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Plus: After a year of gathering your Patch photos, we reveal the winner
people powerIt’s the folks behind the scenes that
drive the Calgary energy sector’s
United Way success
producer oF the YeAr
Keith MacPhail (left) and Jason Skehar have moved Bonavista out from the trust model and created a dividend-paying powerhouse
Bonavista Energy Corp.
includes deceMBer2011Market Monitorquarterly report
Leading the way with customer-driven data, integrated software and services for your upstream decision-making needs.
geoSCOUT | gDC | petroCUBE at www.geoLOGIC.com
They can copy us. They just can’t be us.If imitation is the sincerest form of flattery, we’re one flattered group. Drawing on a quarter century of oil and gas experience, geoLOGIC continues to be the market leader in data, software solutions and support. And while we lead the way, our competitors desperately create parity products, sometimes years after us. For details on how geoLOGIC leads the way, visit www.geoLOGIC.com/leader
client: geoLOGIC FOntS: Myriad Proitem: geoLOGIC_Racecar_OW.indd Screen: 300ppidate: September 5, 2011 Final: PDF/X1aFinal Size: 8"w x 10.75"h + 1/4" Bleed PrOductiOn: M. McKendry
CMYKTrap aT ouTpuT
geoLOGIC_Racecar_Oilweek
DECEMBER 2011 Volume 62 Number 12
corporate philanthropy
39 people powerCalgary ranks high on the national United Way scale, but it’s the people behind the campaign that make a difference
By Peter MCKeNzie-BrowN
photo contest
51 your photos in the patchFeaturing the year’s best overall photo, as well as a selection of 2011’s honourable mentions
Market Monitor
44 squeeze playAs producers found themselves caught between falling crude prices and the potential for rising costs, investors pulled back from the resource sector in the third quarter
By DALe LUNAN
Features
2011 PRODUCER OF THE YEARon the cover
WINNER | Bonavista HONOURABLE MENTION | Progress HONOURABLE MENTION | Peyto
21
22 28 32
standing tall on the gas pedal right time to growBonavista combines what was best
about income trusts with what is
best about corporations to create a
dividend-paying powerhouse
By R.P. StaStny
Progress Energy’s aggressive growth
in natural gas has new markets in
mind
By R.P. StaStny
Peyto Exploration & Development’s
Deep Basin pure play charges ahead
with modern multi-frac technology
By R.P. StaStny
contents
51
39
44
marketMONITOR
marketMONITORmarketMONITOR
market
MONITOR market
MONITOR
oilweek.com | 3
9 the patch 9 They like her! They really like her!
10 Someone always has to be different
11 $200-million gas liquids projects in
the works
14 Former Canadian GM to head ConocoPhillips
AND MUCH MORE
18 alternative/renewable energy
57 wealth & wisdom A second dip?
Today’s financial turmoil is hard to
ignore, but there’s cause for hope
By KeviN DehoD
70 rewind A look back at this month in Oilweek’s
history
departMents
coluMnists
contents
association corner
59 time to man up Labour shortages have become a fact
of life, and the CAODC is now dealing with a critical shortage of one of the most critical positions on rigs
By CiNDy SoDerStroM
eye on the environMent
61 eye on the environment With advancing technology, the oil
and gas industry’s environmental performance is under a more powerful microscope—and anyone can watch
By LeAh LAwreNCe
rock raMBlings
63 the detrimental act of coasting
Federal legislation barring foreign seismic vessels from Canadian waters acts as an anchor on future exploration
By weS reiD
our industry
65 what’s next Alison Redford represents change at
the top of the Tory ladder, but is it the right kind of change for Alberta’s energy industry?
By DAviD yAger
9
18
11
Plus: After a year of gathering your Patch photos, we reveal the winner
people powerIt’s the folks behind the scenes that
drive the Calgary energy sector’s
United Way success
producer oF the YeAr
Keith MacPhail (left) and Ron Poelzer have moved Bonavista out from the trust model and created a dividend-paying powerhouse
Bonavista Energy Corp.
includes deceMBer2011Market Monitorquarterly report
on the coverFrom new digs in Eighth
Avenue Place in Calgary,
Bonavista Energy’s Keith
MacPhail and Jason Skehar
are directing steady growth
for the former trust and are
this year’s Oilweek Producer
of the Year.
Photo: Charles Hope
PREsiDENt & CEOBill Whitelaw | bwhitelaw@junewarren-nickles.com
iNtERiM PUBlisHERChaz Osburn | cosburn@junewarren-nickles.com
EDitORiAlEditorDale Lunan | dlunan@junewarren-nickles.com
Staff WriterR.P. Stastny | pstastny@junewarren-nickles.com
Editorial Assistance ManagerSamantha Kapler | skapler@junewarren-nickles.com
Editorial AssistanceBrandi Haugen, Marisa Kurlovich proofing@junewarren-nickles.com
ContributorsJoseph Caouette, Leah Lawrence, Peter McKenzie-Brown, Wes Reid, David Yager
CREAtivEProduction, Pre-Press and Print ManagerMichael Gaffney | mgaffney@junewarren-nickles.com
Senior Publications ManagerAudrey Sprinkle | asprinkle@junewarren-nickles.com
Art DirectorKen Bessie | kbessie@junewarren-nickles.com
Creative Services ManagerTamara Polloway-Webb | tpwebb@junewarren-nickles.com
Senior DesignerCathlene Ozubko | cozubko@junewarren-nickles.comCreative ServicesChristina Borowiecki, Angie Castaldi, Janelle Johnson production@junewarren-nickles.comContributing PhotographersCharles Hope, Joey Podlubny
sAlEsDirector of SalesRob Pentney | rpentney@junewarren-nickles.com
Sales Manager – AdvertisingMaurya Sokolon | msokolon@junewarren-nickles.com
Ad Traffic Coordinator – MagazinesDenise MacKay | atc@junewarren-nickles.com
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SalesNick Drinkwater, Ellen Fraser, Rhonda Helmeczi, Nicole Kiefuik, Jeff LeHoux, David Ng, Sheri Starko
For advertising inquiries | adrequests@junewarren-nickles.com
MARkEtiNgMarketing & Trade Show CoordinatorJeannine Dryden | jdryden@junewarren-nickles.comMarketing DesignerCorinne McKetiak | cmcketiak@junewarren-nickles.com
OffiCEsCalgary2nd Floor, 816–55 Avenue N.E., Calgary, Alberta T2E 6Y4Tel: 403.209.3500 Fax: 403.245.8666 Toll-free: 1.800.387.2446Edmonton6111-91 Street N.W., Edmonton, Alberta T6E 6V6Tel: 780.944.9333 Fax: 780.944.9500 Toll-free: 1.800.563.2946
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We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.
4 | oilweek December 2011
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Not only are the rubber toys happy-coloured, but the people in this
picture actually seem happy. or maybe they’re simply grateful for the
momentary diversion from the heat and the madness of the situation.
So this picture has become my desktop background to remind
me of a number of things.
one is that travelling at 120 to 140 kilometres an hour from
Calgary to British Columbia on the transCanada highway on a
Friday afternoon before the August long weekend in a bumper-
to-bumper cascade of cars is actually worth it, especially if i’m
packing my own inflatable crocodile.
it also reminds me that despite the vagaries of world markets,
the long-term demand for oil and gas is underwritten by a world
that is boldly stepping ever further out on the limb of energy-
dependent urban civilization.
And thirdly, it seems royal Dutch Shell plc knows an oppor-
tunity when it sees one. this fall it became the third partnership
to propose a liquefied natural gas export terminal on Canada’s
Pacific Coast (after Progress energy/PetroNAS and Kitimat LNg).
with three viable LNg export projects, the prospects for
natural gas in the western Canadian Sedimentary Basin are
looking up, which would be icing on the cake for Oilweek ’s 2011
Producer of the year, Bonavista energy and its two runners-up,
Progress energy and Peyto exploration & Development.
At one point this year, supposedly on
halloween, the world woke up to its seven
billionth citizen. hurray!
or rather not hurray. Most news
sources ran the story with some scary pic-
tures of what a world with seven billion
people looks like in developing countries.
one shows elbow-to-elbow, tire-to-
tire throngs of scooter-riding motorists
in what looked more like a scooter rights
rally than just another day of rush hour in taipei, taiwan.
Another is of a solitary man walking on a pedestrian bridge
overlooking 10 lanes of seemingly parked trucks and cars amidst
thousands of people with umbrellas sharing the road in Lagos,
Nigeria, a city of about 15 million people, a six per cent growth
rate, soon expected to overtake Cairo as Africa’s largest city.
And my personal favourite, a pool party of epic proportions in
Suining, China, with thousands of people crammed into a pool to
escape the summer heat wave of July 4, 2010—quite possibly not
a single one of them knowing how to swim since everyone has
a happy-coloured inflatable swimming ring wedged under their
armpits while splashing, shouting, laughing, wiping water from
their eyes….
seven billionAsian gas markets take a step closer
pstastny@junewarren-nickles.com
R.P. Stastny
frontlines
next Month
the year before usOur stable of industry pundits weigh in on
what they see on the horizon for 2012. The
past year met some expectations, fell short
of others, surpassed yet others; time will
tell if the forecasts this time around are
any better.
All’s quiet on the M&A frontThe past year wasn’t exactly one for the books on the
mergers and acquisitions front, as a few major proposed
deals fell through at the last minute. We’ll look at what the
climate might be for 2012, and delve into what makes a
good M&A leader.
oilweek.com | 7
10FirstEnergy’s outlook
for natural gas
producers optimistic
15Experts predict below-
average oil prices for
winter 2012
Back in the summer and fall, when wags in Alberta were pontificat-ing on who might emerge from the six-pack of contenders for ed Stelmach’s top job with the Progressive Conservatives, Alison redford wasn’t high on too many lists. Before the first vote, most figured the fight would come down to a battle between gary Mar and ted Morton.
Before the second vote—with Mar facing off against unlikely opponents Doug horner and redford—the betting money seemed still to be with Mar. But in the end, redford squeaked out a narrow victory over Mar, thanks to many horner voters making her their second choice.
They like her! They really like her!redford’s selection prompted our latest Oilweek web poll,
in which we asked our readers whether they thought the PC choice would turn out to be a wise one; would redford, in fact, prove to be an effective leader of the party, and lead them to a win in the next provincial election, whenever that might be.
Nearly 43 per cent of respondents thought redford was just the ticket for the PCs, while 26 per cent stated a definite uncertainty about whether she could do the job. the rest—31 per cent—were undecided.
16Primary and secondary
oil recovery holds up
spread of EOR
Pho
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Newly elected premier Alison redford celebrates her win.
oilweek.com | 9
the patchBits & trips For the canadian oilpatch
every crowd has a contrarian. when it comes to natural gas forecasts, that role falls to Firstenergy Capital Corp.
while most don’t see much reason for natural gas producers to be optimistic for the coming year, Firstenergy’s outlook is comparatively hopeful.
the firm believes AeCo natural gas prices will average C$4.54 per thousand cubic feet in 2012, compared to $3.84 this year.
Someone always has to be
different
Photo: Joey P
odlubny
that’s still a slight drop from its earlier pre-dictions of $4.63 per thousand cubic feet in 2012, but it’s still well above other predictions. AJM Deloitte, for example, is expecting AeCo gas prices to average $4.10 per thousand cubic feet next year.
So what makes Firstenergy so positive about gas prospects next year?
the company is banking on a “deceleration” of U.S. gas supply, which should help ensure that demand will remain robust for the year.
But whatever Firstenergy is seeing, AJM doesn’t share the view.
“there is some positive news in that the U.S. storage levels forecast for the November withdrawal period are near the prior five-year minimum,” says ralph glass, director of energy valuation and operations at AJM.
“we, however, have not seen the turn in overall U.S. production. wells are still being drilled to hold land leases and for liquids recovery.”
the patch
10 | oilweek December 2011
Amount raised from land sales by Canadian govern-ments in the first three quarters of 2011. That’s the third-highest amount in the past decade.
$3.41
$200-million gas liquids projects in the worksPembina Pipeline Corporation plans to construct a 200-million-cubic-feet-per-day enhanced natural gas liquids extraction plant, and associated natural gas liquids and gas-gathering pipelines in the Berland area of west-central Alberta.
Cost of the project is approximately $200 million and will contribute annual eBitDA of around $30 million (including pipeline tolls), the company says.
Called the Saturn facility, it will be connected to talisman energy inc.’s wild river and Bigstone gas plants through existing and newly constructed gas-gathering lines. once operational, Pembina expects the Saturn facility would be able to extract up to 13,500 barrels per day of liquids.
Pembina plans to construct an 83-kilometre, eight-inch pipeline to transport the extracted natural gas liquids to Pembina’s Peace Pipeline, which delivers product into edmonton.
the new plant, combined with Pembina’s Musreau Deep Cut Facility and its recently announced resthaven Facility, are expected to bring the company’s total enhanced nat-ural gas liquids extraction capacity to approximately 600 million cubic feet per day.
Pho
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ight
© P
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ine
Cor
pora
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All
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serv
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oilweek.com | 11
the patch
Rashid Hamid at THE NEW SCIENCE CENTRE
DiscovEr hoW amaziNg you arENow open | sparkscience.ca
Transforming energy puT a liTTleTorque in my sTep.
it’s not every day you get selected as the best of the best. For Pat Daniel, 2011
is his year: he’s been named Canada’s outstanding Ceo of the year by Caldwell
Partners, joining such luminaries as tD Bank president ed Clark (2010), former
transCanada president hal Kvisle (2008), riM chairman Jim Balsillie (2006), encana founder
gwyn Morgan (2005), CNr president Paul tellier (1998) and AtCo’s ron Southern (1996).
But that, it seems, matters not to the environ-mental community. in a tersely worded release, Pierre iachetti, conservation director with Forest ethics, pooh-poohed the award, and did his best to be nominated for Oilweek’s inaugural green grinch of the year (which we shall bestow next spring) by suggesting that designating Daniel the Ceo of the year Award is “like the foxes giving each other awards for raiding the chicken coop.”
Raining on his paradeP
hoto
: Pho
tos.
com
the patch
12 | oilweek December 2011
OLD SCHOOL.
Dig, stage, weld, weld, weld… operate, corrode, rupture, repair, operate, corrode, rupture, replace.
‘‘ ‘‘
That’s what he saidi’ve seen the land reclamation progress at oilsands sites. it’s a necessary, staggeringly com-plex process, and evidence shows the land will be reclaimed as thriving ecosystems after oilsands are developed to help meet the world’s growing energy needs.”
— Dr. Patrick Moore, co-founder and former leader of greenpeace, and current chair and chief scientist of greenspirit Strategies Ltd.
oilweek.com | 13
the patch
Experience, leadership, performance.Since it was established in late 2008, CanElson Drilling Inc. has grown quickly to become one of Canada’s premier drilling contractors. In addition to building its own drilling rigs, the company is expanding its fleet of drilling and service rigs through acquisition. CanElson now operates a fleet of 33 rigs (30 net).
With operations in Western Canada, West Texas, North Dakota and Mexico, CanElson Drilling Inc. is setting new standards for rig utilization.
With right-sized, purpose-built rigs built for horizontal and resource play drilling and experienced, well-trained crews, the company is achieving new records for cost-effective, efficient drilling operations.
Suite 700, 808 - 4th Avenue SW, Calgary, Alberta, Canada T2P 3E8
Phone 403.266.3922 Fax 403.266.3968
www.CanElsonDrilling.com TSX: CDI
when ConocoPhillips announced in July that it would split its refining arm from its exploration and production operations, all that was known was that current chief executive officer Jim Mulva would not be a part of either business.
Now the company has revealed who will be replacing the retiring Ceo—and there’s a familiar face for Canadians.
Senior vice-president of international exploration and production ryan Lance will be stepping into the chief executive’s role for the exploration and production business. over the years, he has held a number of leader-ship positions with ConocoPhillips, including serving as general manager of Canadian operations for Phillips Petroleum Company before it merged with Conoco inc. in 2002.
greg garland, senior vice-president of exploration and production for the Americas, will become head of the refining and marketing operation.
ConocoPhillips expects the split to be completed by the second quarter of 2012.
former Canadian gM to head ConocoPhillips
Pho
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the patch
14 | oilweek December 2011
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SCA
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E
Oil price chillexpected in early
2012experts are forecasting below-average temperatures throughout much of Canada and the United States during the winter of 2011-2012. Now it seems the chill is setting in on oil prices as well.
Morgan Stanley has cut its initial 2012 forecast by $30, down to $100 per barrel, prompted largely by rising oil output from Libya and the still-shaky global economy, reuters reports.
Prices are expected to drop as low as US$85 per barrel during the first half of the year before rising to $110, although the direst scenario suggests prices could dip as low as US$60 per barrel before recovering.
“we see downside risk in the first half of 2012 as grow-ing supply should coalesce with slowing gDP, a stronger U.S. dollar and elevated risk aversion to push down oil prices,” the investment bank says in a research note.
Brent crude prices reached as high as $127 per barrel earli er this year—their highest level since mid-2008.
oilweek.com | 15
the patch
the european Commission has proposed that the oil-sands be ranked as a higher pollutant than other oil sources in the european Union’s fuel quality directive, reuters reports.
Under the guidelines, fuel from the oilsands would have a greenhouse gas value of 107 grams per megajoule, compared to 87.5 grams for conven-tional crude oil.
the news was met with much concern in ottawa, which had been arguing against the inclu-sion of the oilsands in the directive.
“Should the european Union implement unjus-tified measures which discriminate against the oilsands, we won’t hesitate to defend our inter-ests,” says federal Natural resources Minister Joe oliver, adding that the government would look at taking the issue to the world trade organization.
According the Canadian Association of Petroleum Producers, Canada does not currently export oil to the european Union.
in hindsight, it seems so obvious.what has been holding up the spread
of enhanced oil recovery (eor), some-times referred to as tertiary oil recovery, across western Canada? Primary and sec-ondary oil recovery, of course.
According to the Daily Oil Bulletin, edmonton-based consulting engineer Bruce Peachey laid out the problem in even blunter terms at a Petroleum technology Alliance Canada conference on Co2 management in early october.
“[eor] can’t just be economic,” he says. “it has to be more economic than anything else that shareholders’ money can be invested in.”
And as long as Canada lacks a ready sup-ply of affordable Co2 for use in eor, that situation isn’t likely to change anytime soon.
while the United States has the advan-tage of cheap, natural Co2 deposits for use in eor, western Canada’s most economi-cal supplies are generated by gas plants.
“And you need the gas plants to recy-cle the Co2,” he explains. “So not only do we need the gas plants as potential Co2 sources, we need them to collect the gas and treat it so we can re-inject it.”
Peachey sees some potential for eor development in several mature oilfields around the province close to natural gas plants. But he also admits it’s likely that investors will continue to prefer pri-mary oil recovery over the more expensive eor process.
“it’s what shareholders expect oil com-panies to do,” he says.
even secondary recovery, which typically involves waterflooding, will likely remain more popular than eor, Peachey says.
“if you look at the cost options, it is always cheaper to inject water than to inject a gas.”
if producers are interested in tertiary recovery, Peachey says, they’ll likely look south of the border, where the United States has the advantage of existing eor operations, affordable Co2 and supportive public policy.
“they’re not doing eor to get rid of greenhouse gases, they’re doing it to make money. the same as weyburn,” he says.
that 11-year-old Saskatchewan project, owned by Cenvous energy inc., remains the last major eor project launched in western Canada.
EOR no more?
Oilsands reputation tarred by EU
the patch
16 | oilweek December 2011
ATCO Pipelines provides reliable and efficient delivery of natural gas and is committed to operational excellence and superior customer service while ensuring the safety of our employees and the public.
Experience. Growth. Commitment.
www.atcopipelines.comPhone 403.245.7060
Dying for a cigarette
A government organization in the United States known as the Chemical Safety Board is urging oil and gas companies to take swift steps to beef up security at oil and gas storage tank sites.
the reason: too many deaths—espe-cially among those 25 and younger—by people who make recreational visits to the sites and end up dying.
in a report on the incidents that was carried by the news media in texas, the board highlighted three recent lethal explosions, including one in April 2010 that killed a 24-year-old woman and injured a 25-year-old man after they lit a cigarette while on top of a oil tank.
the board said there were 23 simi-lar incidents that involved mostly teens out partying or children—at oil and gas storage sites from 1983 to 2010. texas, oklahoma and Louisiana led the United States in the number of the deaths.
4,000estimated number of people who have registered to speak before the Joint review Panel on enbridge’s Northern gateway pipeline proposal. each speaker will be allotted 10 minutes at the hearings, which are scheduled to begin in January 2012.
Source: Daily Oil Bulletin
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oilweek.com | 17
the patch
blank page for duplexing
energyA l t E R N A t i V Eenergytrucking company pumped on lNgA trucking company in British Columbia has devised a simple plan
to cut its fuel bill in half—and all it had to do was build its own
fuelling station.
well, that’s one way to ensure you don’t get gouged at the pump.
it probably helps that vedder transport Ltd. won’t be fuelling its
trucks with diesel, but rather liquefied natural gas (LNg) provided
by FortisBC, which will run the service for the company. At current
rates, LNg is 50 per cent below the cost of diesel.
in addition to the cost savings, the move will also help the com-
pany slash its greenhouse gas emissions by 27 per cent when
compared to diesel. in total, vedder expects to reduce its annual
greenhouse gas emissions by 3,500 tonnes per year.
vedder expects to have a fleet of 50 LNg-powered trucks run-
ning by early 2012.
green MountainNormally, skiers don’t want whistler, B.C., to be green. But they might be willing to make an exception in this case.
the popular mountain ski resort has fulfilled its
pledge to be carbon neutral by 2012 ahead of schedule,
making good on a promise it made when it signed the
Climate Action Charter with 178 other B.C. municipali-
ties in 2010.
to reach that goal, whistler pursued numer-
ous emission reduction initiatives, such as lighting
upgrades and the $900,000 installation of geo-
exchange and solar heating systems at the local
Meadow Park Sports Centre.
whatever emissions the resort couldn’t reduce
were counterbalanced with the help of offsetters, a
B.C. carbon management consultancy. the firm
purchased carbon offsets on behalf of the municipal-
ity from a renewable energy project run by SunSelect
Produce in Aldergrove, B.C., and a wind turbine
project in turkey.
18 | oilweek December 2011
energyenergyR E N E w A B l E
Everything you always wanted to know about wind power (but were afraid to ask)what sort of threat does a wind farm pose to birds? how does a wind turbine affect television reception? And just what happens if one is hit by lightning?
these are just some of
the concerns addressed
in An Introduction to Wind Energy Development in Canada, a new document
released by the Canadian
wind energy Association
(CanweA).
the 36-page guide is
aimed at helping both public stakeholders and developers
understand the issues surrounding wind power in Canada. it
covers everything from proper site identification to clarifying
jurisdictions, as well as various other safety and environ-
mental concerns.
the document is available on CanweA’s website.
Mills mull biomass prospectsCould pulp mills be the power plants of the future?the president and chief executive officer of the Forest Products Association of Canada thinks so, and he’s gone before the Canadian senate to make the case for generating biomass energy from pulp waste.
Speaking to the Senate Standing Committee on energy,
the environment and Natural resources, Avrim Lazar says
the Canadian forestry industry currently produces the power
equivalent of three nuclear reactors, and that number could
triple over time.
“Already we are self-generating about two-thirds of our
energy needs and about a half-dozen of our mills are now net
exporters of energy to provincial grids,” he says.
Biomass power ranks behind only hydroelectricity among
Canada’s largest sources of renewable energy.
Record-breaking wind in Canadathe final numbers aren’t in just yet, but it’s looking like Canada is heading towards a record number of wind-energy installations this year.
According to estimates from the Canadian wind
energy Association (CanweA), Canada will see 1,338
megawatts of new wind-energy capacity added to
the power grid in 2011, bringing with it $3.5 billion in
investment.
that represents a sizable increase from 690 mega-
watts in 2010, and is the highest new capacity ever
added in a single year in Canada.
when everything is tallied up, the country should
have more than 5,300 megawatts of wind-energy cap-
acity by the end of 2011.
And that number could possibly double in the near
future. CanweA says over 6,000 megawatts of wind-
power projects have been contracted and could come
online in the next five years.
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oilweek.com | 19
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out their profits to a growing investor segment eager for
cash flow, while returning to a seemingly inexhaustible
pool of money to raise more capital for more land, more
junior oil and gas companies, and more development. The
model seemed to work brilliantly until one Halloween day
four years ago.
A lot has happened since then—none of it particularly
good—with perhaps one big exception: horizontal multi-
frac technology, as noted by Keith MacPhail, chairman and
chief executive officer of Bonavista Energy Corporation and
former Canadian Natural Resources Limited executive,
really doesn’t have an industry analogue in how quickly
and profoundly it has changed the oil and gas industry.
In 2007, Bonavista drilled four per cent of its wells using
horizontal multi-frac technology. Today, it drills 80 per
cent of its wells that way. It’s not alone.
And the most prospective assets in the basin for the
application of this technology are largely the ones income
trusts are already sitting on like golden eggs.
Still fiscally disciplined, focused and knowledgeable of
their assets’ geology, former income trusts are now cor-
porations that have, to a greater or lesser extent, layered
growth into their strategies. They are the most exciting
companies on the block these days.
Not surprisingly, after tallying the votes, Oilweek’s
Producer of the Year as well as its two runners-up all hap-
pen to be former income trusts: Bonavista Energy, Peyto
Exploration & Development Corp. and Progress Energy
Resources Corp. In the pages that follow, learn about how
these companies have morphed in the last few years, and
where they go from here.
PRODUCER OF THE YEAR
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oilweek.com | 21
Bonavista combines what was best about income trusts with what is best about corporations to create a dividend-paying powerhouse
By R.P. Stastny
Keep it low-key. Don’t stand out in the crowd too much. And because success is a team effort at Bonavista Energy Corporation, bring in your president and chief operating officer to focus the discussion on the company and its people—these are just some of the things Keith MacPhail, Bonavista’s chairman and chief executive officer, seems to have considered before sitting down to discuss his company’s achievement as Oilweek’s 2011 Producer of the Year.
It’s not that MacPhail doesn’t like talking about the
success of the company he and Ron Poelzer, Bonavista’s
current executive vice-president and vice-chairman,
founded in 1997—how they started as a junior with a
$20-million market capitalization, worked that into an
intermediate in three years, providing investors with
a dizzying $0.75–$8.15 stock ride, then grew produc-
tion at 20–40 per cent per year up until the accretive
expansion years of the income trust era and, more
recently, emerged as a dividend-paying corporation
with a market cap of $4 billion and production of 73,000
barrels of oil equivalent per day. All that is fine. You
can read it on the website. And while there’s room in
MacPhail’s world to celebrate success, there’s no point
attracting too much attention. More important than
talking up your business is going about your business,
and that’s getting oil and gas to market as efficiently
and cost-effectively as possible.
Chalk up this no-nonsense business approach to
growing up on a farm in the Medicine Hat area of
Alberta. It’s a work ethic and demographic story made
STANDING TALL
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WINNER | Bonavista Energy
BonavistaEnergy
Photo: B
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22 | oilweek December 2011
famous by some of western Canada’s most esteemed
oil and gas executives. It’s also a history shared by
Bonavista’s president and chief operating officer, Jason
Skehar, who grew up on a farm outside of a little town
called Theodore in southeastern Saskatchewan.
Like MacPhail, Skehar is an engineer. Like MacPhail,
he has a strong entrepreneurial bent. And his career
trajectory seems to mirror MacPhail’s, who in the
mid-1990s was being groomed for the top position
at Canadian Natural Resources Limited.
But in MacPhail’s case, that entrepreneur spirit side-
tracked him and prompted him to launch Bonavista
through a reorganization of Bonavista Petroleum Ltd.
in the fall of 1997.
Fortunately, an enterprising spirit remains alive
and well at Bonavista today, which seems to amply
satisfy Skehar.
“The entrepreneurial spirit radiates in the halls
here,” he says. “A good example of this is the evo-
lution of our Glauconite play. We’re coming up on
100 horizontal wells drilled into this play and all the
data that we’ve seen suggests that we’re the lowest-
cost operator in terms of drilling and completing this
play to date. But that’s not good enough for the asset
team. They want to find a more effective, lower-cost
alternative to develop this resource. So they’re con-
tinually looking for better ways to do the business.
That kind of spirit creates a healthy, competitive en-
vironment to work in.”
PEOPLEIn thinking about Bonavista as Oilweek’s Producer
of the Year, MacPhail probably also decided that the
right amount of publicity could be a good thing, at
least in considering that one of the main challenges
facing the industry today is finding employees.
Burgeoning oilsands development and the renais-
sance of opportunities in the Western Canadian
Sedimentary Basin ignited by the application of mod-
ern horizontal multi-frac technology have spawned a
strong demand for talent. So shedding the remnants
of the image that came to be associated with income
Bonavista energy drills 80 per cent of its wells today with horizontal multi-frac technology versus four per cent in 2007. the company is focused on three core regions in western Canada.
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trusts—as somewhat conservative, uninspiring places
to work—could actually help it today.
Employees want to feel good about their companies,
they want a variety of opportunities and a runway of
advancement potential. In these and other aspects,
Bonavista is a heavy hitter.
“The people challenge in our industry cannot be
understated,” MacPhail says. “I think we need to change
our mindset a little bit. Historically, at Bonavista we’ve
hired people with five, 10 or 15 years’ experience
who could come in and hit the ground running. As of
late, we’ve recognized that we have to settle for less
experience or even start focusing on new grads and
establish good mentorship and training programs in
the organization.”
Across its three core regions, Bonavista has a wide
spectrum of play types, from liquids-rich gas, deep sour
gas, shallow gas to conventional oil, waterfloods and
heavy oil. That’s good variety for attracting employ-
ees and it’s good asset diversity for the company and
its investors.
“Since we moved from a trust structure to a
corporation at the end of 2010, we’ve increased our
drilling and our spending and, of course, geologists
and engineers love that,” MacPhail adds.
More visibly, the company also shed its old skin by
moving to a newly built tower in downtown Calgary.
The expansive lobby of Eighth Avenue Place features
outwardly sloping glass spanned by white trellis beams.
Tropical trees, sand-coloured stonework and cascades
of natural light fill the space—and the theme of light
is repeated in its office spaces as well. Bonavista occu-
pies three and a half floors high up in the building
overlooking Calgary and the mountains. Its corri-
dors are modern, incorporating the latest trend in
floor-to-ceiling glass walls and sliding doors to keep
things uncluttered.
“I think this creates a better image for our com-
pany without a lot of extra expense,” MacPhail says.
Attracting employees is one thing. Retaining
them is aided by encouraging Bonavista’s manage-
ment, directors and employees to maintain high
levels of ownership, something in the order of
15 per cent. This isn’t particularly unique in the
oilpatch; what is unique is that 14 of its top man-
agers have spent an average of 11 years with the
company. Ownership in the company also has a way
of focusing attention on creating shareholder value.
As for how things get done at Bonavista, MacPhail
says, “We believe that more heads are definitely
better than one in making a decision. So we tend
to work in teams and reach a consensus. Of course
that can’t always be achieved. Ultimately, somebody
has to make the final decision if there’s a stalemate
but, generally, I think it’s a very good environment
to work in.”
Jason Skehar (left), president and chief operating officer, with Keith MacPhail, chairman and chief executive officer, Bonavista energy Corp.
BonavistaEnergy
Photo: B
onavista Energy C
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24 | oilweek December 2011
producer of the year
OPPORTUNITIESBonavista’s current gas weighting is about 62 per cent.
Skehar notes that the Western Canadian Sedimentary
Basin happens to be about the same percentage so,
as the company grows, it makes sense to reflect the
basin’s gas weighting. But ultimately, Bonavista’s gas
weighting is a function of its opportunities. And right
now, many of its liquids-rich gas opportunities are
more profitable than its oil opportunities.
“It wouldn’t bother us to increase our gas weighting
if that’s where we think we can make more money,”
MacPhail says. “Quite frankly, because everybody is so
focused on oil right now, it’s driving the cost of doing
oil drilling and oil acquisitions up. So going against
the grain, acquiring and developing low-cost gas right
now, could be the right strategy a few years out.”
Bonavista’s strength is built on a strategy put in
place 14 years ago: stay focused in a few core areas,
complement those areas with acquisitions along the
way, maintain a high working interest, and control
your operations, from drilling to production to facili-
ties. Its long-term averaged recycle ratio (netback less
finding development costs) of 2.1:1 probably ranks it
in the top 10 per cent of the pack.
“As licensee and operator, just being able to con-
trol when you make that expenditure, how much
you’re spending, what you’re spending it on, is very
important to us,” Skehar says.
In its conversion back to a corporation, Bonavista
didn’t throw the baby out with the bathwater. Today,
it pays a hefty dividend of about six per cent per year
(based on a $25 stock price). Combined with produc-
tion and stock valuation growth targets of about five
to seven per cent, that adds up to about a 12 per cent
annual return to investors.
“I believe investors are more receptive to dividend-
paying companies during a volatile market than they
are just to a pure-growth company,” MacPhail says.
“Without the dividend, you are totally at the whim of
the commodity price movement.”
A strong balance sheet allowed Bonavista to take
advantage of a major opportunity in the summer of
2009 when it was layering in growth-oriented assets.
It paid about $700 million—its largest transaction to
date—for about 492,000 acres of contiguous land, of
which approximately 156,000 (136,000 net) acres are
undeveloped. That provides it with extensive explora-
tion and development potential in many zones within
the area. But currently, its primary development pro-
gram is focused on drilling horizontal wells in the
Glauconite and Rock Creek formations using hori-
zontal multistage fracture techniques.
“Our entry into the western region came when we
acquired a producing asset just north of Calgary from
a major,” Skehar says. “It came with a lot of controlled
infrastructure and operatorship. We’ve grown the
Bonavista energy has a wide spectrum of play types, from liquids-rich gas, deep sour gas, shallow gas to conventional oil, waterfloods and heavy oil.
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western region from 3,000 barrels a day in 2002, to
46,000 barrels a day currently. It’s definitely been
the fastest growing and most profitable region for
us and it will continue to be so. We’re allocating
80 per cent of our exploration and development cap-
ital to the western region this year.”
In applying new technology to older reservoirs and
assets that have been underexploited, Bonavista has
tracked a remarkable statistic. Where it drilled only
four per cent of its wells with horizontal multi-frac
technology in 2007, today it drills 80 per cent of its
wells with this technology.
With its growth target of five to seven per cent
per year, combined with a few strategic acquisitions,
Bonavista should become a 100,000-barrel-a-day com-
pany with 300 or 400 employees in five to 10 years. And
no matter how low-key you play it, a company of that
size will, by its very nature, stand out in the crowd.
123Bonavista energy’s current gas weighting is about 62 per cent—something company chairman and chief executive officer Keith MacPhail says the company would increase “if that’s where we think we can make more money.”
BonavistaEnergy
Photo: B
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26 | oilweek December 2011
producer of the year
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To put our Energy Capital Services1 expertise to work for you, call us today.
Progress Energy’s aggressive growth in natural gas has new markets in mind
By R.P. Stastny
Think Montney and, by association, Encana Corporation comes to mind. Yet the largest owner of Montney rights of any producer in the play is actually Progress Energy Resources Corp., with some 1.1 million acres. And, not to rub it in, but where Encana failed to consummate its proposed partnership with PetroChina International Investment Company to speed development of some of its key natural gas assets in northeastern British Columbia, Progress succeeded in tying the knot with Malaysia’s state energy company, PETRONAS.
Better yet, this Asian energy tiger comes with a
wealth of liquefied natural gas (LNG) shipping ex-
perience, access to high-paying gas markets and
is intent on building an LNG facility on the west
coast of Canada, in which Progress Energy will have
a 20 per cent stake.
Meanwhile, the prospects for Canadian LNG
exports are looking up with the National Energy
Board’s recent issuance of an LNG-export licence
to Kitimat LNG, a producer-owned facility proposed
for a fog-shrouded inlet south of Prince Rupert, B.C.
The more definite step in opening North American
natural gas to world markets is expected in the first
quarter next year when the Kitimat LNG partners—
Apache Canada Ltd., EOG Resources Canada, Inc.
and Encana—make their business decision to go
ahead with the plan.
Of course, pending a favourable decision, the facility
will still need to be built, which will take time—years,
in fact. And Progress Energy’s plans are at an even
earlier stage. But when you’re among the lowest-cost
ON THE GAS PEDAL
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123RUNNER-UP | Progress Energy
ProgressEnergy
Photos: B
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esources Corp.
28 | oilweek December 2011
producers of liquids-rich natural gas in one of the
most economic gas plays in North America, you can
afford to wait.
By then, Progress will have grown its produc-
tion even more dramatically than it has to date. The
2,000 barrels of oil equivalent (boe) per day of pro-
duction it started with as a junior a decade ago is
now about 50,000 boe a day. By 2015, Progress Energy
expects to be producing 100,000 boe a day, accord-
ing to Mike Culbert.
The third-generation Alberta oilman has been
Progress Energy’s president and chief executive offi-
cer since 2004. He was also one of its founders in 2001
when the company recapitalized under new man-
agement. Today, on the eve of the company’s 10th
anniversary, Culbert is feeling pretty good about the
company’s prospects.
“It’s a very aggressive growth plan,” he says. “But
the joint venture fits into it. New market development
fits into it. All of these are stepping stones to that goal.”
TRUST IN GROWTHThe rapid growth Progress is planning may raise
eyebrows considering its income trust roots. But it’s
worth remembering that Progress spun out two ex-
ploration companies when it converted to the trust
model in 2004. One was ProEx Energy Ltd., which was
managed from within the income trust. It continued
pursuing exploration opportunities until 2007 when
Progress bought it back: exploration and a strong
growth orientation were always part of the Progress
Energy skill set. Testing new technologies to unlock
production was another part of its game plan. And
once it found what worked, it set about fortifying its
asset position.
“What it’s all about [for Progress] is having the
repeatability of the asset base to be able to grow from
a junior to ultimately, what we see now, as being a
multinational company,” Culbert says.
Early in his career with Encal Energy Ltd.—and
even before that when he was with Home Oil—Culbert
recognized one of the challenges in a maturing basin
was finding sufficient resources to take a company
to the next step. So Progress always headed for areas
that could provide scalability.
“We were also looking for technology enhance-
ments that could leverage those assets. So if you could
crack the nut on one of these plays, it would yield a
hundredfold opportunity,” Culbert says.
Progress Energy gravitated to British Columbia,
where its management was familiar with the plays from
their Encal Energy days. There, Progress made a small
acquisition and started building around a predomi-
nantly tight gas position in the Halfway trend while
experimenting with different fracturing techniques.
In 2004, it turned to the Deep Basin and made
a major acquisition in the Wapiti/Elmworth area
south of Grande Prairie, Alta. It focused on the Deep
Basin in northwestern Alberta and the B.C. foothills,
built its own infrastructure and bought ownership
in gas plants.
“Today, we have 100 per cent ownership in most
of these assets,” Culbert says. “We’re able to control
our pace of development and, along with owning our
infrastructure, that allows us to be one of the lowest-
cost operators in the region.”
Progress energy is the largest landholder of any producer in the Montney with well over a million acres.
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By 2015, Progress energy expects to be producing 100,000 barrels of oil equivalent a day.
ProgressEnergy
MONTNEYThe Montney showed up on the industry’s radar
in about 2005. Progress had been drilling through
the Montney in the foothills with some shows and
decided to frac the formation through vertical wells
to see what it could get. Encouraging results spurred
further experimentation until 2008, when it drilled
its first horizontal well in the formation.
“We were drilling horizontally into the Halfway,
but the Halfway is such hard rock [that] it’s difficult
to go horizontal. Like others, we found that once you
get down to the Montney, it drills pretty effectively,”
Culbert says. “And like others at the time, we were using
the poly-CO2 frac technique. The results were fairly
encouraging—not out of the park but quite encour-
aging—so we evolved the play and drilled additional
horizontal wells.”
Then Progress piloted a new frac method in the
Deep Basin with Calfrac Well Services Ltd., which
became Calfrac’s Slick Pro product. Slick oil comple-
tions opened up the Nikanassin formation for Progress
and produced some good results.
In the Montney, it tested a related completions
technique called slick water, which was being used
in the U.S. shale gas plays. Essentially a soapy water
mixture, slick water reduces friction. It improved
Progress Energy’s Montney well productivity by almost
threefold.
“It was a game changer,” he says.
The company then reshuffled its geographic priori-
ties and weighed in on the Montney. It bought additional
rights in the stratigraphic column as a risk-mitigation
strategy and set out to chase sweet gas, which doesn’t
require costly additional processing to remove hydro-
gen sulphide and CO2, and gas with liquids.
The Deep Basin actually tends to have a higher
liquids content, but the Montney is a very thick forma-
tion along the foothills with varying levels of liquids
in with the gas. Progress Energy’s production typically
yields about 20 barrels of liquids per million cubic feet
of gas, a ratio which doesn’t strictly meet the level of
true liquids-rich gas, but which is enough to provide
a nice little price bump.
In times of more robust gas prices, producers have
been able to fund their gas development with cash
flow, but the current low-price environment has forced
many producers to either go to the capital markets for
more money or to sell some of their portfolio assets or
look for joint ventures. Last August, Progress chose the
latter as its preferred route to growing in the Montney.
THE ROAD AHEADWith the U.S. shale gas revolution came weaker
Canadian gas exports to the United States. North
American gas prices normalized at their current low
levels, and producers recognized that the massive
natural gas potential in western Canada faced an
uphill battle if they couldn’t find some creative solu-
tions to staying in the game.
So finding and development costs came under fire,
joint-venture partnerships were struck and new markets
for gas were sought. Apache Canada, EOG Resources
Canada and Encana played their LNG export card.
Talisman Energy Inc. formed a $1.05-billion partner-
ship with South African chemical and energy giant
Sasol Limited to develop Talisman’s Montney Farrell
Creek assets, but also to assess the viability of Sasol’s
synthetic gas technology for the conversion of nat-
ural gas into transportation fuel. And now Progress
Energy has weighed in with its PETRONAS partner-
ship and LNG plans.
Clearly, many of western Canada’s gas produc-
ers and, in particular, Progress Energy, aren’t sitting
around waiting for commodity prices to turn. They’ve
rolled up their sleeves, and something big is going to
come out of all this effort.
Photos: B
onavista Energy R
esources Corp.
Mike Cuthbert, president, Progress energy resources
30 | oilweek December 2011
producer of the year
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Peyto Exploration & Development’s Deep Basin pure play charges ahead with modern multi-frac technology
By R.P. Stastny
You’ll have to excuse Darren Gee for sounding a little flat in telling the com-pany story yet again. It’s just that he’s returned from New York and Toronto where he’s been plugging his company to investors, education trusts and everyone else because, these days, they want to hear it directly from the horse’s mouth.
You could easily do these talks by teleconference,
and Gee, president and chief executive officer of Peyto
Exploration & Development Corp., has done them elec-
tronically in the past. But the financial markets haven’t
been kind to investors in recent years. Unrepentant
money markets, unbridled fear and greed, virtual trad-
ing and a moral code seemingly rooted only in profit
have investors desperate for an edge before pulling
the trigger. So they want to see the company heads
in person, gauge the tenor of their voices, watch their
gestures, get a sense of their attitudes and tally up the
clues before handing over their money.
And actually, Gee can appreciate that. He would do
the same in their place; cut through the hype, get to
the facts. In his role as president of Peyto, hype doesn’t
seem to be part of Gee’s repertoire—even though, if
any energy company stock deserves to be hoisted on
investors’ shoulders these days and paraded around
the stadium, it’s Peyto Exploration.
In an era of floundering natural gas prices, this pure
play, Deep Basin, natural gas producer has grown with
RIGHT TIME TO GROW
3
RUNNER-UP | Peyto Exploration & Development
Peyto Exploration & Development
Photo: P
eyto Exploration &
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32 | oilweek December 2011
astonishing determination. It rebuilt its stock price
from a $6.35 low in March 2009 to $23.15 in August of
this year. It’s also managed to protect most of those
gains in the recent energy sector value backslide,
maintaining a stock price above $20.
“Our growth is partly tied to the technology and
partly to our ability to move quickly when the time
is right,” says the Calgary born and raised engineer.
Warming up to the task of retelling the Peyto story,
Gee adds, “The only company that I’ve ever seen do
that before is, well, us—when we were smaller.”
Peyto outgrew its junior breeches in a growth spurt
that took it from 10,000 barrels a day to 20,000 bar-
rels a day. A lot of companies manage to do that with
external funding, but Peyto did it with cash flow.
“It’s all about growing production per share,” Gee
says. Today, with a $2.5-billion market cap, closing in
on production of 40,000 barrels of oil equivalent per
day and with only 34 employees, Peyto quite possibly
has the best gas-to-ass ratio in the industry.
“If commodity prices are relatively flat as they’ve
been, then your cash flow per share is growing at the
same rate as your production per share along with the
rate of your reserves growth,” Gee says. “So all your
value creation metrics are going up lockstep—assum-
ing that you’re not seeing any contraction in your cash
flow multiple. So we’ve been growing at 40 per cent
per share per year. I think that’s one of the fastest-
growing oil and gas companies in North America.”
DEEP FOCUSPeyto’s growth is by choice. And right now, in the
company’s view, is the right time to grow.
“We’ve had periods in our history when it was the
wrong time to grow because the returns we were gen-
erating weren’t strong enough,” Gee concedes. “There
was too much volatility in the royalty regime, too much
uncertainty in the corporate trust tax model and,
for that matter, too much volatility in the gas price.”
Gee is one of the few people in the industry who
is perfectly content with today’s gas prices. While
others steer their companies towards oil and those
who have stayed with gas lament the soft prices and
wait for a turnaround, Peyto has been wildly success-
ful at current prices. In fact, Peyto actually prefers
low commodity prices.
“The biggest stick in the spokes right now would
be higher gas prices,” Gee says. “I know it sounds
crazy for a gas producer to say that the last thing he
wants is for gas prices to go up, but as soon as we get
$5 or $6 gas, everybody and their dog sinks money
into drilling gas wells.”
That’s when things get crazy. Service costs go
through the roof. And Peyto ends up making the same
rate of return for its capital dollar invested but at the
top of the commodity price cycle rather than at the
bottom of it. Eventually, the market reaches a point
of oversupply, commodity prices drop and the indus-
try’s stuck with high service costs.
with a $2.5-billion market cap, Peyto exploration, a pure play Deep Basin natural gas producer, is nearing production of 40,000 barrels of oil equivalent per day.
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Peyto Exploration
& Development
“So would you rather build at the top of the com-
modity price cycle or at the bottom?” he says. It’s a
rhetorical question. Gee expects Peyto would make
the same 30 per cent rate of return at either end of the
commodity price cycle, so why not do it when things
are relatively calm?
The bigger strategy is that Peyto is after investment
rate of return, not netbacks. This is one reason you
don’t see Peyto chasing the latest and greatest tight oil
resource play in the Western Canadian Sedimentary
Basin and paying top dollar for the choicest assets,
taking the time to learn the geology, test it and then
build out.
Chasing rate of return on investment means that
Peyto isn’t even pursuing its most liquids-rich gas
assets in the Deep Basin. The Spirit River package,
which typically yields seven to 15 barrels (sometimes
even 20 barrels of liquids per million cubic feet of gas),
is where Peyto gets its best rates of return.
“Ironically, these are better rates of return even
than our shallower Cardium, which has more than
twice the liquids yield,” Gee says.
Yes, the Cardium has a $36 netback while Spirit
River has a $24 netback but, as it turns out, drilling
wells in the Spirit River formation is easier and cheaper
and the wells have better productivity, higher recov-
ery and quicker payout.
After a decade of working nothing but the Deep
Basin, Peyto knows its strengths, its assets and its
numbers so well in this region that it has the lowest
operating costs in the business. A number of reasons
account for this, starting with the fact that when it
entered this relatively expensive play as a junior, it
had to be an ultra-low-cost, disciplined producer. It
didn’t even drill its own wells. It re-entered old wells,
re-completed them and did whatever it could on the
cheap to bring cash flow on.
Early success with a disciplined approach became
a way of life during Peyto’s trust years. It didn’t stray
from natural gas, which has lower lifting costs than
oil because it doesn’t require the disposal of water
and other fluids. Peyto targets only sweet gas, so it
doesn’t pay extra to extract and dispose of the sour
components and CO2. Peyto also made an infrastruc-
ture investment decision to own its own facilities.
And its focus is on what it builds itself.
“Everything Peyto owns, we went out and de-
veloped,” Gee says. “I don’t think you’ll find any com-
pany even close to our size that built it all by itself.
Effectively 99 per cent of our production goes through
one of our five 100 per cent owned and operated nat-
ural gas plants.”
Now add in the production gains of deploying mod-
ern horizontal multifrac technology since Peyto’s
conversion back to a corporation in 2009 and you
start to see how it grew its production 40 per cent per
share and why it expects to continue growing at this
rate for at least some time to come, with a seven-year
drilling inventory in front of it.
UP FROM HEREHigher gas prices may throw a stick in the spokes of
the Peyto’s chariot, as Gee claims, but the race would
be far from lost should that happen. And Gee doesn’t
see prices increasing any time soon.
“I personally don’t see a correction to the over-
supply situation we have in North America till 2015
or 2016,” he says. “I just don’t see anything material
hitting the horizon other than LNG [liquefied nat-
ural gas] exports.”
Today, North America is producing more gas than
it can consume to support higher gas prices. So gas
wallows at $4 per mmBtu while Japan pays $17 per
mmBtu for its LNG imports. Gee likens this to the
1980s when Alberta had a natural gas supply bubble
and the lack of any long-haul capacity to markets in
the United States.
But change is inevitable. As more gas-fired power
generation is built and as North American natural
gas finds world markets through LNG exports, gas
prices will firm up and you can bet that won’t hurt
Peyto’s stock price.
Photos: P
eyto Exploration &
Developm
ent Corp.
Scott robinson, executive vice-president and chief operating officer, Peyto.
Darren gee, president and chief executive officer, Peyto.
Peyto owns and operates its own gas plants.
34 | oilweek December 2011
producer of the year
429365Calfrac Well Services Ltd
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To determine Oilweek’s 2011 Producer of the Year,
we first asked our readers to let us know who
they thought would be worthy candidates for
consideration. Then, late last spring, the edito-
rial team here at JuneWarren-Nickle’s Energy
Group met to discuss those nominations and
add their own to the discussion.
In the end, more than a dozen companies were
considered, but a consensus amongst the editorial
team was quickly reached to include five com-
panies who have achieved a high profile in the
Western Canadian Sedimentary Basin: Bonavista
Energy Corporation, Penn West Petroleum Ltd.,
Peyto Exploration & Development Corp., Progress
Energy Resources Corp. and Trilogy Energy Corp.
Throughout September, we asked our read-
ers to vote for who they thought deserved to be
Oilweek’s 2011 Producer of the Year, and the results
couldn’t have been any closer: less than 100 votes
separated all five finalists, and Bonavista just
managed to edge out both Peyto and Progress,
who finished in a virtual dead heat.
HOW YOU VOTED
PRODUCER OF THE YEAR
18%
20%
20%
17%
25%
Bonavista Energy Corporation
Peyto Exploration & Development Corp.
Trilogy Energy Corp.
Progress Energy Resources Corp.
Penn West Exploration
36 | oilweek December 2011
counts.
every drop of
The more we know, the less water we use to produce a barrel of oil. With today’s technology, over 80% of the water used in our oil sands process is recycled over and over. But we’re not stopping there. We continue to improve and are designing even further reductions in water use.
Joy RomeroCanadian Natural
oilsandstoday.caA message from Canada’s Oil Sands Producers.
The Canadian Association of Petroleum Producers (CAPP) represents member companies that produce over 90 per cent of Canada’s natural gas and crude oil, including Canada’s Oil Sands Producers.
Loca
tion
56.9
1307
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4620
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ENERGYSERVICESSUMMIT.COM
Canada's Premier Business develoPment summit for the energy serviCes seCtor
May 28–29, 2012 Edmonton Marriott at River Cree ResortEdmonton, Alberta, Canada
“While the world is getting better, the disparity between the top
and the bottom is getting greater,” says John Manzoni, Talisman
Energy Inc.’s chief executive officer and a volunteer campaign
co-chair this year for the United Way of Calgary. “Those of us
at the top who have benefitted from an astounding couple of
decades of prosperity often forget that the things that have con-
tributed to that prosperity have actually made things worse for
some people.”
“Calgary itself plays a role in that,” he says. “It’s an oil town,
a hydrocarbon city. As the price of oil goes up, so do costs…the
cost of food, the cost of accommodation, the cost of fuel. As a
result, people get left behind. All that’s happening in the finan-
cial sector is just exacerbating the situation. I am increasingly
of the view that business has a moral obligation and responsi-
bility to help to bridge those gaps.”
Those comments represent the windup to Manzoni’s reply
to a pretty simple question: “Why did you agree to co-chair this
year’s United Way campaign?” Now comes the pitch. “If you can
do something locally, that’s all the better. Based on that perspec-
tive, [the United Way] is a great opportunity to do something
that helps.”
A relative newcomer to Calgary—Manzoni came to Calgary
from Britain four years ago to assume Talisman’s top job—he
also acknowledges business reasons to become involved.
“From a selfish perspective, I’m new to the city and it’s a great
way to get to know more people. There are many advantages to
doing this in addition to the fact that you can do some good.”
Manzoni’s co-chair this year is Susan Riddell Rose, chief
executive officer of Perpetual Energy Inc., which has about 180
employees locally. A native of the city, Rose says she’s “involved
in the program because it aligns perfectly with my goals and my
husband’s goals and my family’s goals, and our vision of what
we want the city of Calgary to be.”
“The United Way has been a presence in the community for
quite a long time,” she continues. “It’s often been said that every
dollar given to the United Way contributes six dollars of benefit
to the community. That’s because the United Way helps fund
high-impact programs that help the city avoid certain kinds of
outcomes down the road. If you do that, you can save the sys-
tem quite a bit of money.”
Campaign co-chairs “come from every part of the spectrum
of the Calgary community—sports figures, small business, tech-
nology. It just happened that this year they’re both executives
from the energy industry,” according to Ruth Ramsden-Wood,
who has been the chief executive officer of the Calgary and Area
United Way organization for the last 14 years.
On average, each co-chair dedicates 46 hours to the annual
campaign. “They lead a cabinet of 50 people who represent
every segment of our society, from major energy companies to
Calgary ranks high on the national United way scale, but it’s the people behind the campaign that make a difference
By Peter McKenzie-Brown
People power
Pho
to: U
nite
d w
ay o
f C
alga
ry
Corporate participants help the United way kick off its annual campaign in September.
oilweek.com | 39
corporate philanthropy
universities to unions,” she says. They “work with those people
and they meet with people throughout the community for the
whole year leading up to the campaign. It’s a pretty hefty role.
They become very visible in the community.”
“We put a lot of time into developing our cabinet and they
develop additional cabinets in their own sectors,” Riddell
Rose adds. “That enables our efforts to trickle down and into
the community.”
FuNManzoni, Ramsden-Wood and Riddell Rose give the big-picture
look at the United Way. If you narrow your focus to the work-
place campaign, matters get much more interesting.
“Every company has its own fun events,” says Riddell Rose.
“It’s part of the intrigue that you can use these events to express
your own creativity. Something like 1,200 United Way campaigns
will take place this year, and they will all be different. Lots of
creativity comes into play, and that can be defining for com-
panies’ cultures.”
What kind of fun? Ask Melanie Swanson, an integrity ana-
lyst at Nexen Inc. and chair of that company’s 2011 United Way
campaign. Nexen’s theme is “Be a superhero,” and that theme
led to a public relations home run for the company.
As the United Way season kicked off in September, hordes
of company employees donned superhero costumes to test the
previous world record for “most superheroes in a single place.”
According to Swanson, “It was a lot of fun to organize the event,
but the purpose was to breathe life into the campaign. There was
an adjudicator from the Guinness Book of World Records present,
and we had to meet particular criteria.”
When the adjudicator announced that Nexen’s 437 super-
heroes had blown away the previous world record, a jubilant
crowd went wild. The event got wide-eyed publicity across the
full spectrum of media—from TV to Twitter.
The superhero stunt reflects a corporate culture that strongly
supports the charity. A year ago, Nexen and its 1,900 Calgary-
area employees contributed a jaw-dropping $1.4 million to the
United Way. Half the total was a corporate contribution.
Nexen’s media success was the envy of other companies.
According to Peter Ingle, surplus property manager for Imperial
Oil Limited and co-chair of that company’s campaign, “We have
fun events, but I have to admit I’m a bit jealous of what Nexen
did. I’d like to do something like that. Our events have tended
to be more internal. For example, we have large-scale Wii com-
petitions among our employees.”
Ruth Ramsden-Wood never tires of telling stories about cor-
porate fun. For example, “A few years ago a law firm auctioned
a goat for its chairman, and I can’t tell you how many emails
came in from around the country making pledges.”
She adds that many companies find imaginative ways to raise
money. For example, for three months each year Esso markets
$25 United Way gift cards at its service stations—while supplies
last, of course. From each sale, $2 goes to the charity.
When it comes to individual campaigns, companies can do
anything. According to Manzoni, “To kick off our campaign we
had a breakfast for our employees, and about 300 or 400 came.
We need events like that to tell people the stories out there—for
example, to tell them about the children who go to school without
breakfast. The number in Calgary is stunning—I think it’s 20,000.
People need to know that, and we need to find ways to fix it.”
CORPORATE SuPPORTThe high level of corporate support within Calgary has helped
make the city a champion within Canada’s United Way network.
Photo: U
nited way of C
algary
United way volunteer campaign co-chairs John Manzoni (left) and Susan riddell rose (second from left) at the campaign’s kickoff event in September.
40 | oilweek December 2011
corporate philanthropy
Last year’s campaign raised about $52 million. In terms of total
funds raised, that amount put Calgary in Canada’s number-
three spot. However, at $39.20 the city was fifth in terms of per-
capita giving. Fort McMurray, Alta., was tops, with contributions
of $64.78 per head.
Corporate support involves much more than cash, of course.
First and foremost, it involves the work and commitment of indi-
vidual volunteers. “If employees want to take time to work on
the campaign, we let them have it,” says Manzoni, “and we find
ways to make them feel special.”
Some companies lend people from their staff to the United Way.
“We usually get them involved at the beginning of fall, and they
work throughout the campaign,” according to Ramsden-Wood.
“They become our arms and legs. I believe we have 35 this year,
but in previous years we’ve sometimes had more. Companies do
this to some extent because they see it as a leadership develop-
ment opportunity for their employees.”
Nexen’s Melanie Swanson worked as a loaned rep with the
United Way last year, and says she got a great deal out of the
experience. “It gave me a sense of how much the United Way
actually does. So this year I wanted to contribute again by chair-
ing our corporate campaign.”
Swanson and Peter Ingle are two good examples of how the
system works and how much effort is involved.
“I’m a big believer in the United Way and I have been ever
since I joined the company 27 years ago,” Ingle says. “I think it’s
a good way to be involved. The United Way targets funds in a
very focused way.”
“At Esso we have two campaign chairs, and there is an over-
lap,” he says. “The lead co-chair is putting in maybe 20 per cent
of her time during the peak period of our campaign; I’m putting
in about 10 per cent. Next year I will do the bulk of the work
while we train somebody else for the year after that. We have
a really active cabinet, and we have floor leaders,” whose job is
to see whether their colleagues will open their hearts and wal-
lets to the charity.
While Imperial Oil has a notional target of $1.2 million in
contributions from Calgary-area employees, Ingle stresses that
this is strictly an internal number. “Philanthropy is a very per-
sonal thing,” he says, “and we don’t do anything to influence
where people direct their gifts. We designed the campaign to
help people learn more about United Way and how it can help
in our community, but we also send out a really clear message
that [giving] is up to the individual.”
Nexen’s Swanson says that during this year’s peak campaign
period she invested half of her time in the company’s campaign.
A lot of that time went into the superhero event, which she says
was designed to “increase participation in and awareness of the
event.” Like Ingle, Swanson was assisted by people on each floor
who went from office to office, talking up United Way giving.
In her case, they were called “Floor Superheroes,” and most of
them trotted around with brochures in their Guinness-adjudicated
superhero outfits.
Asked how much time she and the other volunteers in her
company have given to the cause this year, all she could say
was “hundreds of hours.” She estimates that the cash cost
of the campaign represented one to two per cent of the total
money raised.
Virtually all the larger companies in the energy industry
make direct contributions to the United Way, but they follow
quite different models. According to Ramsden-Wood, how con-
tributions are made is “really driven by the philosophy within
the company.” The most common approach is gift-matching,
by which companies match employees’ and often annuitants’
Pho
tos:
Uni
ted
way
of
Cal
gary
Led by volunteer campaign co-chair John Manzoni, president of talisman energy, the United way of Calgary gets significant support each year from Calgary oil and gas companies.
oilweek.com | 41
corporate philanthropy
contributions. Gift-matching is usually dollar for dollar, but some
companies match at even higher levels: in at least one case, three
dollars for every dollar given by the employee.
Gift-matching can be a powerful motivator, especially since
there is often no limit to the size of your gift, and you can actu-
ally direct your gift to a specific charity among those the United
Way serves. Thus, whether you donate $10 or $10,000, matching
funds will double the amount the charity receives. As Riddell
Rose explains it, gift-matching is a way “to show that the cor-
poration is passionate about what our employees are passionate
about. The United Way is not the only area where we match
employee giving.”
Gift-matching can also cost a company dearly. According to
Ramsden-Wood, “Some years ago a retiree from Shell was giving
huge amounts to the community [through the United Way], and
the company matched him for every dollar he gave.” Last year,
Shell and its people contributed five per cent of the total raised
in Calgary. Between 2000 and 2010, their contributions exceeded
$32 million—a vivid illustration of the energy industry’s impact
on the city’s not-for-profit agencies.
Unlike most other companies, Imperial doesn’t use the gift-
matching model. Its Esso Foundation treats corporate United
Way funding as part of its nationwide community investment
program. According to the company’s Jon Harding, “The total
budget is based on community need in the regions where we
live and operate. Over 17 communities across Canada receive
funding as part of our annual United Way grants.”
PEOPlE POwERWhile workplace campaigns are an extremely important part
of the United Way calendar, the organization’s volunteers are
active throughout the year.
In United Way parlance, leaders are those who give from $1,000
to $10,000 in a year and major donors are those who give more.
According to Riddell Rose, “We have a Leaders initiative, but we
also have a Major Donors initiative and I’m very involved in those
relationships.” As Manzoni elaborates, “The vast amount of money
comes from Leader level giving, so we want to increase leadership
giving.” That is one area of the organization’s focus.
The other is to bring new people into the United Way—“to engage
the younger generation.” Organization insiders describe this effort
as their BeCause initiative. According to Riddell Rose, it “originated
10 years ago to try to get the aged 23–35 demographic—people who
often don’t have the means to actually give—to become ambassadors
spreading the good word about what the United Way is doing in our
community. Our company actually has two BeCause ambassadors—
young, high-potential employees. They are leading our United Way
campaign. Ambassadors focus on the idea that if we work as a vil-
lage we can make the city a better place.” It’s all about people power.
According to Peter Ingle, Imperial Oil also focuses “on getting
newer employees engaged in the United Way. We encourage them
to just give their time through our Days of Caring, for example.”
This is a program in which a team from the company will go out
and work in the community—helping repair and repaint a shel-
ter for street kids, for example.
At Talisman, Manzoni says, “We dedicate a week to the idea of
having [our working groups share] ‘A Day That Makes a Difference.’
Members of our executive team get involved in volunteering some-
where, and people get involved with them.”
“I am inspired by the amount of work the many people involved
in the United Way campaign actually do,” says Ruth Ramsden-Wood,
who will retire this winter. “We are a chronically understaffed
not-for-profit organization, and it is these people who make pos-
sible what we do each year.”
Susan riddell rose, president of Perpetual energy and co-chair of the United way’s volunteer campaign.
Nexen president Marvin romanow accepts congratulations from a Guinness Book of World Records representative at a United way awareness event in September.
Photos: U
nited way of C
algary
42 | oilweek December 2011
corporate philanthropy
830101Beijing Zhenwei Exhibition Co, Ltd
full page • fp
market
MONITOR
SQUeeZEplaymarket
MONITOR
SQUeeZEplayBy Dale Lunan
It appears that the oil-price honeymoon in western Canada may be over. For the better part of the last two years, producers have been riding a groundswell of financial largesse based on robust global oil prices that at times exceeded the century mark.
But in the third quarter, the bloom from the commodity price
rose, not only globally as markets responded to the ongoing
European debt crisis, but also in North America, where struc-
tural barriers impeded the flow of crude to key refining markets.
The result was that West Texas Intermediate (WTI) crude, the
benchmark North American stream, was discounted heavily
from Brent blend, sending investors in North America scurry-
ing for more secure places to park their cash.
In the third quarter, WTI averaged US$89.74 per barrel, a dis-
count of about US$22 per barrel to Brent. That compares to the
second quarter, when WTI averaged US$102.59 per barrel, about
a US$15 discount to Brent. Year-to-date through September, Brent
averaged US$111.47 per barrel, a US$16 per barrel premium to
the WTI average of US$95.46 per barrel.
Traders, speculators, hedge funds and other players in com-
modity markets took their money and ran for safer harbours as
fears of financial contagion in the Eurozone spread to Spain and
Italy, while weaker employment and manufacturing datapoints
As producers found themselves caught between falling crude prices and the potential for rising costs, investors pulled back from the resource sector in the third quarter
market monitor
44 | oilweek December 2011
Dow JoNeS/UBS eNergy iNDeX | JUly – SEPt. 2011
S&P/tSX CAPPeD eNergy iNDeX | JUly – SEPt. 2011
eNCANA CorPorAtioN | JUly – SEPt. 2011
iMPeriAL oiL LiMiteD | JUly – SEPt. 2011
market
MONITOR
SQUeeZEplay traders, speculators, hedge funds and other players in commod-ity markets took their money and ran for safer harbours as fears of financial contagion in the Eurozone spread to Spain and italy, while weaker employment and manufacturing datapoints from the United States raised fears of economic contraction, perhaps even recession. Stock markets gyrated wildly, as the big indexes posted consecutive days of steep gains and losses on heavy volume, and finally slid into correction territory, usually defined as a 10 per cent drop from a recent high. Commodities followed suit, as rising con-cern about faltering demand resulted in a rush to lock in profits through August.Source: Croft Financial Group
encana corporation’s third quarter was destined for troubles even before it began, with the June collapse of a joint venture with PetroChina international investment Co. ltd. that would have put development of Encana’s Cutbank Ridge gas reserves in north-eastern British Columbia on a fast track. And the quarter ended on a sour note: third-quarter earnings of just US$120 million, down from more than US$600 million in the third quarter last year, and blamed the decline on the volatility of the Canadian and American dollars over the past year.
if ever an example exists of a good company caught in a bad market, imperial oil is that example. in the second quarter, the granddaddy of Canadian integrated companies trotted out per-formance metrics chief executives can only dream of: net income was up 40 per cent; cash generated from operations doubled to $656 million; capital expenditures were five per cent higher; its Cold lake heavy oil project achieved yet another production record; and its Kearl oilsands project is developing on time and on budget, headed towards first oil late next year. But still, the market hammered the company, driving its shares down from more than $45 in early July to less than $37 in late September.
Oil and gas took one of the wilder rides in the market last quarter. First off, energy prices have been falling steadily since the middle of April and this definitely affected the index. But there were some big finds in the quarter, including Chevron’s discovery in the deep-water Gulf of Mexico, and Norwegian company Statoil’s triton in the North Sea. But the market has a habit of battering companies that are on the periphery of pricing, and that seems to be the case with this sector and the ongoing woes in the Middle East. the index also saw big losses due to European fears in September.
$125
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IMO-T:Daily Close
ECA-T:Daily Close
oilweek.com | 45
market monitor
CreSCeNt PoiNt eNergy CorP. | JUly – SEPt. 2011
hUSKy eNergy iNC. | JUly – SEPt. 2011
LegACy oiL + gAS iNC. | JUly – SEPt. 2011
PArAMoUNt reSoUrCeS LtD. | JUly – SEPt. 2011
market
MONITOR
SQUeeZEplay
the third quarter proved something of a roller coaster for crescent point energy, Oilweek ’s 2009 Producer of the year and a long-time darling of the market. with a leadership position in the emerging Beaverhill lake light oil resource play, Crescent Point stands to duplicate its pioneering successes in Saskatchewan’s Bakken light oil play. Second-quarter earnings soared to $185 mil-lion from $72 million, while crude oil and liquids production for the period was 21 per cent higher than in the comparable 2010 period. And at the end of the summer, it strengthened its position in the North Dakota Bakken play with a pair of acquisitions that brought production of 750 barrels of oil equivalent per day and prompted a 1,000-barrel-per-day increase to its estimated exit rate this year.
like imperial Oil, husky energy saw earnings, cash flow and pro-duction grow in the second quarter, but that positive momentum failed to sway investors through much of the third quarter. the com-pany received a tiny boost from the market in late September when it announced that it would be proceeding with the development of the liwan gas field in the South China Sea, one of its three growth pillars. Gas is expected from liwan in late 2013 early 2014, with full production of 500 million cubic feet per day expected in 2015.
legacy oil + gas, Oilweek ’s 2010 Producer of the year, saw its shareholder base grow dramatically in 2010, to nearly 143 million shares outstanding at the end of March this year from 74 million a year earlier. while market capitalization of the growing com-pany reached $2.1 billion in March this year, it has since tracked oil prices lower and sat at around $1.4 billion in mid-October.
Pursuing a course to get steadily oilier, paramount resources reported in July that its Hoole in situ oilsands leases southwest of Fort McMurray, Alta., held 20 per cent more bitumen than was ini-tially thought.
A new evaluation pegged the best estimate for the “economic contingent bitumen resource” on the 56-section lease at some 763 million barrels.
$45
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15
July
15
July
15
July 1
5
July 2
2
July 2
2
July 2
2
July 2
2
July 2
9
July 2
9
July 2
9
July 2
9
Aug 5
Aug 5
Aug 5
Aug 5
Aug 12
Aug 12
Aug 12
Aug 12
Aug 19
Aug 19
Aug 19
Aug 19
Aug 26
Aug 26
Aug 26
Aug 26
Sept 2
Sept 2
Sept 2
Sept 2
Sept 9
Sept 9
Sept 9
Sept 9
Sept 1
6
Sept 1
6
Sept 1
6
Sept 1
6
Sept 2
3
Sept 2
3
Sept 2
3
Sept 2
3
Sept 3
0
Sept 3
0
Sept 3
0
Sept 3
0
CPG-T:Daily Close
HSE-T:Daily Close
LEG-T:Daily Close
POU-T:Daily Close
market monitor
46 | oilweek December 2011
weSterN CANADA weLL CoMPLetioNS | JAN – SEPt. 2011
Operators rig released 9,181 wells across Canada over the first nine months of 2011, up close to 14 per cent from the 8,062 wells drilled in the January-to-September period last year. Many of the wells drilled this year are still under confidential status, but of those with a reporting status, about 70 per cent are listed as oil or bitumen wells, which would make 2011 the “oiliest” year for Canadian drilling over the past decade. Only 20 per cent of the rig released wells with a status are listed as gas wells—a decade low.Source: Daily Oil Bulletin
MetreS DriLLeD & CoMPLetioNS | JAN – SEPt. 2011
Reflecting the steadily increasing volume of horizontal drill-ing in western Canada, metres drilled through September were up, as were the number of completions. with more horizontal wells, average number of days to drill a well increased to 9.3 days through September this year from 9.1 days one year ago. the increase was more dramatic in Alberta, where the number rose to 12.11 days from 9.98 days in the first nine months of 2010.Source: Daily Oil Bulletin
market
MONITOR
SQUeeZEplayfrom the United States raised fears of economic contraction,
perhaps even recession, Croft Financial Group reported in a third-
quarter market commentary. Markets in Canada and elsewhere
gyrated wildly and finally slid into correction, and commodities
followed suit, as rising concerns over faltering demand persuaded
investors to lock in profits through August.
Players in the energy markets were equally reluctant to stay in
the game, as the U.S. economy struggled to recover, and demand
projections remained weak. Canadian energy stocks felt the
brunt, as jittery investors headed to the sidelines to await more
positive direction.
Most Canadian energy subsectors performed dismally in the
third quarter, as oil prices fell and investors looked to derisk,
Calgary brokerage FirstEnergy Capital Corp. said in an October
FirstEnergy Synopsis research report. Only the refining and
market, and storage and transportation subsectors, First Energy
said, showed strength, as investors sought yield and safety in
turbulent markets.
Stocks in FirstEnergy’s coverage universe were impacted
to greater or lesser degrees by this flight of capital, the report
noted, and the evidence of that flight showed up in significant
multiple contractions as debt-adjusted cash flow and net asset
value multiples fell to lows seen during the crash of late 2008
and early 2009.
As a group, the stocks multiples are approximately 15–20
per cent below where we would normally expect them to be,
FirstEnergy said.
Cenovus Energy Inc., which has downstream operations that
actually benefit from the WTI discount to international oil prices,
was the leader among FirstEnergy’s group of integrated energy
companies, and showed only a three per cent decline through the
end of September. Talisman Energy Inc., on the other hand, has
twice reduced its 2011 production guidance due to operational
issues in North America and, more importantly, in the North Sea,
and suffered the worst share-price performance through nine
months of all the companies tracked by FirstEnergy.
Cenovus shares actually climbed early in the third quarter,
from about $36.50 per share as the quarter opened to more than
$38 towards the end of August, before riding a roller coaster over
the rest of the period and ending September at around $31. Since
then, the company’s shares have seen some recovery and, by late
October, had climbed to around the $36 mark.
Talisman’s performance, however, paints a decidedly different
picture. From a second-quarter closing quote of $19.40 per share,
it fell 35 per cent through the third quarter, ending September
at $12.50 per share, just half its 52-week high of $24.82. In early
October, the stock set a new 52-week low of $11.34 per share.
For 2011, Talisman is now anticipating production of 425,000
barrels of oil equivalent per day, about a six per cent increase
over 2010 but far short of its initial expectations.
“In line with our priority of safe operations, we are conduct-
ing extended maintenance work on our Tartan platform in the
North Sea,” Talisman president John Manzoni said, in provid-
ing the company’s latest guidance in early October. “While we
6,000
8,000
10,000
20.00
15.00
10.00
5.00
0.00
12,000
14,000
4,000
2,000
02007 2008 2009 2010 2011
COM
PLET
IOn
S
MET
rES
DrIL
LED
(mill
ions
)
metres drilled completions
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
02007 2008 2009 2010 2011
OIL
GAS
DRY
SERVICE
oilweek.com | 47
market monitor
market
MONITOR
SQUeeZEplay
weSterN CANADA LAND SALeS | JAN – SEPt. 2011Canadian governments raised $3.41 billion from land sales to the end of September, up from $3.04 billion in 2010, and the third-highest tally in the last 10 years. A total of $4.12 billion was raised in 2008, with $3.71 billion spent in 2006. Average land prices in western Canada over the three quarters slipped to $847.94 per hectare from $873.98 in the January-to-September period of 2010. Of the four western provinces, only Alberta saw increased bonus bids from last year, as spending on resource plays such as the Duvernay helped to stoke spending in the province. Alberta led all provinces with bonus bids totalling $3.06 billion at its land sales over the first nine months of the year, at an average of $884.50 per hectare. the per-hectare value is a record for the province at the three-quarter mark.Source: Daily Oil Bulletin
horizoNtAL weLLS DriLLeD iN CANADA | JAN – SEPt. 2011
Alberta continues to lead the way on the horizontal drilling front, with exploitation of light tight oil resources like the Cardium, the Alberta Bakken and the Duvernay driving an increasing amount of activity. Saskatchewan is seeing some growth as well.Source: Daily Oil Bulletin
CrUDe oiL PriCeS | JAN – SEPt.
Crude oil prices continued to gain strength on a year-to-date basis through September, but the third quarter was particularly vola-tile for oil, as events surrounding the European debt crisis and the struggling recovery of the U.S. economy sent crude down sharply in the latest three-month period. North American producers were especially hard-hit, as infrastructure constraints kept west texas intermediate trading at a discount to Brent blend.
weLL LiCeNCeS iN CANADA | JAN – SEPt. Producers across Canada licensed 1,552 wells in September, bringing the nine-month tally to 13,440 permits, up 16 per cent from last year. the 13,440 permits for January to September include 6,973 horizontal wells, a record to the end of the third quarter. in fact, at the year’s three-quarter mark, operators have licensed more horizontal holes than the year-end horizontal permit total for 2010 (6,668).
For September, Daily Oil Bulletin records show 904 licences granted in Alberta, 437 approved in Saskatchewan and 69 issued in Manitoba. British Columbia assigned 138 new licences during the month (76 were approved, or input).Source: Daily Oil Bulletin
$1,000
$800
$600
$400
$200
$02007 2008 2009 2010 2011
$541.64 $518.61 $183.05 $873.98 $847.94
$/H
EC
TAR
E
6,000
5,000
4,000
3,000
2,000
1,000
02007 2008 2009 2010 2011
AB
SK
BC
OTHER
$120
$100
$80
$60
$40
$20
$02007 2008 2009 2010 2011
BRENT BLEND
OPEC BASKET
WTI CASH
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
02008 2009 2010 2011
AB
SK
BC
OTHER
market monitor
48 | oilweek December 2011
have seen a number of successes across the portfolio in 2011,
for instance the strengthening of our shale portfolio in the Eagle
Ford and Duvernay plays, strong growth from the Marcellus,
and continuing exploration success in Colombia, the production
misses have been disappointing, and reflect poor delivery and
execution in a few areas of our portfolio.”
Despite the market concerns, field activity in western Canada
remained strong through the third quarter, led by a dramatic
rebound in land sale activity and increased drilling activity, with
a strong focus on oil and bitumen targets.
Interest in western Canadian land sales has continued to
recover following the lows witnessed in [the second half of 2009],
FirstEnergy said in its third-quarter report. The raw amount of
acreage purchased since then has snapped back quickly, while
[the price] paid for this land is approaching an all-time high, as
seen by the $331 per acre attracted in 2011 to date.
The brokerage expects land sale activity to remain strong
through the rest of this year, but remains uncertain of what
2012 might bring, suggesting that with large tracts of emerging
resource plays already secured, broader macroeconomic issues
and volatile commodity prices, industry will find it difficult to
finalize 2012 investment decisions.
Through the first nine months of 2011, Alberta remained on
pace to set a new record for bonus payments, thanks largely to the
emerging Duvernay shale play, which has generated bonus bids of
more than $2.3 billion since December 2009. Average bids in the
province reached $884 per hectare through the end of September,
topping the $811.50 per hectare average price generated through
all of 2006, when the oilsands frenzy sent bonus bids soaring.
In Saskatchewan, land sale activity in the third quarter essen-
tially tracked historical averages, as operators consolidated
positions in existing exploration fairways and expanded the
boundaries of known pools and plays. Land activity in British
Columbia, however, has dropped steadily since the second quar-
ter of 2010, and through September 2011 bids were off 56 per cent
while purchased acres were off 65 per cent, FirstEnergy said.
It appears most of the prime Montney acreage was secured
over the last six years, while operators also continue to look
over the fence at the oil and liquids-rich natural gas prospects
in Alberta or Saskatchewan, who both now have competitive
royalty incentive programs, the brokerage added.
On the drilling front, operators rig released 9,181 wells across
Canada through September, a 14 per cent increase from the com-
parable 2010 period, according to Daily Oil Bulletin (DOB) records.
Nearly 70 per cent of the non-confidential completions were
reported as oil or bitumen wells, which would make 2011 one of
the oiliest in the past decade, the DOB said.
Alberta rig releases were up nine per cent through nine months, to
5,816 wells from 5,316 wells, while metres drilled reflecting the almost
total move to horizontal multi-stage fracture stimulation jumped
23 per cent through the period, to 10.35 million from 8.39 million.
Saskatchewan drilling was up 38 per cent through September,
from 1,839 the year before to 2,536 wells from 1,839 in the prior
year period, while metres drilled rose to 3.86 million from 3.13 mil-
lion. British Columbia drilling was down nearly 10 per cent, to
466 wells from 517 wells, while metres drilled slipped to 1.68 mil-
lion from 1.74 million.
oilweek.com | 49
market monitor
CONGRATULATIONS TO THE 2011
PRODUCER & SUPPLIER OF THE YEAR WINNERS!
Can
adia
n P
ub
lica
tio
ns
Mai
l Pro
du
ct A
gre
emen
t N
o. 4
006
924
0
CANADA’S OIL & GAS AUTHORITY :: NOVEMBER 2011 :: $10
Plus: Using gas to find oil, the Canadian Gas Association sounds off, and M&A activity sinks to recession-era levels
SUPPLIER OF thE YEAR
Newalta Corp. Troy McElgunn (left) and
Doug Pecharsky have helped Newalta reshape oilfield
waste management
BABY STEPS Momentum grows to develop
Yukon gas potential
CALGARY RISINGA cow town no more, Canada’s
oil capital has loftier goals
includes east coastsuPPleMent
CANADA’S OIL & GAS AUTHORITY :: NOVEMBER 2011 :: $10
How Black Diamond Group and GE Power & Water made the top three
Ex-oilsands exec Neil Camarta on starting the 21st Century’s bitumen rush
Firebag Stage 3: Why Suncor is confident it can meet its new capacity
215515
SUPPLIER OF THE YEAR 2011:
O I L S A N D S R E V I E W.CO M : : T H E U N CO N V E N T I O N A L O I L AU T H O R I T Y : : N OV E M B E R 2 0 1 1 : : $ 1 0
Can
adia
n P
ublic
atio
ns M
ail P
rod
uct
Ag
reem
ent
#40
06
9240
DALE MARCHAND AND CANADIAN DEWATERING ARE DEPLOYING THE SOLUTIONS FOR ONE OF THE OILSANDS’ BIGGEST CHALLENGES: TAILINGS
and
Baytex Energy and Canadian Oil Sands ride successful strategies to the top three
The environmental reason why Syncrude is sinking $4.5 billion into its mine trains
How a Fort McMurray artist plans to use bitumen on canvas to change the oilsands dialogue
211736
PRODUCER Of thE YEaR 2011:
O I L S A N D S R E V I E W.CO M : : T H E U N CO N V E N T I O N A L O I L AU T H O R I T Y : : D E C E M B E R 2 0 1 1 : : $ 1 0
Can
adia
n P
ublic
atio
ns M
ail P
rod
uct
Ag
reem
ent
#40
06
9240
ConoCoPhilliPs Canada
anD sEniOR viCE-PREsiDEnt
niChOlas OlDs aRE On
a COURsE fOR OilsanDs
DOminanCE basED
On PaRtnERshiP anD
COllabORatiOn
maker
Plus: After a year of gathering your Patch photos, we reveal the winner
people powerIt’s the folks behind the scenes that
drive the Calgary energy sector’s
United Way success
producer oF the YeAr
Keith MacPhail (left) and Ron Poelzer have moved Bonavista out from the trust model and created a dividend-paying powerhouse
Bonavista Energy Corp.
includes deceMBer2011Market Monitorquarterly report
junewarren-nickles.com
&
Winners will be recognized at the Oilweek | ATB Financial Annual Report Awards luncheon in Calgary, in November.
we would like to thank our readers and followers for helping us select this year’s industry leaders!
2011
PR
OD
UCER OF THE Y
EA
R
this photo from Jamie Angus, a geologist with Reservoir Dogs Geological (pictured above), was featured in the November issue of Oilweek, and was chosen as the winner of this year’s contest. Jamie, who took this dramatic shot of lightning behind a Savanna Drilling rig while working for Crescent Point Energy near Dollard, Sask., lives in Regina and will be receiving his new iPad by mail.
2011winner
this issue marks the end of the first year of Oilweek ’s Patch in Pictures
photography contest. For the past 12 months we’ve been publishing your
interesting photos, selecting winners each month based on oil and gas
relevance, creativity and photographic quality. on these five pages you’ll
not only learn about the photographer behind the winning photos, but
also view a selection of 2011’s honourable mentions.
Your photos in the Patch
oilweek.com | 51
photo contest
jAnuArY FebruArY MArch1. rory gibson
Rigging up a single free-standing service rig
2. Peter DavisCustom Caterpillar building enclosure
3. Afsaneh AkmaliGas well blowout
4. Kelly weberlayout of a FracStar
5. Jeffery Borchert
6. Afsaneh AkmaliGas well blowout
7. Peter DavisFull moon over gas plant
8. Katherine hodgesOil seed skyline
afsaneh akmali peter davisJeffery Borchert
1 2 3
4 5 6
7 8
hon
oura
ble
men
tion
sJanuarythe Safety Boss crew planning the next state of their assault on a gas well blowout in northern Alberta.
FebruaryProcess vessels at Connacher Oil and Gas’s Great Divide steam assisted gravity drainage project south of Fort McMurray, Alta.
MarchA pastoral scene near a compressor station in the willesden Green region of west-central Alberta.
entries
52 | oilweek December 2011
April MAY june 9. John McPherson
Rock trucks
10. Bryan AlexanderScreening building under construction
11. Ben BarnesNatural gas storage well
12. Linda gardiner MethotPipelines
13. Afsaneh AkmaliGas well blowout
14. Brad wetterstrandthunderstorm near a rig
15. Jeffery Borchert
16. Joshua trahanwelder
Matthew goffinet Jamie angus rob watt
9
12 13
15 1614
1110
AprilA row of SAGD injection wells at Cenovus Energy’s Christina lake operation.
Maythe setting sun through a wellsite near Shaunavon in southwestern Saskatchewan.
JuneA process gauge at a legacy Oil + Gas compressor station in the turner Valley area of Alberta.
oilweek.com | 53
photo contest
julY August septeMber
17. Sylvia MacBeanFlooded oil pumpjack
18. Peter DavisOil service rig
19. gerald FordCold weather technologies heaters
20. Jamie AngusPumpjack at night
21. Brad wetterstrandPumpjack at sunset
22. John McPhersonSuncor Firebag site
23. Mark CapaldoSunrise at Christina lake
trevor rubak don gunngerald Ford
entries
17
23
21
22
19
20
18
hon
oura
ble
men
tion
sJulyHurley’s Rig 9, of Hurley well Service, a Class iii mobile freestanding single service rig in Grande Prairie, Alta.
AugustAn aging heavy oil storage tank just outside Kindersley, Sask.
SeptemberConcrete-coated pipe being pulled across the North Saskatchewan River as part of Enbridge’s waupisoo pipeline project.
54 | oilweek December 2011
noveMberoctober deceMber
24. Bryan Alexander Night shot of crusher building
25. AnnaMae terry Sunrise at Cenovus
26. Brad wetterstrand Aging oil tank
27. gerald Ford Historic wooden pumpjack
28. Afsaneh Akmali Gas well blowout
29. Chris Sakell Slant service rig
30. Brittany Smolders Precision rig at sunrise
Brittany smolders Jamie angus Jamie angus
26
27 28
29 30
24 25
octoberA unique shot on a lease site south of Shaunavon, Sask.
NovemberDramatic shot of lightning behind a Savanna Drilling rig near Dollard, Sask.
Decembertwo key western Canadian energy forms near Gull lake, insouthwestern Saskatchewan.
oilweek.com | 55
photo contest
JuneWarren-nickle’s Energy Groupfull page • fp
rising starsins#4999
NomiNatioNsare Now opeN for oilweek’s 2012 class of risiNg stars
Help UscatcHa risiNg star
Oilweek is searching for the best and brightest in the Canadian oil and gas industry to be our Rising Stars of 2012. We’ll profile them in our May 2012 issue and honour them during our Rising Stars celebration in June.
Visit oilweek.com/risingstars for details. Nominations close December 31, 2011.
NomiNate YoUr risiNg star todaY!
Nominees must be under the age of 45, a Canadian citizen or landed immigrant and working in Canada as of December 31, 2011.
oilweek.com/risingstarsPremier sPonsor:
Recently there has been no shortage of negative news. the
global stock markets have been under heavy selling pressures.
given that the scars of the last recession/bear market in 2008 have
not fully healed, a large number of investors lack confidence and
have become paralyzed and fearful in the global economy and
financial markets. while this market correction has distinctly dif-
ferent causes than the correction in 2008, it is a very worthwhile
exercise to review some of the key indicators and fundamentals this
time around to gain insight into future investment opportunities.
one of the major similarities this time is the dramatic rally in
bond prices and, hence, record-low interest rates. United States
long-term treasuries, as measured by the tLt index, were up
30 per cent in the third quarter, the best-ever quarterly return
since the index was established in 2002. U.S. 10-year bond yields
declined to 1.74 per cent—even lower than where they were at the
height of the Lehman crisis in 2008. At the end of September, the
yield spread between U.S. 10-year bonds, and the dividend yield
on the Standard & Poor’s 500 went negative (dividend yields were
higher than bond yields) for only the third time since 1955, and the
first time in negative territory since 2008.
yield spreads (scotia capital)
Another example of the dramatic spread between dividend
yields and bond yields here at home in Canada can be gleaned
by comparing guaranteed investment certificate (giC) rates at
the Bank of Nova Scotia with the actual dividend yield on the
underlying stock. the Bank of Nova Scotia is currently advertis-
ing three-year fixed giC rates at 1.7 per cent interest. however,
BNS common stock currently pays a four per cent dividend yield.
the company has grown the dividend at 5.9 per cent per year
over the last five years, and 11.2 per cent per year over the last 20
years. Lastly, we feel the dividend is very secure as Scotiabank
only pays out about 40 per cent of its annual earnings in the form
of a dividend. even if the share price goes nowhere for the next
three years, the dividend yield alone provides a significant pick-
up in after-tax return over a 1.7 per cent giC.
while a number of group of 7 and european Union mem-
ber countries have been piling on debt and living beyond their
means, the corporate sector has been generally prudent. with
reduced debt, increased dividends and solid cash reserves, they
are in a good position to weather the storm.
even though the oil and gas business can be extremely cycli-
cal, i thought it would be interesting to compare some of the
financial metrics for Canadian Natural resources Limited (CNQ)
as they are in 2011 with where they were in December 2008.
Along the same lines, one of the sectors with low debt levels
and growing cash flow is the technology sector, and by review-
ing the same metrics for intel, investors can get a sense of just
how strong some companies are today. i also want to highlight
A second dip?today’s financial turmoil is hard to ignore, but there’s cause for hope
Sou
rce:
Sco
tia C
apita
l, S
hille
r
10-Year Bond Yields Spread With S&P 500 Dividend Yield (1956-2011)
-23
-200
0
200
400
600
800
1,000
1,200
Dec
-56
Dec
-61
Dec
-66
Dec
-71
Dec
-76
Dec
-81
Dec
-86
Dec
-91
Dec
-96
Dec
-01
Dec
-06
Dec
-11
oilweek.com | 57
Kevin Dehod
wealth & wisdom
McLean & Partners Wealth Management provides investment advisory services to high net-worth individuals, trusts and not-for-profit
organizations. The firm manages portfolios through both segregated accounts and pooled investment vehicles. While we invest in public
equity and fixed income markets across the globe, our primary focus is to invest in dividend-producing growth stocks. Find out more at
www.mcleanpartners.com.
create storms, sculpt mountains
“As a company built on a foundation of science and engineering, MEG Energy is proud to support the new Science Centre’s Earth & Sky gallery and its exploration of the relationships between the forces that have shaped and continue to shape our landscape.”
A special thank you to all of our
imagineaction partners including:
Now Open SparkScience.ca
- Bill McCaffrey, Chairman, President & CEO MEG Energy
the fact that both CNQ and intel have raised dividends and
returned cash to shareholders since 2008.
european governments and european banks have signifi-
cant challenges ahead with the reality of a greek default, bank
re- capitalization and serious government spending cuts and
austerity on the way in 2012 and beyond. however, economic
indicators in the United States, China and Canada like auto sales,
durable goods, the iSM (institute for Supply Management) index,
jobless claims and corporate earnings, while all somewhat slug-
gish, are not collapsing and are generally coming in better than
expected. this indicates that we are not headed towards an eco-
nomic recession and ensuing free fall in corporate earnings.
volatility in financial markets is structurally higher in a
globally interconnected world of computers and traders. Since
1940, there have been just 30 trading days when the U.S. stock
market fell by five per cent or more. half of those occurrences
have happened since January 2000, and 30 per cent of these
one-day trading extremes have occurred in the last 3.5 years.
the upside tells an even more volatile story as 50 per cent
of all occurrences since 1940, when the stock market was up
five per cent or more on one day, have occurred in the last
3.5 years. the average investor hold period for a New york
Stock exchange–listed stock went from seven years in 1960 to
eight months today. So volatility in financially traded assets
is likely here to stay, and it will continue to test our conviction
and confidence when it comes to investing and maintaining a
longer-term perspective.
the factors causing a de-stabilization in financial markets are
different today than in 2008. investors need to recognize this and
allocate capital accordingly.
investing in companies at a reasonable valuation with grow-
ing dividends provides attractive income for your portfolio in the
short term when market volatility and one-off risk events domi-
nate the headlines.
over a five-year time horizon, dividend yield and dividend
growth accounts for almost 80 per cent of an investor’s return,
and given today’s level of interest rates versus dividend yields,
investors with a five-year time horizon should be allocating cap-
ital to global dividend growth stocks.
Kevin Dehod, vice-president & portfolio manager, Mclean & Partners wealth Management ltd.
cnq 2011 2008
Short-term Assets $2.6 billion $3.3 billion
total Debt $8.6 billion $13.0 billion
Cash Flow $5.8 billion $6.7 billion
Dividends Paid $392 million $208 million
intel 2011 2008
Short-term Assets $23.0 billion $19.9 billion
total Debt $2.0 billion $1.3 billion
Cash Flow $19.0 billion $10.9 billion
Dividends Paid $4.0 billion $3.1 billion
wealth & wisdom
58 | oilweek December 2011
The shortage of skilled labour has
been on industry’s radar for the last
decade. it’s hardly a “new” hot topic, but,
as can happen, a long-present problem
can get sudden urgent play when it seeps
into public discourse. recent government
policy discussion and media coverage
have turned to the issue of skills shortages,
and the statistics are dire enough to cap-
ture the public’s attention. the Petroleum
human resources Sector Council has forecasted that, in oil and
gas, the services sector alone could need as many as 72,000
additional workers between now and 2020.
the Sector Council’s assessment is a forecast. however, drill-
ing and service rigs already feel this shortage keenly. this winter,
the workload will fall heaviest not to the lease site or wellsite, but
rather, in the months ahead, personnel departments will shoul-
der the weightiest task: staffing rigs.
this year’s manpower challenge is not the usual winter ramp-
up. in a typical winter ramp-up, rigs draw in vast numbers of
new hires to work entry-level crew positions for the frantic first
quarter. the task presents a challenge every year, but what con-
tractors saw through 2011’s first quarter and will see again in the
coming first quarter is a different manpower issue.
industry is short derrickhands. that’s the consistent response
from drilling and service rig contractors. it’s the fallout from
the last economic downturn when industry lost thousands of
employees to other career paths.
the crew’s derrickhand is not an entry-level position.
Derrickhands bring to the job site knowledge that comes with
several years of experience. they’re the industry employees who
are readying to step into the crew’s senior position, the driller.
And as skilled experienced crewmembers, they are critical in
helping junior crewmembers learn the ropes. A rig fleet that suf-
fers a shortage of derrickhands faces a skills shortage.
this winter, like last winter, rig contractors will struggle, and
their struggles will be felt across the industry. without enough
senior crewmembers in the sector, rigs will shut down when
crews need time off. it’s a short-term solution to the manpower
gap that will hit the bottom line for many companies, contractors
and their clients alike.
the longer-term solution requires training up a new work-
force, a monumental task. that workload is equal parts
recruitment and retention.
to help address the recruitment piece, the Canadian
Association of oilwell Drilling Contractors (CAoDC) is retool-
ing its online presence. Since 2006, www.rigtech.ca has been
an online resource for future and current rig employees. the
site was originally commissioned to help drilling rig employees
access information about the rig technician trade. it also offered,
as a secondary function, general employment information for
job seekers who would be new to rig work.
this online resource will undergo big changes. CAoDC
is overhauling www.rigtech.ca, scheduled for completion
mid-December. CAoDC is also launching a second site on
Nov. 8, one that is specific to service-rig career paths, called
www.ServicerigDrive.ca.
the aim of both sites is to help industry rebuild the work-
force smarter by better capturing the imagination of a new pool
of applicants. Since the launch of www.rigtech.ca, CAoDC has
noticed that a good portion of interested job seekers struggle to
present themselves as a good fit for a rig job. Some job seekers
Cindy Soderstrom
time to man upLabour shortages have become a fact of life, and the CAoDC is now dealing with a critical shortage of one of the most critical positions on rigs
oilweek.com | 59
Each month, a Canadian energy industry association speaks out on issues affecting its members.
Association Corner
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Cindy Soderstrom, Canadian Association of Oilwell Drilling Contractors
misunderstand that they need a vehicle to get to the remote
locations of a drilling site. others don’t realise that for service
rig work, a full class-five licence with a clean driver abstract is a
critical entry-level requirement.
the two new sites will offer detailed information that gives
individuals clear next steps for preparing an application and
contacting industry.
the retention part of the task is not as straightforward. oil
and gas is a volatile industry, and in western Canada, spring
breakup adds to the uneven activity. For rig crews, this means
opportunity in the winter and uncertainty through the rest of
the year. it’s a scenario that works against efforts to improve
employee retention.
there is something to be said for the robust activity in-
dustry saw between 2003 and 2006: with short spring breakups
and steady demand for rig employees, the industry’s skilled
workforce was large enough to drill a record-breaking 22,000
wells in 2006. today, industry is not staffed to break any activ-
ity records, regardless of the number of rigs in the fleet or the
strength of market demand.
the rig employee who is gaining experience and seniority
in the rig crew hierarchy is a critical industry resource. without
these employees, contractors will be unable, this year, to put
idle rig equipment to work. And the challenge of this lost seg-
ment of the workforce is not a challenge that will be overcome
in short order. rigs are the recruiting ground for sectors that
rely on the hands-on experience of a driller. Undoubtedly, the
wider industry will notice today’s missing derrickhand for years
to come.
This winter, like last winter, rig contractors will struggle, and their struggles will be felt across the industry. Without enough senior crewmembers in the sector, rigs will shut down when crews need time off.
association corner
60 | oilweek December 2011
I have a new favourite homepage for my
web browser: www.Skytruth.org.
the west virginia–based nonprofit
organization uses remote sensing and
digital mapping technology to map oil
spills and other environmental incidents.
they say a picture is worth a thousand
words, but for environmental images like
those produced and posted by Skytruth,
they can be worth billions. Billions of
dollars in costs to oil and gas companies caught on film.
Skytruth provides current and immediate information about
oil spills and other toxic releases to anyone who wants it, infor-
mation that is technically publicly available, but difficult to find
behind the walls of government and industrial bureaucracies.
the organization first came to my attention when its presi-
dent and founder, John F. Amos, started appearing on cable
news networks at the time of the Deepwater horizon accident
and over the subsequent five months it took to drill a relief well
and have the well declared “effectively dead.”
Amos was one of the first to claim that initial estimates from BP
and the U.S. government grossly underestimated the amount of oil
leaking from the Macondo Prospect well into the gulf of Mexico.
As we all know, Amos was proven to be disastrously right.
But it wasn’t just the math that caught my attention.
Amos quickly marshalled the efforts of South wings and
waterkeeper Alliance to launch the gulf Monitoring Consortium.
with satellite images and mapping, aerial reconnaissance and
photography, and on-the-water observations and sampling,
the gulf Monitoring Consortium provided up-to-the-minute
images, analysis and on-the-ground accounts of the events as
they unfolded. it was compelling, timely and, as it turned out,
more true to what was happening than the tedious and scripted
updates being provided by BP and the U.S. National oceanic and
Atmospheric Administration.
Skytruth continued to follow the progress of the spill—with
updates broadcasted via its blog, Facebook and twitter—long
Big brother is watchingwith advancing technology, the oil and gas industry’s environmental performance is under a more powerful microscope—and anyone can watch
after traditional news networks had moved on to washington,
D.C. in the process, it discovered and reported on a 10-mile-long
slick emanating from a different location in the gulf—seemingly
from a semi-submersible drill rig at site 23051. Further investi-
gation revealed that the rig was working to cap 26 wells that had
been damaged by hurricane ivan and had been leaking since
2004. According to National response Center monthly reports,
as of october 2011, the site was still leaking. Skytruth and the
waterkeeper Alliance recently filed notice of their intention to
sue taylor energy Co. LLC, Samsung C&t America inc. and Korea
National oil Corp., the owners and operators of the site, under
U.S. federal environmental laws for ongoing discharge violations
that pose an imminent and substantial endangerment to health
and the environment.
in a time when the public no longer trusts the environmental
claims of oil and gas companies and governments, Skytruth and
its founder offer something different: an independent view.
John Amos is a geologist by training. Before starting
Skytruth, he used his tools of the trade to look for offshore oil
for BP, Shell, exxon and the U.S. Department of energy. in 2000,
he was hired by NASA to use satellite and radar imagery to help
detect and map oil slicks off the coast of Louisiana and texas.
After his stint with NASA, Amos started meeting with
environmental groups, talking to them about their informa-
tion needs, resource limitations and the state of environmental
remote sensing. Armed with a grant from the Curtis and edith
Munson Foundation, he recruited a board of directors that
includes representatives from the environmental Defense Fund,
the Marine Conservation institute and the ocean Conservancy.
Skytruth’s goal is to provide “visual proof of our impact on
the landscapes, habitats and environment of the planet to any-
one who cares to see it…to help people understand our changing
world and motivate them to take action to protect and preserve
the environment.”
while a lot of time and effort is spent tracking oil spills in the gulf
of Mexico, Skytruth also has projects underway that are looking at
natural gas drilling and fracking and mountaintop mining.
leah lawrence keeps tabs on environmental concerns as they impact Canadian energy producers and consumers.
eye on the environment
oilweek.com | 61
leah lawrence
leah lawrence
earlier this fall, Skytruth launched a real-time pollution alert
system that provides updates of environmentally significant
incidents across the United States. want to know if there has
been an incident near your home, your kid’s school or near the
beach at your favourite vacation destination? Just enter a zip
code on their website and up-to-the-minute updates will be
delivered to your email inbox. it’s free. Maps are viewed using
google Maps or google earth.
Until recently, Skytruth has paid little attention to Canada
and Canadian companies. in June 2009, there was a post about
encana’s natural gas drilling activities in the U.S. rockies and,
in August 2010, a passing mention of an enbridge pipeline leak-
ing oil into the Kalamazoo river in Michigan.
then in october 2011, in the midst of the media circus
surrounding the Keystone XL pipeline, came this: Alberta’s Tar Sands: In Situ Extraction Converted to Mining?
the post included historical images of “a 7,000-acre
forested area of what appeared to be in situ extraction since
2003 which is now cleared and actively being mined.” wrote
Amos: “industry has been touting in situ extraction as a more
‘environmentally friendly’ way to produce the tar sands, but
that’s just Pr bull if they’re going to eventually mine
it anyway.”
i wanted to have a look for myself, so i tweeted John
and asked for the latitude and longitude. within the hour he
replied, with a link to an updated post. Apparently the folks at
the Alberta-based Pembina institute also follow the Skytruth
blog. they explained to John that the images he had posted
showed landscape fragmentation due to seismic survey lines
that are, of course, part of the process of delineating an oil-
sands deposit prior to its development and, not, as John had
hypothesized, in situ extraction prior to mining.
John then posted a photo of an in situ project about 15 miles
northwest of Cold Lake, Alta. in the updated post, he said the
footprint on the landscape was similar to that of natural gas facil-
ities in western wyoming’s Jonah and Pinedale Anticline fields.
the whole event passed in the space of a few hours—and
it made me think of an industry meeting i had been at a few
weeks prior.
A representative from the Alberta government was present-
ing an online tool that could provide the public with aggregated
environmental information about the oilsands. All the informa-
tion presented was publicly available—but anyone in the public
wanting it would have to suffer through the cost and aggrava-
tion of a Freedom of information and Protection of Privacy (FoiP)
request, a process that can take months.
Some industry representatives in the room were distinctly
uncomfortable. wasn’t making the information easily available
like placing a target on their backs?
yes. But the information is already out there. And the issues
are being discussed, whether industry and government are
participating or not.
welcome to the democratization of corporate environmental
management, ladies and gentlemen. get used to it.
eye on the environment
62 | oilweek December 2011
offshore oil and gas exploration, because foreign seismic vessels
are not allowed to work in Canadian waters.
there is one exception. A foreign vessel may be licensed to
temporarily engage in the coasting trade, as long as no suitable
Canadian ship can be found for the project.
introduced in 1992, the act states, “in the offshore, that is
beyond the territorial sea, all commercial marine activities
related to the exploration and exploitation of non-living natural
resources are reserved to Canadian ships.”
But when only two vessels in the 100-ship global seismic fleet
are Canadian-registered, exploration in Canadian waters suffers.
yes folks, only two, and Calgary-based geophysical Service
incorporated owns both of them.
in a country bordered by three oceans and blessed by the
world’s longest coastline, this is unnecessary and injurious to
Canada’s offshore hydrocarbon development potential.
throughout eastern Canada, offshore producers and the 500
or so companies servicing them became antsy about this prob-
lem several years ago.
Now they’re at a stage where manicures aren’t needed. it may
get worse if the feds don’t change the legislation to allow for
greater exploration.
realizing that exploration and its highly lucrative oppor-
tunities may succumb to death by a thousand bureaucratic
yawns, the nail biters could start biting heads off—metaphori-
cally speaking.
Nalcor energy–oil and gas is a Newfoundland and Labrador
Crown Corporation and one of many offshore petroleum-related
businesses in eastern Canada concerned that the Coasting trade
Act has put them behind the eight ball.
Nalcor’s vice-president, James Keating, fired off a blunt letter,
dated Feb. 26, 2010, to the organization overseeing the act, the
Canadian transportation Agency.
in it, he wrote, “Canada is at a distinct disadvantage in
attracting offshore exploration investment due to the limited
availability of high-quality seismic data. the intent of the
Coasting trade process is to protect Canadian interests. we
believe that in the case of the importation of foreign seismic
The potential of Canada’s East Coast offshore basins to be world-class explor-
ation targets, and the interest to invest in
that potential are there, but the seismic
vessels aren’t—not that they couldn’t be if
Canada’s Coasting trade Act was changed
appropriately.
this is why Atlantic Canada’s offshore
oil and gas exploration activities continue
to stagnate.
As the world becomes desperate for fuel at affordable
prices, the desire and will to explore for hydrocarbons, even
while accepting a 90 per cent risk factor, must surely be gain-
ing momentum because that 10 per cent chance of discovering
another sweet, light hibernia erases, in many instances, 100 per
cent of the fear associated with failure.
So why hasn’t petroleum exploration been increasing off
Atlantic Canada where discovery potential is as good as, or bet-
ter than, in most places around the globe?
the answer can be summed up in a sarcastic quip i
received from a person concerning another matter controlled
by lawmakers. Appearing frustrated about the mountainous
number of unregistered voters in one district of ontario during
that province’s recent provincial election, he said, “it’s your
government at work.”
in Atlantic Canada, oil companies and provincial politicians
wonder when the federal government will get to work on
rearranging the act.
Shawn Skinner was one of those politicians until meeting
defeat in Newfoundland and Labrador’s recent election. he had
been natural resources minister.
“it’s my belief, as the minister, that the Coasting trade Act
suppresses seismic and exploration activity because of the
requirements to have a Canadian-registered vessel do the work,”
he said prior to the election.
Designed to protect and support Canada’s domestic ship-
ping industry by reserving the country’s “coasting trade” to
Canadian-flagged vessels, it does the opposite for east Coast
wes Reid
the detrimental act of coastingFederal legislation barring foreign seismic vessels from Canadian waters acts as an anchor on future exploration
oilweek.com | 63
Newfoundland-based wes Reid comments on the East Coast offshore industry.
rock ramblings
wes Reid
vessels, the process is inadvertently working against Canadian
interests by reducing our global competitiveness in exploration.
if there was a readily available sizable fleet of Canadian-flagged
seismic vessels, the impact of the coasting trade process would
be somewhat mitigated as operating companies and non-
exclusive seismic vendors would have a significant choice in
selecting suitable Canadian-flagged vessels. this is clearly not
the case—there is presently one Canadian-flagged vessel in the
world compared to a global fleet of approximately 100 seismic
vessels.”
Nalcor’s manager of exploration, richard wright, summed it
up by saying, “we prefer, in terms of Nalcor, both exclusive and
non-exclusive surveys and that the best technology gets used…
at fair, competitive rates.”
there are two types of seismic data that industry or government
can purchase: exclusive and non-exclusive. the former entails one
company acquiring seismic information strictly for itself.
Non-exclusive data—from multi-client seismic programs—is
collected and can be sold to any number of parties, usually in-
dustry players.
the Canadian transportation Agency received Keating’s
letter more than a year ago, apparently less than worried that the
world’s floundering economy might flop back toward another
deep recession.
i read somewhere that Stephen harper sees the present
as perfect for developing megaprojects that might smooth
Canada’s ride through such tumultuous times.
By god, i believe he’s onto something! Do i see vision here? if
so bring it on, and with it a revamping of the Coasting trade Act.
its revision last year or decades ago would have triggered
much more exploration in Atlantic Canada, but let’s not dwell on
the past when times remain opportune for attracting exploration
investment in the region.
there’s oil in them thar basins, probably by the billions
of recoverable barrels, all waiting to be extracted, waiting to
stimulate economies.
international marine services provided by mobile offshore
drilling units and vessels specifically designed to conduct
seismic surveys are integral to the success of any offshore
petroleum sector, and Canada’s east Coast is no exception.
Besides hamstringing the chances of oil companies and
their shareholders to benefit from the rewards of hydrocarbon
exploration in Atlantic Canada, the Coasting trade Act is possibly
leaving the area and, ironically, ottawa, with less royalty and tax
revenues, fewer jobs and all the spinoffs they generate.
the Canadian Association of Petroleum Producers (CAPP)
is also concerned. Speaking on behalf of its members, the
organization states that the “Coasting trade Act is having a
detrimental impact on the development of Canada’s offshore oil
and gas resources.”
CAPP believes that, under current rules, Canadian operators
provide only specifications of the vessels they have available—
their offers seldom contain any information on how the operator
intends to conduct and complete proposed activity.
CAPP recommends that the content of the offers be expanded
to encompass requirements for a clear and substantive plan of
action addressing how the Canadian vessel operator intends to
carry out the proposed activity.
“oil and gas companies wishing to pursue offshore seismic
programs have no certainty with respect to the outcome of the
Coasting trade Act process,” CAPP states. “the combination of
the potential for regulatory delay, restrictions on competition,
increased program costs, the likelihood of sub-optimal technical
results and possibility of program cancellation is directly imped-
ing offshore exploration in Canada. it is the industry’s view that
the recent year-over-year decline of offshore seismic programs is
directly attributable to the Coasting trade Act regulatory barriers.”
Non-exclusive seismic activity is experiencing the greatest
adverse impact, according to CAPP.
“it’s a fundamental and integral aspect of the oil and gas
exploration process particularly in frontier regions as it is an
accepted industry mechanism for oil and gas companies to share
exploration risks,” the association states.
“international offshore seismic companies view the Coasting
trade Act as a significant barrier to enter Canada. they have
been effectively shut out of the Canadian market and are no lon-
ger able to further build and expand their Canadian libraries
of non-exclusive seismic data for resale to multiple oil and gas
company clients.
the fact that new non-exclusive seismic data is no longer
coming to market for purchase by oil and gas companies has
long-lasting consequences for progress for future development
of Canada’s offshore resources.”
instead of consequences, long-lasting petroleum sector
development and production are what the east Coast and the
rest of Canada need to help insulate it from global economic
uncertainties.
Make the CtA exploration-friendly to hopefully make that
a certainty.
“ It is the industry’s view that the recent year-over-year decline of offshore seismic programs is directly attributable to the Coasting Trade Act regulatory barriers.”
— Canadian Association of Petroleum Producers
rock ramblings
64 | oilweek December 2011
In her own words, she won thanks to “teachers, nurses and soccer moms.” on october 7, Alison redford was sworn in as the 14th premier of Alberta. the unpopu-lar five-year reign of ed Stelmach and his dreaded New royalty Framework (NrF) of 2007 is finally over.
what’s ahead for our industry now that our 40-year governing party has a new leader and the province a new premier? Alberta is the fifth-largest hydrocarbon-producing juris-
diction in the world on a barrel-of-oil-equivalent basis, behind only russia, the United States, Saudi Arabia and iran. Big business. As we’ve all learned, Alberta’s premier can make or break us. Can we succeed with “teachers, nurses and soccer moms” driving the bus?
Because Alberta’s resources are almost exclusively government-controlled, Alberta’s premier in many ways has the same ability to determine our fate as the leaders of venezuela, russia, Saudi Arabia, Libya or iran. they all have the power, and they all have used it to our benefit and to our detriment.
Lest we forget, Peter Lougheed quadrupled royalties. Don getty eventually reduced them after a decade of misery. ralph Klein left things alone. ed Stelmach increased and lowered royalties in a single term. with the same governing party since 1971, you’d hope Alberta’s fiscal regime could be somewhat more predictable.
redford is proudly from the “Progressive” side of the Progressive Conservative party. Progressive is new political jargon for the conviction that governments can direct society better than conservatives or free markets, and therefore must. Progressives used to be called liberals, socialists and interventionists.
Current practitioners include Barack obama, Naheed Nenshi, Dalton Mcguinty and the recently deceased Jack Layton. Progressives aggressively govern, spend money, raise taxes and run deficits, or some combination thereof. Progressives don’t court corporations for votes.
By design, the opposite of progressive is regressive, as redford’s new chief of staff, Stephen Carter, has stated. “regressives” include Stephen harper, David Cameron, Brad wall, most republicans and me. Less government, lower taxes, no deficits.
Nevertheless, redford has cultivated a following among Calgary’s corporate opinion makers. redford is the MLA for Calgary-elbow, an inner-city riding containing some of the city’s wealthiest neighbourhoods like Mount royal and elbow Park, home of many senior oil executives.
During the darkest hours of the NrF when communications between our industry and the premier’s office were the worst in
history, redford made the rounds inquiring why the NrF was so awful. She asked questions and listened. this form of psychother-apy—where thankfully one cabinet minister admitted privately (if not publicly) that Stelmach’s policies were terrible—earned redford respect. when she ran for tory leader she received corporate support.
After redford remained in the race after the first ballot, some Calgary oil execs urged others to vote for her. At one point, urban legend had it that redford alone persuaded Stelmach to launch the Competitiveness review in 2009 that resulted in the final destruction of the NrF. those who know tell me this is false. But they all concur that redford is smart, listens and readily admits the Stelmach administration made many mistakes.
however, redford didn’t win with broad support in her party or from Albertans. Before the final vote her team ran a targeted campaign soliciting unionized government employees and other non-traditional tories—“teachers, nurses and soccer moms”—to buy memberships and vote. A backroom deal with Doug horner to support her on the final ballot pushed her over 50 per cent. hardly a monument to representative democracy, but permitted within the rules of the race.
how much support will redford garner in next year’s prom-ised election?
true conservatives and those who believe politics should be principled are appalled. redford remained silent as a cabinet minister while some of the worst legislation in history became law and two record deficit budgets were delivered. Promising public money, redford won through sweetheart deals with huge and powerful public service unions. her party is now Conservative in name only. hopefully, continued petrodollars will adequately fund her activist, nanny-state initiatives.
But for those who don’t follow politics closely and con-sider good government as the one that does the least damage, redford has gained acceptance. there’s a perceived lower risk in re-electing the tories, even for the 12th consecutive time. She’s a big change from ed Stelmach, which everyone wanted. there will be lots of comforting words about public health care and education, always popular. And she’s said nice things about our industry as something other than a source of taxes, a big improvement from her predecessor. that’s okay, for now.
the tory leadership race was about change. the next election will be about greater change. Albertans will be asked to replace or keep a party that has been in power longer than most Albertans have been alive. they’ve been good, bad and, most recently, ugly.
So is Alberta about big government, or Albertans fulfilling their own big dreams? your choice.
David yager
What’s nextAlison redford represents change at the top of the tory ladder, but is it the right kind of change for Alberta’s energy industry?
dlyager@telus.net
oilweek.com | 65
our industryDavid yager, who stepped down recently as chairman and chief executive officer of HSE integrated ltd. to contest the riding of Calgary-Hawkwood for the wildrose Alliance, is a past chairman of PSAC and a long-time observer of the western Canadian oil and gas industry.
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FEATUrInG THE TOP PICkS FrOM OUr 2011 ESSEnTIAL PHOTOGrAPHy COnTESTpatch in pictures
Jamie Angus of Regina took this photo of two key western Canadian energy forms near Gull lake, in southwestern Saskatchewan.
deceMber2011this month’s winning photo in
Oilweek ’s 2011 Patch in Pictures
photo contest was submitted by
Jamie Angus.
Don’t forget to get your entries in
now for Oilweek ’s 2012 Patch in
Pictures contest. the deadline for
the January edition of Oilweek is
Nov. 21, 2011.
entries can be uploaded at
www.oilweek.com/photo.aspx.
oilweek.com | 67
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The Oilfield Atlas is going digital!
In December 2011, have the entire Western Canadian Sedimentary Basin at your fingertips! The new online edition of The Oilfield Atlas allows users to manipulate digital maps, enhance views and use comprehensive search filters. The new online edition will also offer an option to download content to a GPS unit**. Now you can have information from The Oilfield Atlas with you on the road!
New for the ninth edition of The Oilfield Atlas:• 300 new facilities• Expanded B.C. and Saskatchewan maps• Newly legislated Alberta Land Use Stewardship Act
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DECEMBER 2011
christmas day
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have something you’d like to include on an upcoming Oilweek calendar?Send an email to our editor Dale Lunan at dlunan@junewarren-nickles.com
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AtCo Pipelines
www.atcopipelines.com ............................................. 17
BDo Canada LLP
www.bdo.ca .................................................................. 31
Beijing zhenwei exhibition Co, Ltd
www.cippe.com.cn ...................................................... 43
Calfrac well Services Ltd
www.calfrac.com ......................................................... 35
Canelson Drilling inc
www.canelsondrilling.com ......................................... 14
Canadian Association of Petroleum Producers (CAPP)
www.capp.ca ......................................................... 5 & 37
Degolyer and MacNaughton Canada Limited
www.demac.com ......................................................... 26
dmg events
www.petroleumshow.com ......................................... 60
emirates SkyCargo
www.skycargo.com ....................................................... 8
entec engineering technology inc
www.entecinc.com ...................................................... 20
Flexpipe Systems
www.flexpipesystems.com ............................... 13 & 15
general Motors of Canada Ltd
www.gmcanada.com ........................ inside back cover
geologic Systems Ltd
www.geologic.com ........................... inside front cover
global Steel Ltd
www.globalsteel.ca ..................................................... 49
Millennium Directional Service Ltd
www.millenniumdirectional.com .............................. 38
NgC Product Solutions
www.ngc-ps.com ........................................................... 6
Nitrous Services
www.nitrousservices.com .......................................... 17
Platinum energy Services Corp
www.platinumenergy.net .............. outside back cover
Safety BoSS inc
www.safetyboss.net .................................................... 11
Stikine energy
www.stikineenergy.com ............................................. 20
Suncor energy inc
www.suncor.com ......................................................... 36
telus Spark
www.imagineaction.ca ................................. 12, 58 & 62
UnionBank
www.unionbank.com ................................................... 27
vertigo theatre Society
www.vertigotheatre.com ............................................ 68
weBsite directory and advertisers’ index
dec. 4-8
20th world petroleum congress, doha, qatarwww.20wpc.com
dec. 5-6
5th annual aboriginal energy Forum, toronto, onwww.insightinfo.com
dec. 6-7
10th annual shutdowns superconference, calgary, aBwww.shutdownssuperconference.com
dec. 7-8
tight oil Forum, calgary, aBwww.insightinfo.com/tightoil
Photo: Joey P
odlubnyP
hoto: Photos.com
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25 YEARS AGODECEMBER 1986
Husky swallowed up by China
During the last weeks of 1986, husky oil was prepar-ing to enter a new era in its corporate history. Following what was described as eight days of non-stop negotia-tions in hong Kong, Bob Blair, chairman of Nova Corp. international, had hammered out a deal that would open the door to major Chinese investment in Canada’s oil and gas industry.
50 YEARS AGODECEMBER 1961
California dreams a reality for Alberta natural gas producers
Alberta was preparing to tap into a new natural gas market in the early days of December 1961. the Pacific gas transmission line had just been completed, tying together a 1,017-mile system of pipelines that stretched all the way from the Alberta-B.C. border to San Francisco.
10 YEARS AGODECEMBER 2001
Oilpatch titan resurfaces with new venture
you can take the man out of the patch, but you can’t take the patch out of the man. After retiring from his posi-tion at the head of Nova Corp. international in 1991, Bob Blair was at last back in busi-ness with the oil and gas industry, bringing with him new products and ideas.
the first test export was successfully sent through the pipeline in December, with the initial supply pro-vided by a new gas plant at rimbey, Alta. Since then, the volume of gas sent through the line over the years has expanded con-siderably. in 2008, Alberta exported 268.2 billion cubic feet of gas to California.
No longer dealing in pipelines and petro-chemicals, Blair was now working with optic technology that could be applied to flow meters and pressure sensors. the venera-ble oilpatch icon had joined electronics firm Coldswitch technologies inc. as executive chairman and had returned to the familiar sport of drumming up business in the cor-porate corridors of Calgary.
the company contin-ues today under the name Photon Control inc., but it would prove to be one of Blair’s final ventures into the business world. he died in 2009 at the age of 79.
Li Ka-shing, a wealthy hong Kong financier, pur-chased a 43 per cent stake in husky for $484 million. Nova, which had previously held the majority share, saw its interest in the com-pany reduced to 43 per cent, while Li’s son and CiBC held the remainder.
that arrangement con-tinued until 1991 when Nova—burdened by debt and looking to unload the struggling husky—sold its interest in the company to the east Asian billionaire for $375 million. Li’s hutchison whampoa Ltd. has been the company’s majority owner ever since.
The Oprah school of natural gas negotiations
5 YEARS AGO
DECEMBER 2006
Natural gas producers suffering through the current price slump may want to cast their memories back to the winter of 2006, when low prices also had com-panies scrambling to find ways to make ends meet.
while some businesses were turning to the more lucrative world of oil drilling, others, like Anderson energy Ltd., were sticking with natural gas. how were they managing? By just saying no to price increases, according to Brian Dau, Anderson’s president and chief executive officer.
“the suppliers that came to us trying to increase prices this winter were advised we wouldn’t be accepting that,” he explained. “the ones that still wanted the price increase are no longer working with us…they’ll be watching reruns of oprah on tv this winter.”
rewindA LOOk BACk TO THIS MOnTH In Oilweek’S HISTOry
70 | oilweek December 2011
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