bid $4,002,780 to acquire a 1,327-hectare exploration licence located southwest of Midale. The parcel is prospective for multiple targets, particularly the Bakken Formation and the Three Forks Group/Torquay Formation.
Two parcels northeast of Lloydminster in the St. Walburg area received bonus bids totalling $9,736,304.69 for 1,295 hectares, with one of these parcels receiving the highest dollar-per-hectare at $8,115.76; these parcels are prospective for heavy oil in the Mannville Group, with well logs showing significant potential for the application of thermal recovery methods.
The next public offering of petroleum and natural gas rights will be held on August 1, 2017.
For more information, contact:
Coherence, not shouting, needed in Canadian energy discussion
This is the text of a letter that will be sent to Prime Minister Justin Trudeau and all of Canada’s premiers and territorial leaders. It speaks to a special effort by the team at JWN Energy—a Calgary-based energy information company—to create a national platform via which all Canadians can access the important discussions we need to have about Canada’s energy future.
By Bill Whitelaw
June 5, 2017 5:06pm
Pipeline construction. Image: Kinder Morgan
Dear Prime Minister and Premiers:
Canadians want to talk about energy. More important, they need to talk about energy.
They want to be part of a civil society that shapes and defines its own future constructively and respectively.
But there’s nothing civil about the way we discuss energy currently. In fact, it’s more akin to thinly-disguised civil war.
Take the pipeline “debate.”
Look what’s happening in British Columbia. It’s shameful. A decision with the force of democracy behind it has been made—on a project that was thoroughly debated and is intensively regulated. And yet there are those who think they can undo it simply by disagreeing with the decision. That attitude flouts the way we do democracy in Canada and it sets us on a slippery slope.
So far, we should give ourselves a C-minus grade on how-to-get-along-on-things-energy report card. And that’s being generous.
Most Canadians also want a stop to the shouting and political backbiting around energy matters; an end to the activists who torture facts and figures until they scream false confessions. They want a stop to the pseudo-science that generates misleading headlines from a befuddled media and a stop to the belief we can flip a switch and be independent of petroleum in a heartbeat. No wonder they seem disinterested; who would really want to step into the mess we’ve made of our energy heritage.
In the oil and gas sector, we get that we have been part of the dialogue problem. We haven’t done a particularly good job talking to Canada. Oh, we shovel numbers and equations at Canadians that they know mean something, but it all somehow gets lost in translation. Put another way, we haven’t helped ordinary folks make meaning around the ways energy intersects and transects their lives.
We should be helping Canadians understand they actually own the hydrocarbon molecules we extract and process. Beyond what we take as profit, as a reward for risking capital, the rest of the proceeds go toward making Canada better. Health care. Education. Social welfare. Public infrastructure. These all come to mind, among many other benefits, that sometimes seem too countless to enumerate.
It’s a tough message, but we’re energy entitled in this country. As Canadians, we use (and even abuse) energy. As the oil and gas sector—as do our counterparts in other energy systems—we need to share with Canadians the realities of accountabilities and responsibilities of being so energy blessed; to recognize we live with an embarrassment of energy riches, but we’re also spending ourselves silly.
Instead, as a sector, we have focused on talking to elected officials, often convinced we need to do that because your ears are being bent by special interests who don’t get how important energy, in this case petroleum, is to the way we live as Canadians.
We get as a petroleum sector we need to improve our performance. And improving we are. We’re tackling air, water and land challenges with world-class technologies developed by some of the finest minds around. Often, we’re the envy of other jurisdictions globally for the way we innovate and the way we regulate.
We have great stories to tell. But we haven’t been very good storytellers. Nor have we been very good at earning trust.
All that means we’re at an energy crossroads in Canada. There are important choices we have to make collectively as Canadians—choices informed by balanced and rational dialogues unfiltered and unadulterated by the extremes of both ends of our energy continuum. There’s much about energy Canadians don’t know—much about how energy fuels so much of what we take for granted in our overall life quality.
So my company is stepping up.
At JWN Energy, we’re trying to make a difference. We’re not a big company. Many oil companies make more in an hour than we make in a year. But we’re passionate. And we know energy. We’re stepping up because no one else so far seems to be able to bring Canadians together through energy knowledge development, idea-sharing and working through challenges collaboratively.
We’re using our flagship brand, Oilweek, to create a national dialogue platform—one that embraces all forms of energy and welcomes all energy stakeholders. On this platform the hydro community will connect to the solar community; the nuclear folks to the petroleum people. We will discuss. We will debate. We will collaborate. And we will disagree.
Yes, we’re leaving Oilweek as the name. It’s a brand with value. And it stands for something. It stands for an energy sector that for more than a century has helped make Canada what it is; the reality is that a robust and evolving petroleum sector is still critical to Canada’s well-being domestically and internationally—and it will be so for a long time to come. If we don’t get the oil and gas conversation right, we will fail miserably as other forms of energy gain momentum as stable suppliers to Canadians.
For 75 years Oilweek has served, we think honourably, Canada’s upstream petroleum sector as a perspective platform. Now, as we turn 150 as a nation, this fall we are turning our attention to all forms of energy—and to all Canadians.
Our new positioning statement: Connecting Canadians to Their Energy.
There are no free energy rides. Sunbeams and wind gusts don’t pay royalties, but solar and wind and hydro and biomass have an important part to play in the way we shape our future. But as systems, they need to cohere and mature. Oil and gas is a mature energy system, both bruised and built by decades of experience. We will transition over time, and those other systems will come to play important roles in an evolving system of systems. But petroleum will remain a key driver of our economic and social foundations for a long time despite the noisy naysayers. People won’t drive electric cars on roads paved with charged particles but rather on asphalt derived from petroleum. That’s how a system of systems works.
We’re fragmented as an energy nation. At a time when we need coherence, we’re shouting at each other. The noise is deafening.
At Oilweek, we hope to be a stepping stone to the Canada that can be: one in which energy solidarity defines us as a nation.
Drilling expected to come back with a vengeance
PSAC raises its 2017 drilling activity forecast by 60 per cent
BRIAN ZINCHUK/ PIPELINE NEWS
JUNE 2, 2017 09:34 AM
Mark Salkeld Photo By Brian Zinchuk
Calgary– The number of oil wells drilled is a leading indicator of the industry’s health as a whole, and on April 27, the Petroleum Services Association of Canada (PSAC) forecast a big improvement in the oil sector’s prognosis.
PSAC released its in its second update to the 2017 Canadian drilling activity forecast, one that now sees a 60 per cent uptick in expected activity.
The revised forecast of the number of wells drilled (rig released) across Canada for 2017 has shot up to 6,680 wells. This represents an increase of 2,505 wells and a 60 per cent increase from PSAC’s original 2017 drilling activity forecast released in early November 2016 of 4,175 wells rig released. PSAC based its updated 2017 forecast on average natural gas prices of $3.00 CDN/mcf (AECO), crude oil prices of US$52.50/barrel (WTI) and the Canada-US exchange rate averaging $0.74.
On a provincial basis for 2017, the revised forecast for Saskatchewan now sits at 2,670 wells compared to 1,940 wells in the original forecast, and Manitoba is forecasted to see 221 wells or a jump of 171 in well count for 2017. PSAC now estimates 3,320 wells to be drilled in Alberta, up from 1,900 wells in the original forecast. Approximately 60 per cent more wells are also expected to be drilled in British Columbia, with PSAC’s revised forecast now at 449 wells for the province up from 280 in the original forecast.
On April 28, PSAC president and CEO Mark Salkeld spoke to Pipeline News about the expected increase. He said, “When we did our original forecast back in November, we were still in the grasp of ‘lower for longer.’ We were only just kind of coming around to US$50 oil and realizing it might be here for a bit. We were reluctant to get too excited, so, based on the data we had for the first three quarters of 2016, that was where we were at – 4,000 (wells).
“Then we got the data for the fourth quarter of 2016, and there was a good uptick in that fourth quarter. Saskatchewan is just rocking it; Crescent Point, and their cookie cutter wells and stuff like that. So we thought we’d give it a 24 per cent increase and then we got our first quarter stuff in, and holy cow!
“What we saw was a couple of things driving it. There was confidence in US$50 oil. There were definite cost reductions on the part of the service sector, because they had no choice. Producers like Crescent Point and whatever sent form letters saying, ‘Reduce your cost by 30, 40, 50 per cent.
“The other thing was, because there wasn’t this high level of drilling activity, producers are looking to build their inventories again. It’s kind of an ideal situation where costs were down, they were reasonably confident in their prices, and they needed to get some production to service,” Salkeld said.
“In my mind, Crescent Point was the star player in all of this. They just developed that formula for easy to drill and complete wells, and to get production to surface quickly for good return. They went ahead with it.”
Their forecast does not look at specific company’s announced forecasts of their own work, but rather the broad spectrum.
Some companies are moving money out of the oilsands into the conventional side.
“The single biggest factor in all of this is the cost of services was reduced, significantly.”
Asked if that translates to service companies working for nothing and going broke along the way, he replied, “That’s exactly right. That’s been my soapbox rant over the last couple of years. The cost savings for producers have not been sustainable. We’ve seen companies go broke. We’ve seen consolidations, we’ve seen mergers and acquisitions, and that’s just expanding. We’ve got fewer service companies, but the ones that survived are bigger, some of them, but there’s lots gone.”
He noted that PSAC has lost about 100 members. Salkeld estimates that about a third have been through mergers and acquisitions, another third have chosen to prioritize their spending on something other than membership dues (like paying their staff and preparing equipment for work), and the last third are simply gone out of businesses.
“There are labour pressures. We started to see it right at the end of winter, here,” he noted. Some companies are now hiring green hands, having exhausted the labour pool.
“They put the people to work they kept on payroll, first off. They put the people to work, their ex-employees, laid off employees, they went back to work. And now they’re hiring. They’re hiring green, but there’s also a bit of scalping going on, encouraging crews from the competition to come across,” Salkeld said.
He saw it the most in fracking and cementing, which are holding job fairs. “They’ve got ads out, trying to hire like crazy.”
He noted those areas are seeing demand with respect to getting wells completed, and that those segments are starting to see a bit of a rate increase.
As for when oilfield services companies can start raising their rates, Salkeld noted some oil producers are willing to wait, or to tell an outfit that wants more an hour to go away and they’ll find someone they’re comfortable with.
“The rate increase, across the board, is going to take a couple years, I would say. The in-demand, critically-needed services are going to get something,” he said. That includes top-rated companies with squeaky-clean safety records.
“We’ve still got member-companies operating at cost, or at a loss, or waiting. The waiting period is when there’s enough critical mass, when there’s enough producers out there firing up rigs and crews to get commitments to have production going and wells spudded to qualify for permits, but we’re not there now.
“We’ll coast along this spring and summer, and we’ll start to see some pressures build up in the fourth quarter. The pressures will be labour and equipment recertifications. There’s lots of iron, rigs and frac spreads that are parked. The rigs need Level 4 (recertifications), the pumps and all the high-pressure equipment needs recertification. It all costs money.
“When all the available equipment has gone to work, and all the equipment against the fence has gone to work after some money is spent on it, that’s when the producers that need the services more and the services companies will get away with rate increased.”
All told, Salkeld said, “It’s good!” about finally having some good news, but he added there’s cautious optimism. This country still needs access to markets other than the United States, and that requires pipelines to tidewater. If the United States brings in a border adjustment tax on energy products, that will put even greater pressure on getting those export pipelines completed.
PSAC will be part of the Saskatchewan Oil and Gas Show again, held June 7-8 this year. “We’re coming down full force to host the barnstorming breakfast,” he said.
They will also have roundtable discussions with members.
In response to the revised forecast, Energy and Resources Minister Dustin Duncan said in a release on April 28, “This announcement is a clear sign of renewed operations in Saskatchewan, in part because of our province’s stable and competitive operating environment.
“After an extended period of cost management and reductions, this industry is showing us once again the kind of resiliency and efficiency that makes it one of our most dynamic economic sectors and a major contributor to Saskatchewan’s economic growth.”
© Copyright 2017 Pipeline News
Junior oil and gas players go missing, not seen recovering any time soon
By The Canadian Press
June 5, 2017, 7:19 a.m.
Canada’s publicly traded junior oil and gas sector has shrunk to a shadow of its former self and isn’t seen recovering any time soon, hit by the combination of soft energy prices, disinterested investors and higher-cost projects that favour large companies.
The trend marks a significant shift for an industry in which these smaller players traditionally played an outsized role in discovering and developing new oil and gas pools, often becoming takeover targets that helped grow the reserves of their bigger rivals.
At the end of March there were just 25 publicly listed junior companies producing between 500 and 10,000 barrels of oil equivalent per day, well down from 94 in late 2007, according to Iradesso Communications.
The sector lost 17 publicly traded juniors in the past 30 months as benchmark U.S. oil prices fell from over US$100 to about half as much.
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“The kind of plays we’re doing now, the capital required for them is so huge,” said Brian McLachlan, CEO of junior Yoho Resources.
“You’d have to raise so much money as a tiny company to get in the game and, if you don’t have a really great currency, you’re just spinning your wheels.”
Yoho and two other small public companies—Trilogy Energy and Celtic Exploration—famously pooled resources in 2010 to drill one of the first Alberta Duvernay shale oil and gas wells using horizontal drilling and multi-stage hydraulic fracturing, the technology behind the boom in U.S. oil and gas production.
The productivity of the resulting well drew attention that helped Alberta boost proceeds from the auction of drilling rights to a record $3.5 billion in 2011.
But last fall Yoho departed public markets, selling itself for $31.5 million to private equity firm One Stone Energy Partners of New York.
“We took it private because there wasn’t a heck of a lot of support for a public company our size,” said McLachlan.
Veteran energy industry executives and observers said that experience is not uncommon.
Acumen Capital analyst Trevor Reynolds said the recent oil price crisis sent some debt-laden juniors into bankruptcy or forced sales. But many others, dismayed by share price erosion, have dumped their public listings in favour of private equity backing.
He noted a typical single Duvernay well costs $13 million to $14 million to drill and complete, an amount that could tie up a small firm’s entire annual exploration budget. Larger players have cut the average cost of a Duvernay well to $10 million or less by using manufacturing processes to drill and complete several wells at the same time, sometimes from a single well pad.
The going private trend shows no signs of slowing, according to ARC Financial Corp CEO Lauchlan Currie. ARC is one of Calgary’s largest private equity firms with $5.3 billion raised through eight funds.
“The public markets have moved upmarket to the larger companies, given the risk and lack of liquidity (of juniors),” he said.
Currie said ARC has backed eight new small producer or oilfield services companies in the past two years. He added it’s a good time to invest as share prices are low, oilfield services costs are coming down, and the exchange rate allows companies to pay costs in cheap Canadian dollars and sell their products in strong American dollars.
Aspenleaf Energy, backed by ARC and the Ontario Teachers’ Pension Plan, bought publicly traded junior Arcan Resources in June 2015 and is looking to grow from current production of about 4,000 barrels per day of light oil by buying more assets and companies.
“The general thinking now is you need to have a market cap in excess of a billion dollars (to survive),” said CEO Bryan Gould. “Typically, that means production of more than 10,000 barrels per day.”
© 2017 The Canadian Press
Enbridge eyes pipeline expansion after merger with Spectra Energy
CALGARY — The Globe and Mail
Published Sunday, Jun. 04, 2017 4:06PM EDT
Last updated Sunday, Jun. 04, 2017 9:47PM EDT
Enbridge Inc. is mulling expansion of a major export pipeline, in the first sign of how the company plans to use its scale after a $37-billion merger with Spectra Energy Corp.
Chief executive officer Al Monaco said in an interview that the company is assessing a range of opportunities as it looks to integrate Spectra’s sprawling network of pipelines and processing infrastructure into its own operations. They include a possible expansion of the newly acquired Express pipeline from Alberta to Wyoming.
The potential for pipeline growth comes as oil sands production once again nears the upper limits of existing capacity, a situation analysts say will ultimately weigh on prices for the extra-heavy crude as producers pay more to ship barrels by train.
Enbridge currently transports the bulk of Alberta crude to U.S. markets along its 2.2-million-barrel-per-day mainline network, on which deliveries regularly get curtailed during periods when demand to ship oil exceeds available space.
Though there are no firm plans to do so, Mr. Monaco said it’s possible the company could expand Express, which runs more than 1,250 kilometres from Hardisty, Alta., to Casper, Wyo., and has capacity of 280,000 barrels.
“We’re looking at that at the moment,” he said at the company’s Calgary headquarters. “Now that we’ve closed the deal, the first priority has been: Okay, how can we see how one and one equals more than two?
“We’ve got a major conduit with our mainline system. We’ve got another conduit now into the [Midwest] market. There may be some opportunities to optimize between the two, and so we’re thinking about ways that we can do that.”
Enbridge expects to offer more detail about integration and future growth opportunities at an investor day scheduled for Thursday in Toronto.
It is studying options as plans for new pipelines get bogged down by legal and political wrangling, with environmentalists and First Nations saying such projects will undercut efforts to reduce carbon emissions from Alberta’s energy sector.
Projects facing resistance include Enbridge’s Line 3 replacement, which the company has said won’t start up until 2019. The $7.5-billion project, approved last year by Prime Minister Justin Trudeau, would add 370,000 barrels per day of new capacity between Alberta and Superior, Wisc.
But it faces legal challenges from the Manitoba Métis Federation and the Association of Manitoba Chiefs, who are seeking to overturn federal approvals for the Canadian portion of the route. The project also needs final clearances from regulators in Minnesota.
Similarly, rival Kinder Morgan Inc.’s plan to nearly triple the flow of crude between Edmonton and the Pacific coast on its Trans Mountain pipeline has encountered new roadblocks.
The Houston-based company insists the $7.4-billion expansion will start up by 2020. But B.C.’s Green Party and New Democratic Party have pledged to kill it once they wrest power from the weakened Liberals, although it remains unclear exactly how.
Despite the political manoeuvring, Mr. Monaco said B.C. remains a promising region for natural-gas growth.
Enbridge now has a bigger footprint in the key Montney exploration zone, where producers have been hampered by weak prices and pipeline constraints, stoking demand for new services.
The company is currently testing shipper interest for a possible expansion of the B.C.-to-Chicago Alliance pipeline system, in which it owns a 50-per-cent stake. Mr. Monaco also said major liquefied natural-gas projects will eventually be built on the northern coast, even though proponents have put off investments.
“I think everybody focuses on short-term natural-gas prices, but the reality is the cost of finding and developing natural gas in B.C. and Alberta is very, very low,” he said, making global LNG exports more appealing.
“There’s so much gas being produced into the Alberta market. Producers, I think, have come to the conclusion that it needs to go elsewhere.”