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Energy & Mines

July 2017

BC Land Sales

Alberta Land Sales

Western Canada Land Sale Revenue Bounces Back

Scott Land the Top Crown Buyer

Drilling Up from Last Year

Trans Mountain Expansion

Well Permit Count

Paramount Resources

Crescent Point Is Top Operator

Pacific NorthWest LNG Project Not Proceeding: Proponent

Contractor Operating Days Rose Significantly

Worker Numbers May Limit Reactivation: Calfrac

PSAC Increases Drilling Activity Forecast


BC Land Sales

By Richard Macedo

A large $77 million parcel highlighted BC’s July sale of petroleum and natural gas rights as land sale revenue this year continues its strong recovery after an anemic 2015 and 2016.

Industry acquired 17,009 hectares for $84.73 million at an average price of $4,981.28.

Year-to-date, the province has collected $155.01 million on 52,200 hectares at an average price of $2,969.54.

Land sale highlights

The high-priced drilling licence was picked up by Scott Land & Lease Ltd., which paid $77 million at an average price of $13,893.90 per hectare for the 5,542-hectare parcel.

Also at the sale, Windfall Resources Ltd. acquired two leases for $2.03 million each at an average price of $7,703.49.

JuneWarren-Nickle's Energy Group

Alberta Land Sales

By Richard Macedo

The Alberta government attracted $9.52 million in bonus bids at its July 05th sale as it kicked off its second half 2017 land sale schedule.

Industry picked up 41,673 hectares at an average price of $228.52.

Year-do-date, the province has collected $189.65 million on 567,753 hectares at an average price of $334.04.

Britt Resources Ltd. acquired the top bonus parcel, with a successful bid of $2.12 million, at $2,067.87 per hectare.


The Alberta government generated $27.64 million at its July 19th land sale, which pushed the province past the $200-million mark year-to-date.

Industry acquired 111,673 hectares at an average price of $247.52.

This pushed the province past the $200 million-mark for the year—industry has now paid $217.29 million on 679,426 hectares at an average price of $319.81.

 

Sale highlights

Highlights of the sale included a $2.37 million bid by Prairie Land & Investment Services Ltd. The broker paid an average of $3,081.11 for a 768-hectare lease.

Windfall Resources Ltd. acquired a six section parcel for $1.17 million at an average of $759.56.

Scott Land & Lease Ltd. picked up a four-section lease for $1.75 million. The broker paid an average of $1,711.80.

The bonus bid high was paid by Plunkett Resources Ltd., which acquired a licence for $5.2 million, which worked out to an average price of $1,310.79.

 

Oilsands parcels

Also this week, 42,162 hectares of oilsands rights were sold for $4.74 million, which worked out to an average price of $112.46.

JuneWarren-Nickle's Energy Group

Western Canada Land Sale Revenue Bounces Back

Over the first six months of 2017, bonus bids paid to provincial governments in Western Canada totalled $276.57 million, with industry tying up 596,481 hectares.

Just over 65 per cent of that bonus haul was spent in Alberta.

To the same point of 2016, industry had spent $80.18 million in Western Canada for 508,491 hectares.

Producers have paid $463.66 per hectare at the six-month mark of 2017, also substantially above an average of $157.69 during January-June 2016.

Alberta—interest in East Shale Basin draws attention

At the six-month mark, Alberta has collected $180.13 million on 526,080 hectares at an average of $342.39 per hectare. To the same point a year ago, Alberta had collected $63.77 million on the sale of 443,917 hectares at an average price of $143.66.

In the six land sales of the second quarter of 2017, the government brought in $97.4 million in bonus revenue.

Interest in the emerging Duvernay East Shale Basin was a trend during the first six months of the year.

Montney leads recovery in British Columbia

British Columbia attracted the second-highest bonus total from January-June 2017, driven by interest in the Montney, which is the dominant formation in the natural gas-prone province.

For the six-month period, B.C. has brought in $70.28 million on 35,191 hectares at an average price $1,997.20. At the same point last year, the government had collected only $4.22 million in total, on the sale of 27,377 hectares at $154.20 per hectare.

Producers spent $48.14 million tying up land in B.C. during the first quarter, and $22.15 million during the second quarter.

Saskatchewan June land sale sparks 2017 recovery

Saskatchewan, meanwhile, has collected $25.94 million for 2017 after a strong June sale. Industry acquired the rights to 34,845 hectares at an average price of $744.49 in the first half of 2017. To the same point of 2016, the government had collected $12.04 million on 35,784 hectares at an average price of $336.59.

Industry picked up 23,239 hectares at the June 2017 auction at an average price of $982.80 per hectare with a bonus of $22.84 million flowing to Saskatchewan government coffers — the largest revenue for a single public offering in almost three years.

Manitoba sales increase, though bonus revenue is modest

For the six-month period, Manitoba has attracted $214,096 on 365.14 hectares at an average price of $586.34. To the same point of 2016 it had brought in $141,859 on the sale of 1,413.62 hectares at an average price of $100.35.

JuneWarren-Nickle's Energy Group

Scott Land the Top Crown Buyer

Scott Land & Lease Ltd. was the top buyer of Crown land in the first half of 2017.

The broker acquired 191,407 hectares during the six-month period on behalf of its clients for $127.22 million at an average price of $664.63 per hectare.

Scott Land picked up 155,387 hectares in Alberta for $62.83 million and 32,027 hectares for $62.37 million in B.C.

The second most active Crown buyer during the January-June period was broker Ranger Land Services Ltd., which acquired 9,643 hectares for $18.54 million at an average price of $1,922.79. Its land buying was split between Alberta and Saskatchewan.

JuneWarren-Nickle's Energy Group

Drilling Up from Last Year

By Stephen Marsters

Operators across Canada rig released 9.05 million metres, excluding experimental hole, in the first half of 2017, up 122 per cent from 4.08 million metres drilled in the first six months of last year.

The 9.05 million metres were drilled with 3,345 holes, up 137 per cent from 1,413 wells drilled in the first half of 2016.

In June alone, operators drilled 522 wells across the country, excluding experimental wells, up 195 per cent compared to 177 rig releases in the year-prior period.

First-half metres rose 140 per cent in Alberta to 5.34 million metres versus 2.23 million metres of hole in the comparable period last year. Alberta’s rig release count lifted to 1,706 in the half from 689 in the first six months of 2016 (up 155 per cent).

Saskatchewan’s metres drilled increased 122 per cent to 2.26 million metres from 1.02 million metres last year. Producers rig released 1,189 wells in the province in the January-to-June period, up 137 per cent from 502 a year ago.

In comparing Alberta and Saskatchewan, the former province’s overall count for the half included one new field wildcat versus none in Saskatchewan.

Saskatchewan’s rig release total included 12 outpost holes versus 28 in Alberta, while the Wild Rose province drilled 37 new pool wildcats compared to six for its eastern neighbour.

In B.C., total metres drilled rose about 72 per cent in the first half of 2017 to 1.25 million metres compared to 723,735 metres to the end of June last year. The rig release count also improved 72 per cent, to 295 wells from 172 in last year’s first half.

Manitoba’s metres drilled tally lifted 126 per cent to 174,632 metres from 77,435 metres a year ago. Manitoba’s rig release count increased 132 per cent to 95 wells from 41 to the end of June last year.

In Western and Northern Canada, the average length of development and exploratory holes for the half declined to 2,701 metres, down from 2,850 metres in the year-ago period.

Of the wells drilled across Canada to the end of June, 1,659 still have no final status (oil, gas, dry or service). Of those with a status designation, 1,348 (about 80 per cent) were reported as an oil well. There were 275 wells listed with a gas status (about 16 per cent).

To the end of June, 1,053 of the wells drilled in Alberta had oil or bitumen as an objective compared to 265 wells last year, while 563 were approved for natural gas targets compared to 308 in the first half of 2016 (excluding experimental wells). In Saskatchewan, 1,063 wells have chased oil, up from 484 a year ago.

Including experimental wells

Including experimental wells, producers drilled 3,860 wells compared to 1,922 in the first six months of 2016 (up 101 per cent).

Operators rig released 529 wells in June, up 189 per cent from 183 a year ago.

JuneWarren-Nickle's Energy Group

Trans Mountain Expansion

By Elsie Ross

Kinder Morgan Canada Limited (KML) has initiated its first pipeline order and expects to finalize contracts with its general contractor by mid-August in preparation for a September 2017 start on its $7.4 billion Trans Mountain pipeline expansion.

Most of the activity this fall will involve work such as site preparation and terminal work in preparation for the start of major construction next year.

Trans Mountain continues to need a good number of local permits from Alberta and British and Columbia related to utility and road crossings and access to Crown land.

The expansion, which will increase Trans Mountain capacity to 890,000 bbls per day from 300,000 bbls a day, is expected to be in service at the end of 2019.

JuneWarren-Nickle's Energy Group

Well Permit Count

By Stephen Marsters

Canada’s well license count improved 101 per cent in the first half of 2017 compared to a year ago, as governments across the country approved 4,452 new wells versus 2,211 in the first six months of last year.

The license count in Alberta for the January-to-June period improved 81 per cent to 2,133 permits from 1,180 in the first half of 2016.

Saskatchewan and B.C. both saw a year-over-year increase of 134 per cent in permitting.

Operators licensed 1,929 wells in Saskatchewan to the end of June versus 823 a year ago, while B.C. approved 361 permits during the first half of 2017 compared to 154 in the comparable period a year ago.

Manitoba’s permit count rose 75 per cent to 84 during the first half of 2017 compared to 48 well authorizations during the first six months of 2016.

Operators in Western Canada licensed 3,082 wells with an oil or bitumen target during the half, an increase of 141 per cent from 1,278 such permits in the first half of 2016. A total of 674 gas wells were permitted during the half compared to 598 last year (up 13 per cent).

Excluding experimental wells, 86 per cent of the wells licensed during the first half of 2017 were for horizontal wells, even with last year. Operators licensed 3,665 horizontal wells during the first half of the year compared to 1,733 a year ago.

This year’s six-month license count includes only 65 oilsands evaluation wells, down from 149 such permits to the end of June last year.

Excluding experiment wells, the top five companies that licensed wells during the first half of 2017 were: Crescent Point Energy Corp. (456), Canadian Natural Resources Limited (353), Teine Energy Ltd. (265), Cenovus Energy Inc. (193) and Raging River Exploration Inc. (192).

Including experimental wells, the top five companies were: Crescent Point (456), Canadian Natural (355), Teine (266), Cenovus (193) and Raging River (192).

June

Operators licensed 1,063 new wells in June compared to 556 a year ago and 736 wells in June 2015.

Alberta licensed 519 wells in June, up 104 per cent from 255 permits in the year-prior period, while Saskatchewan approved 424 permits during the month compared to 244 wells licensed in June 2016.

B.C. approved 90 wells last month, up from 45 in the year-prior period.

Manitoba’s June permits improved to 30 from last year’s nine (up 233 per cent).

JuneWarren-Nickle's Energy Group

Paramount Resources

Paramount Resources Ltd. has agreed to purchase Apache Corporation's Canadian assets as an entity, and the agreement provides for the transfer of employees in Canada of Apache Canada Ltd. upon the close date of the transaction.

Apache said last week it will complete an exit from Canada upon the closing of three recent transactions.

Apache said it had agreed to sell its Apache Canada Ltd. subsidiary to Paramount Resources. This includes properties located principally in Alberta and British Columbia. In a separate transaction signed in June, Apache agreed to sell its Provost assets in Alberta to an undisclosed privately-owned company. Also in June, Apache sold its assets at Midale and House Mountain, located in Saskatchewan and Alberta, to Calgary-based Cardinal Energy Ltd.

JuneWarren-Nickle's Energy Group

Crescent Point Is Top Operator

By Stephen Marsters

Crescent Point Energy Corp. was the top operator during the first six months of 2017 — drilling the most metres across Canada and also rig releasing the most wells, excluding experimental/test wells.

Crescent Point drilled 837,120 metres during the first half of the year, and drilled 308 wells.

Based on total metres rig released, Crescent Point was followed by Tourmaline Oil Corp., which drilled 463,959 metres.

Third place was nabbed by Encana Corporation, which drilled 435,170 metres from January to June, followed by Canadian Natural Resources Limited (350,409 metres) and Seven Generations Energy Ltd. (316,157 metres).

The top 10 was rounded out by: Whitecap Resources Inc. (297,379 metres), Royal Dutch Shell plc (282,108 metres), ARC Resources Ltd. (261,759 metres), Peyto Exploration & Development Corp. (259,647 metres) and Raging River Exploration Inc. (253,368 metres).

The top explorers in Canada in the first half of the year, ranked by metres drilled, were Royal Dutch Shell (58,286 metres), Canadian Natural (56,528 metres) and Athabasca Oil Corporation (37,999 metres).

Including both exploratory and development metres, Crescent Point was the top operator in Saskatchewan with a total of 773,891 metres drilled. Seven Generations led in Alberta with a total of 316,157 metres, Encana was the top finisher in B.C. (285,330 metres) and Tundra Oil & Gas Partnership led in Manitoba (100,456 metres).

Ranking the operators by metres drilled, including test/experimental metres, the top operators were: Crescent Point (843,179 metres), Tourmaline (463,959 metres), Encana (435,170 metres), Canadian Natural (374,020 metres), Cenovus Energy Inc. (324,844 metres), Seven Generations (320,357 metres), Whitecap (297,379 metres), Royal Dutch Shell (282,108 metres), ARC (261,759 metres) and Peyto (259,647 metres).

Top operator based on rig releases

Based on rig releases, excluding experimental/test wells, the top operators following Crescent Point were: Canadian Natural (247 wells drilled), Raging River (161), Teine Energy Ltd. (148), Cenovus (140), Whitecap (126), Tourmaline (110), Encana (88), Husky Energy Inc. (87) and Sinoenergy Investment Corp. (78).

Alberta’s top operator in the first half of 2017 was Canadian Natural, which drilled 213 wells. Cenovus drilled 140 wells, followed by Sinoenergy with 78 wells rig released. Tourmaline and Peyto each rig released 62 wells in Alberta during the half.

Heading the list in Saskatchewan were Crescent Point (291), Raging River (150), Teine (148), Whitecap (90) and Spartan Energy Corp. (57).

In British Columbia, Encana led the pack with 63 wells rig released. Second-place finisher Tourmaline drilled 48 wells, followed by ARC with 43. Painted Pony Energy Ltd. drilled 28 wells, while Crew Energy Inc. rig released 17 wells.

Tundra topped the list in Manitoba with 55 wells rig released in the first six months of 2017, followed by Corex Resources Ltd. (14) and Canadian Natural (eight).

Based on the rig release count, and including test/experimental wells, the top five operators in the first half of 2017 were: Cenovus (315), Crescent Point (310), Canadian Natural (295), Raging River (162), Teine (149), Whitecap (126), Devon Canada Corporation (119), Husky (116), Tourmaline (110) and Encana (88).

JuneWarren-Nickle's Energy Group

Pacific NorthWest LNG Project Not Proceeding: Proponent

In a blow to the Canadian natural gas industry, Pacific NorthWest LNG (PNW LNG) announced that the LNG project in Port Edward, BC, will not proceed as previously planned.

“The decision was made by PETRONAS and its partners after a careful and total review of the project amid changes in market conditions,” the company said.

JuneWarren-Nickle's Energy Group

Contractor Operating Days Rose Significantly

By Stephen Marsters

Members of the Canadian Association of Oilwell Drilling Contractors (CAODC) booked 34,482 operating days in the first half of 2017 in Western and Northern Canada, excluding experimental wells, an increase of 114 per cent from 16,082 days booked in the first six months of last year.

Total metres drilled also rose during the period, Rig Locator records show, increasing about 117 per cent to 9.25 million metres in the first half of this year from 4.26 million metres to the end of June 2016.

The average length/depth per well for CAODC members increased year-over-year. In the first half of this year, it lifted to 2,374 metres per well, up from 2,241 metres per well in the year-prior period.

It took CAODC members an average of 8.8 days to drill a well over the first six months of 2017 compared to 8.5 days in the January-to-June interval last year.

Including oilsands evaluation holes and experimental wells, the top five contractors during the half were:

Precision’s main customer during the half was Canadian Natural Resources Limited, which accounted for 154 of its wells (15.6 per cent of the total), followed by Cenovus Energy Inc. (145 wells, or 14.7 per cent) and Devon Canada Corporation (94 wells, or 9.5 per cent).

Savanna’s main customer was Raging River Exploration Inc. (127 wells, or 22.4 per cent), followed by Crescent Point Energy Corp. (85 wells, or 15.0 per cent) and Cenovus (76 wells, or 13.4 per cent of the contractor’s total).

Ensign’s main customer was Teine Energy Ltd. (113 wells, or 25.1 per cent of the total), followed by Canadian Natural (68 wells, or 15.1 per cent) and Cenovus (65 wells, or 14.4 per cent).

The company’s rig #356 drilled 52 wells to the end of June, the highest count for a rig.

Trinidad’s main clients were: Tundra Oil & Gas Partnership (49 wells, or 17.6 per cent of the total), Peyto Exploration & Development Corp. (32 wells, or 11.5 per cent) and Encana Corporation (28 wells, or 10.0 per cent).

For Western Energy, its top clients were: Crescent Point (49 wells, or 20.2 per cent of the total). The contractor also drilled 21 wells for Canadian Natural (8.7 per cent) and 20 for ISH Energy Ltd. (8.3 per cent).

Excluding test wells, Precision’s share of the market lifted slightly to 24.37 per cent in the first half of 2017 from 24.18 per cent in 2016, while Savanna’s share declined to 13.72 per cent from 14.84 per cent.

Ensign’s market share decreased to 12.08 per cent in the first half from 13.52 per cent a year ago, Trinidad’s share of the market declined to 8.32 per cent from 10.94 per cent in the first half of 2016, and Western Energy’s share increased to 6.92 per cent from 4.32 per cent a year ago.

Precision was the top contractor for horizontal wells during the half with 611 wells rig released and 2.0 million metres of hole (excluding test/experimental or DSW wells).

Ranked by wells drilled, the top horizontal contractors, following Precision, were: Savanna (409), Ensign (340), Trinidad (264) and Western Energy (227).

Ranked by metres drilled, the top horizontal contractors, following Precision, were: Trinidad (977,838 metres), Ensign (935,179), Savanna (914,300 metres) and Western Energy (783,895 metres).

Rig utilization during the second quarter for CAODC members stood at 19.25 per cent, up from 7.00 per cent in last year’s second quarter. For the first half, rig utilization rose to 29.09 per cent from 12.39 per cent a year ago.

As usual, smaller contractors dominated rig utilization and most metres drilled per rig categories.

D2 Drilling Inc.’s peak fleet size of one rig during that half had a 69.61 per cent utilization rate. DC Drilling Inc.’s two rigs booked a 59.94 per cent utilization rate, while Stampede Drilling Ltd.’s three rigs had a 59.48 per cent utilization rate.

Bonanza Drilling Inc. ranked first in average metres drilled per rig (35,279 metres), followed by Stampede (30,736 metres) and Vortex Drilling Ltd. (27,771 metres).

JuneWarren-Nickle's Energy Group

Worker Numbers May Limit Reactivation: Calfrac

By James Mahony

Management at Calfrac Well Services Ltd. cited labour as a “key constraint” in Canada, as the contractor prepares to re-deploy idle pressure-pumping equipment later this year.

Calfrac chief executive Fernando Aguilar expanded on the point, after being asked to compare the Canadian labour picture with the situation in the United States, where some oil and gas basins are seeing brisk demand for industry workers.

Back in 2014, when Western Canada’s industry was booming, Aguilar recalled a number of studies that reached similar conclusions: Alberta was roughly 100,000 workers short of meeting the industry’s needs, which led oilpatch companies to take various steps to attract people to the industry.

Later, after the downturn hit, some of the workers who had come to Alberta, along with others in British Columbia, decided to leave the industry. “Of the 200,000 to 300,000 people who left during the downturn, one third of them are back with us, one third are not coming back, and the other third is watching to see if the industry is going to be stable enough,” Aguilar told analysts and investors.

Since then, the company’s efforts to attract workers has paid off, both in terms of bringing back former Calfrac employees and in recruiting new workers, he said.

“We’ve been successful in attracting people, [including] 60 to 65 per cent of [those] who used to work for Calfrac, out of the 2,500 [workers] we released in the downturn,” he said. [Our] Canadian business is incorporating those activities. We have exhausted local [labour] pools in the area [and] are trying to attract people who are younger, coming from different industries and provinces.”

JuneWarren-Nickle's Energy Group

PSAC Increases Drilling Activity Forecast

The Petroleum Services Association of Canada (PSAC) increased its forecasted number of wells to be drilled (rig released) across Canada for 2017 to 7,200 from the previous estimate of 6,680.

This was the third update to its 2017 Canadian Drilling Activity Forecast.

On a provincial basis for 2017, PSAC now estimates 3,604 wells to be drilled in Alberta, up from 1,900 wells in the original forecast. It is expected 580 wells will be drilled in British Columbia this year, with PSAC’s revised forecast up by 300 wells in the original forecast. The revised forecast for Saskatchewan now sits at 2,794 wells compared to 1,940 wells in the original forecast, and Manitoba is forecasted to see 206 wells or a jump of 156 in well count for 2016.

JuneWarren-Nickle's Energy Group