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PIPELINE NEWS SASKATCHEWAN’S PETROLEUM MONTHLY Canada Post Publication No. 40069240

June 2019

www.pipelinenews.ca

Vol. 12/12

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Crescent Point’s big sale in detail

Come to the oilshow A2

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Energy minister responds to competitiveness concerns A8

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PIPELINE NEWS June 2019

The big Crescent Point sale, in detail By Brian Zinchuk Calgary – There’s a lot of buzz going around southeast Saskatchewan, as Crescent Point Energy Corp. put up for sale six significant tracts of properties earlier this year, after a decade of serial acquisition. While no sales were announced during the Crescent Point first quarter financials announcement on May 9, there’s plenty of anticipation of something coming up one of these days. Pipeline News obtained a copy of the company’s “Southeast Saskatchewan Light Oil Portfolio Offering� earlier this year, which listed National Bank and Scotiabank as the two banks involved. The document says there are ~21,625 boepd of predominantly Mississippian light oil for sale, with over 100 mmboe of 2P reserves across ~800 net sections of land. There is a high working interest of 86 per cent in primarily operated production. As of the week of Dec. 23-29, 2018, the properties had 20,099 boepd in production, of which 90 per cent was oil and liquids, and a base production decline of 20 per cent. The annualized net operating income is $255 million, with operating netbacks of $32.35 per boe. The total offering includes over 1,560 identified drilling locations, with over 500 booked. Crescent Point says there is development potential across multiple producing zones, and significant seismic coverage over the land base providing validation.

dĹšĹ?Ć?žĂƉĹ?Ć?Ĺ?ĹśĆŒÄžĆ?Ä?ĞŜƚWĹ˝Ĺ?Ŝƚ͛Ć?Íž^ŽƾƚŚĞĂĆ?Ćš^Ä‚Ć?ĹŹÄ‚ĆšÄ?ĹšÄžÇ Ä‚Ĺś>Ĺ?Ĺ?ŚƚKĹ?ĹŻWĹ˝ĆŒĆžĹ˝ĹŻĹ?Ĺ˝KÄŤÄžĆŒĹ?ĹśĹ?͘Í&#x; The offering is divided into six areas, five in southeast Saskatchewan, and one in the extreme southwest corner of Manitoba, referred to as “Pierson.â€? In making the initial announcement back in October that the company would be retaining and focusing on its Viewfield Bakken, Flat Lake and Shaunavon plays (Shaunavon being in southwest Saskatchewan), this is born out in the offering. Basically, almost ev-

erything east of Highway 47, except for part of the Viewfield Bakken around Forget and Kisbey, is for sale. There’s also a portion south of Weyburn. The maps included in the documents show that pretty much everything in southeast Saskatchewan that is not part of the Viewfield Bakken of Flat Lake plays is up for grabs. Greater Tatagwa Starting from the west is the “Greater Tatagwa,� which appears to include

property in the Weyburn Unit. This parcel is six townships east to west, from Range 12W2 to Range 17W2, and up to four townships south to north, from Township 5 to Township 8, with Weyburn at the top. Greater Tatagwa is listed as having 2,498 boepd of production, of which 100 per cent is oil and NGLs. There are 70 drilling targets listed, all in the Midale formation. Viewfield Conventional Working eastward is a

narrow band referred to as “Viewfield Conventional.� Its production is pegged at 3,065 boepd, of which 97 per cent is oil and NGLs. This band is roughly two townships wide, from north to south, and runs between the Viewfield conventional and Flat Lake in its western portion. Much of this portion falls along Township 5 and 6. The eastern portion hooks to the northeast, going to Township 10. This area had 249 po-

tential drilling targets, 116 Midale and 126 Frobisher/ Alida. Pinto The “Pintoâ€? area runs from just east of Estevan for five townships to Range 3W2, and from the U.S. border north for up to five townships to Township 5. This is the largest production volume area, but the one with the lowest oil fraction. Pinto is listed as having 6,150 boepd, but only 73 per cent of that is oil and NGLs. Ĺš3DJH$

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PIPELINE NEWS June 2019

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Saskatchewan Oil & Gas Show is just around the corner By Brian Zinchuk Weyburn – There’s a palpable feeling in the Weyburn oilpatch that things are looking up, so you better get in your truck and get to Weyburn on June 5-6 for the Saskatchewan Oil and Gas Show to see for yourself. Del Mondor, show chair, said on May 9, “We’ve had a recovery in the oil business just in time for our oil show. Lots of people are going to be around. Lots of exhibitors, lots of fun, commerce going on. We expect just as many exhibitors, if not more, than 2017. “We’ve upped our game on our speakers. Rex Murphy and Vivian Krause are both highly sought-after speakers.” Murphy is well known for his acerbic commentary, previously on CBC, and currently with the National Post. He has been a fervent defender of the Canadian oilpatch, pointing out how, when his native Newfoundland was brought low by the cod fishing moratorium, it was the oilpatch that provided its people with jobs and hope. Murphy will be speaking at 12:30 p.m. on Thursday, June 6.

Vivian Krause

Rex Murphy

Krause has come to prominence in recent months as her efforts over seven years to expose the influence of foreign money in a campaign to landlock the oilsands has gained attention. Many of the issues she raised were referenced in the acceptance speech of Premier Jason Kenney when he won the recent Alberta election. Krause will take the stage at 2 p.m. on Wednesday, June 5. “She’s got a great message, and it’s a real eyeopener for those that want to listen. If you want to listen and find out just what’s going on, and who’s trying to influence everything in our industry, I think Vivian’s got some facts to share,” Mondor said. “We’re really excited. We’ve got a great lineup of speakers. There’s a cabi-

net meeting on Wednesday morning, so we’re going to have a full slate of Saskatchewan government officials. The premier will be speaking at the premier’s luncheon on Wednesday, which is our Hall of Fame awards as well.” It has since been announced that Pierre Poilievre, MP for Carleton, Gerard Deltell, MP for Louis-Saint Laurent, and Robert Kitchen, MP for Souris-Moose Mountain will also be speaking at noon on June 5. “The Saskatchewan as well as the southeastern Saskatchewan Oilman of the Year will be announced Wednesday night for our luncheon. Again, a hugely popular steak and lobster night on Tuesday. It’s a whole bunch of different events, and a whole bunch

dŚĞƌĞ͛ƐĂůŽƚŵŽƌĞŽƉƟŵŝƐŵƚŚŝƐLJĞĂƌŝŶƚŚĞŽŝůƉĂƚĐŚ͕ƐŽĐŽŵĞĂŶĚƐĞĞŝƚĨŽƌLJŽƵƌƐĞůĨĂƚ ƚŚĞ^ĂƐŬĂƚĐŚĞǁĂŶKŝůĂŶĚ'ĂƐ^ŚŽǁ͘&ŝůĞƉŚŽƚŽ of positivity going on in the oil business,” Mondor said. That was born out by the numerous interviews Pipeline News conducted for this edition. Most Weyburn oilpatch companies were expressing a positive outlook, and many had either been hiring or beginning to invest in new

capital equipment in recent months. There’s a new service rig in town, for instance. Mondor would like to see it in the oil show, but it’s going to work instead. “That’s the kind of optimism I’m talking about, the change from everybody just feeling beaten up about everything. By no means

am I saying we’re out of the woods and everything’s rosy, but there’s a hint of optimism that maybe the light at the end of the tunnel isn’t a train. It might be the end of the tunnel. “The re-investment, not only by service companies, but by producers, is a clear indication of that increased positivity,” Mondor said.

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PIPELINE NEWS June 2019

PIPELINE NEWS

EDITORIAL

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To submit a stories or ideas: Pipelines News is always looking for stories or ideas from our readers. To contribute please contact Brian Zinchuk at 306-461-5599. Subscribing to Pipeline News: Pipeline News is a free distribution newspaper, and is now available online at www.pipelinenews.ca Advertising in Pipeline News: Advertising in Pipeline News is a newer model created to make it as easy as possible for any business or individual. Pipeline News has a group of experienced staff working throughout Saskatchewan, Manitoba and parts of Alberta, so please contact the sales representative for your area to assist you with your advertising needs.

Published monthly by the Prairie Newspaper Group, a division of Glacier Ventures International Corporation, Central Office, Estevan, Saskatchewan. Advertising rates are available upon request and are subject to change without notice. Conditions of editorial and advertising content: Pipeline News attempts to be accurate, however, no guarantee is given or implied. Pipeline News reserves the right to revise or reject any or all editorial and advertising content as the newspapers’ principles see fit. Pipeline News will not be responsible for more than one incorrect insertion of an advertisement, and is not responsible for errors in advertisements except for the space occupied by such errors. Pipeline News will not be responsible for manuscripts, photographs, negatives and other material that may be submitted for possible publication. All of Pipeline News content is protected by Canadian Copyright laws. Reviews and similar mention of material in this newspaper is granted on the provision that Pipeline News receives credit. Otherwise, any reproduction without permission of the publisher is prohibited. Advertisers purchase space and circulation only. Rights to the advertisement produced by Pipeline News, including artwork, typography, and photos, etc., remain property of this newspaper. Advertisements or parts thereof may be not reproduced or assigned without the consent of the publisher. The Glacier group of companies collects personal information from our customers in the normal course of business transactions. We use that information to provide you with our products and services you request. On occasion we may contact you for purposes of research, surveys and other such matters. To provide you with better service we may share your information with our sister companies and also outside, selected third parties who perform work for us as suppliers, agents, service providers and information gatherers.

What is the business model in southeast Sask going forward? A few months ago, Pipeline News obtained a copy of the overview of the bid package that Crescent Point Energy Corp. put out as it seeks to sell off roughly 21,000 boepd of production in southeast Saskatchewan and southwest Manitoba. The package includes six parcels, five in southeast Saskatchewan and one in southwest Manitoba. Basically, it appears that everything that is not the Viewfield Bakken (around Stoughton) or Flat Lake (around Oungre-Torquay) is up for sale. That’s a lot. We’ve sat on this information for a while, waiting to see what would happen. While we’ve heard many rumours from numerous people that some deals might be close, but when Crescent Point held its first quarter earnings call on May 9, there was no reference to any sales. Thus, the sales process seems to be ongoing. It’s evident that Crescent Point has been disposing of assets for a while now. We were astonished, back in the summer of 2017, when we heard that Corex had bought some properties in Manitoba. Up until that point, it was almost a truism – Crescent Point didn’t sell, anything, ever, at least in this neck of the woods. But indeed they had. And later, Torc Oil & Gas bought some of Crescent Point’s production as well. But that was before this bid package was announced. This is a big deal. That’s because, for the better part of a decade, the business model for much of southeast Saskatchewan was for small junior oil producers to fire up, build up their production, and then sell. Most of the time, that sale was to Crescent Point. You could usually tell when another noticeable sale was coming up, because Crescent Point would put out a press release referring to bought-deal financing. For example, an Oct. 13, 2014 press release announced the completion of a $375 million bought deal financing. Another examples was on Sept. 24, 2014, when another $750 million in bought-deal financing was announced, at $43.40 per share. To list all the examples would probably fill this page, but you get the idea. That 2014 example is perhaps telling, because Crescent Point stock was soaring, and the downturn had started, but no one really knew it yet. Oil was US$93.54 on Sept. 26, 2014, and it plummeted from there. We have not yet come close to returning to those dizzying heights. Along the way, Crescent Point surpassed even mighty Husky Energy to become the largest oil producer in Saskatchewan. All this is to say that building up a small oil company, it was a pretty safe bet at some point you would have a “liquidity event” and be “taken out” by Crescent Point. Champagne corks all around. This sale of those six parcels is effectively the partial breakup of Crescent Point. This isn’t just the sale of a few “non-core” pieces. This is a big deal. This sale is going on because Crescent Point is under pressure to dramatically reduce its debt. Hopefully it will come out

much stronger in the end, and in a few years, again be in a position of strength. We must keep this in perspective. Even if it does sell 21,000 bpd of production, and is successful in its other sales of reaching its goal of disposing of a total of 50,000 boepd, that still leaves the company with around 124,000 boepd. But in the meantime, what will be the business model, going forward? For one, a few people with knowledge of the sale have told us the parcels for sale are too big. Two of those pieces are in the range of 6,000 boepd. Three others range from 2,400 to 3,560 boepd. Those are way too big for small juniors to pick up and develop, unless we see some sort of consortiums come together, with the intention of splitting them up afterwards. These parcel sizes mean that the most likely buyers will need to be intermediate producers in scale. There’s a few of those operating in southeast Saskatchewan whose names spring to mind. There’s always the possibility that an outside company could jump into the region as well, although, given the flight of companies and capital from the Canadian oilpatch, don’t bet on it. One thing you will hear from almost every service company is that they welcome the idea of having more potential clients to work for. The reality is, when you get to be as big and influential as Crescent Point has become, the region becomes something of a “company town.” If a substantial portion of your fleet isn’t working for Crescent Point, it’s not working. During the downturn, when other companies tightened their purse strings even more, that became doubly the case. Crescent Point often led the entire nation in active drilling rig numbers. They were spending some money, and keeping some activity going, while others were holding their cards close to their chests. Consider this: if you are going to buy a property, it’s not likely you’re going to sit on your hands. You’ll want to do something with it. Crescent Point hasn’t done much drilling in these areas for a while now. New owners will likely mean new development. So what is the oil company business model going forward in southeast Saskatchewan? Does a large oil company swoop in and buy the whole package, lock stock and barrel? We’ve heard that’s unlikely. Do we see a handful of already-active intermediates take a chunk here and there? Will we see the rise of the junior oil producer again? And if we do, what is their strategy? How do they plan for an exit, a liquidity event? Who will be the buyer? One of the intermediates? Or will they have to adopt the model of some of the familyowned oil companies, quietly producing for decades, with no intention of selling out anytime soon? It’s hard to get investors excited about that. They like having a reason to pop the cork on their champagne bottles. Whatever the change will be, and whenever it comes, Crescent Point’s sale of these six parcels will substantially shake up southeast Saskatchewan. Keep your eyes open. There may be opportunity there.


PIPELINE NEWS June 2019

In almost all cases I heard ŽŶĞǁŽƌĚ͗ŽƉƟŵŝƐŵ This month I spent a lot of time in Weyburn, as should be expected. This June 5-6 is the Saskatchewan Oil & Gas Show. I’ve found that doing a focus on Weyburn the month before typically produces our largest paper of the year, and with this one at 40 pages, it didn’t disappoint. That, in itself, is a decent gauge for confidence in the oilpatch. People who buy ads are showing their confidence. I tried as much as possible to knock on doors with people whom I have never done a story on, or haven’t spoken to in quite a while. While it wasn’t universal, in almost all cases I heard one word: optimism. And that’s a good thing. Because this June will mark a full five years since this downturn began. Five years! Oil started declining from its peak in June 2014, and hasn’t returned since.

Yet even though the price hasn’t recovered to the lofty heights of US$100/bbl for WTI, our production in Saskatchewan is still strong. We peaked around 535,000 bpd in December 2014. The last number I’ve seen is 485,000 bpd these days. That’ actually pretty good, all things considered. And more significantly, we are producing that 485,000 bpd with a lot fewer people, an awful lot less drilling and service rigs, as well as trucks and everything else in between. It means, on an efficiency basis, we’ve become a lean, mean machine. So now we’re more efficient. We are making basically the same oil with less, and for less. But the oil price has been slowly creeping up again, floating in the low US$60s. That’s good. We heard, yet again this month, that US$50 is the tipping point. Below that, a lot of wells get taken off programs. We’re above

that, so things are looking up. In many ways, people around Weyburn are voting their confidence with their pocketbooks. It was refreshing, and honestly, a little surprising, to see a brand new service rig, the first I’ve seen in years, at John Kmita Ltd. Summit ESP is looking to double its local workforce. Through a couple rounds of hiring, Matrix Solutions has brought on seven new people fulltime and a summer student. Miller Well Servicing could have had more rigs working, if they could find additional people. Southern Range Well Servicing is also looking for people, and they’ve increased their shop rate for their staff. Streamline Oilfield Services bought a new truck recently. CFO Rentals has added a new line of rod coupling breakout tongs

Big parcels for sale Ż3DJH$ The Pinto area has, by far, the largest number of potential drilling targets listed at 719. That’s broken down into 438 Midale, 28 Frobisher/Alida, 43 Bakken and 210 Torquay targets. To the east of that, running along the U.S. border to the Manitoba border is “Glen Ewen.” Its production is pegged at 3,562 boepd, with a 91 per cent oil and NGL ratio. This portion is seven townships east to west, from the Manitoba border to Range 2W2, and four townships south to north, from the U.S. border to Township 4. Greater Manor The last portion in southeast Saskatchewan is also the largest. “Greater

Manor” runs a little over 14 townships north to south, from Township 4 to Township 18. It runs six townships from east to west, from Range 30W1 to Range 2W2. Greater Manor has the second highest volume of all, with 5,715 boepd, of which 97 per cent is oil and NGLs. This region has the most diversity of targets, with five potential formations to drill into for a total of 281 targets. The Amaranth has 66 targets, 40 in Frobisher/Alida, 84 in the Tilston, 29 in the Bakken, and 30 in the Torquay Pierson The aforementioned Pierson centres around that Manitoba village, and runs from the U.S. border to Township 6, and is four

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townships wide, from the Saskatchewan border to Range 26W1. The Pierson area has 64 identified targets in the Amaranth formation. Big parcels Notably, with the exception of the Pierson parcel, most of these parcels are substantially larger in volume than when they were acquired piecemeal over the years. Several people with knowledge of this offering expressed concern to Pipeline News that they may be too big for smaller companies to acquire, limiting the potential buyers to larger firms. Also notable is the fact most of the land in the region close to the Carlyle field office is up for sale.

A5

OPINION

FROM THE TOP OF THE PILE

By Brian Zinchuk to its offerings. Whitecap Resources is looking at adding another natural gas liquids plant to the Weyburn Unit, which if it goes ahead, will take two years to build and be a substantial investment. They’re also drilling a few wells this year, too. These are just a few of the good things I hear this month. It was refreshing. Invigorating. And welcome. There’s two big events this spring. The first is the Williston Basin Petroleum Conference in Regina, which will happened after this edition goes to press, but before it gets distributed. And then there’s the oil show. I’m looking forward to a more positive mood this year at both. I can’t wait to hear Vivian Krause and Rex Murphy speak at the oil show. Murphy gave a hell of a speech in Vancouver a few months ago, when he spoke about Canada’s relationship with its resource industries.

He summed it up in one word: “lunatic.” Amazingly enough, that speech popped up on my Facebook feed as I type this. If that curling rink in Weyburn isn’t full to the rafters on June 6, people will have missed out. In other words, don’t miss this for anything. About six months ago, someone I know strongly suggested I look into the American money that was being used to partially finance opposition in Canada to pipelines and the oilsands. This came up after I had spent a good chunk of time looking into the Stoughton refinery that never was. Vivian Krause’ name came up regarding the investigation of this foreign money. Once I dug a little bit into what she had uncovered, I told my friend there wasn’t much I could do. She had done it all. She had spent years digging into the ties and the finances. And over the last six months, people have fi-

nally taken notice. It is no small matter that new Alberta Premier Jason Kenney dedicated a large portion of his election night acceptance speech to taking up the issues Krause has raised. And she will be speaking in Weyburn on June 5. People! This is a big deal! Make sure you show up and listen. I’m taking our 15 year old out of school for a day. I’m taking her to the oil show. And I’m giving her a notepad and a pen. I want her to talk to as many people as possible, without me showing her around, asking them what they do, and what sort of education they needed to get to where they are. She’s been quizzing me on a regular basis regarding future careers. Here’s the perfect opportunity. Things are looking up. You just have to ask around. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@ sasktel.net.

Crescent Point supports oil ƐŚŽǁ͕ƌĞƉůŝĞƐƚŽƋƵĞƐƟŽŶƐ ĂďŽƵƚƚƌĂŶƐŝƟŽŶƉůĂŶ Pipeline News asked Crescent Point via email for comment about upcoming Saskatchewan Oil and Gas Show in Weyburn, as well as this current property sale, with the understanding it is still in process. The company responded on May 17, stating, “Crescent Point is proud to support the communities in which we operate as well as the Saskatchewan Oil & Gas Show. This year, we are volunteering at the show, sponsoring a lunch and are proud that one of our team members is on the Saskatchewan Oil & Gas Show board. We encourage our employees to attend this event because it is a great opportunity to build professional relationships, meet with vendors and learn about new technologies. “Saskatchewan remains Crescent Point’s largest operating area, with its three key focus areas all located within the province. These plays, which include Viewfield, Shaunavon and Flat Lake, provide attrac-

tive returns, free cash flow, long-term scalability and reliable market access. These positive criteria supported our decision to allocate more capital to these resource plays in 2019. “Since announcing our transition plan to become a more focused and efficient company with a stronger balance sheet in late 2018, our team has worked diligently to improve our company’s financial position through disciplined capital allocation and cost reductions. Our management team is also progressing its asset disposition process, which it initiated during first quarter 2019. “Crescent Point is working to become a stronger company to ensure our company, employees, Saskatchewan residents, investors and community partners can all benefit from the responsible and safe development of Saskatchewan’s vast resources.”


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PIPELINE NEWS June 2019

^ĂƐŬĂƚĐŚĞǁĂŶŵĂŬĞƐŝƚƐĐĂƐĞďĞĨŽƌĞ^ĞŶĂƚĞĐŽŵŵŝƩĞĞ on Bill C-48, the Oil Tanker Moratorium Act By Brian Zinchuk Regina – Speaking on behalf of the government of Saskatchewan, Energy and Resources Minister Bronwyn Eyre testified before the Senate Transportation and Communications Committee when it held a hearing May 1 in Regina, looking into Bill C-48, the Oil Tanker Moratorium Act. This is the bill which would formalize the moratorium of oil tankers exporting Canadian crude oil products from the northern B.C. coast. This was Eyre’s opening statement, in its entirety: First off, I would like— we would like—to thank members of the committee for stopping in Saskatchewan. I know that was in question at one point. There was some talk of it’s being an “unnecessary expense.” But of course we feel that that’s the last thing it is, and that it’s necessary and important that you hear from Saskatchewan people directly about the impact, to their jobs and livelihoods, that this Canadian energy crisis that we are in—because it is a crisis—represents; and is having on people. This crisis continues to

put Canadian jobs at risk: thousands across Western Canada. And these are Canadian jobs. Just like GM or Chrysler jobs or SNC-Lavalin jobs.  We like to say that energy jobs are ‘people too.’ Why we’re here today, and why we feel it’s important to address you on Bill C-48, is because this proposed bill is part of a broader, macro-economic issue—which is that Canadian exporters continue to not be able to get oil to tidewater, which has a resulting, trickle-down effect on the price that we get for Canadian energy products; and ultimately on royalties (which of course fund hospitals and highways, social services and schools...here and across Canada). This should be a national issue. After all, last year, insufficient pipeline capacity cost Canada’s energy sector $20.6 billion, or 1 per cent of GDP.  Here in Saskatchewan, we feel that, within the federation, when it comes to energy, there is, quite simply, a double standard between East and West—even be-

dŚĞ^ĞŶĂƚĞdƌĂŶƐƉŽƌƚĂƟŽŶĂŶĚŽŵŵƵŶŝĐĂƟŽŶƐŽŵŵŝƩĞĞůŝƐƚĞŶĞĚƚŽ^ĂƐŬĂƚĐŚĞǁĂŶ͛ƐĐĂƐĞŽŶDĂLJϭ͘ tween West and West. And that’s a painful realization; and a painful truth to have come to terms with. If you told a person on the street that despite proposed Bill C-48, the Oil Tanker Moratorium Act, the $40 Billion-dollar liquid natural gas (LNG) terminal—planned for Kitimat in BC—will get federal relief from tariffs on steel modules and will get a new pipeline to supply it with natural gas...  And that it will be perfectly OK for LNG monster tankers to go through the Douglas Channel and upload LNG from Kitimat.  But that this same bill will decree that oil tankers,

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which would load Western Canadian oil at the exact same port, will not be allowed to go through the exact same channel. That person would say that’s a double standard. And that’s not a moratorium. If you told that same reasonable person that there are 20,000 so-called tanker movements per year in Canada, 85 per cent of which are on Canada’s east coast. And that inbound tanker traffic, carrying foreign oil products from Algeria, Saudi Arabia and Nigeria, among others, can enter Quebec ports without issue. That of the 25 million tonnes of oil that Quebec imports per year, on oil tankers, 89 per cent goes

through the ports of Quebec City and Montreal... And this, despite significant St. Lawrence beluga whale populations... And so therefore: That under Bill C-48, inbound, foreign oil is okay. But outbound Canadian oil is banned. A reasonable person anywhere in the country would say that’s preposterous. And that’s not a moratorium. The fundamental problem with this proposed bill is its selectiveness. Why the West coast and not the East coast? Why the northern B.C. coast and not the Port of Vancouver? Because Northern B.C. is more beautiful than Vancouver? Or the

St. Lawrence? Or the coasts of Newfoundland? More environmentally fragile or valued? Of course not. Let’s also forget: Newfoundland has significant off-shore oil rigs. New Brunswick refined $1.6B worth of Saudi oil last year. Why don’t they qualify for an oil tanker moratorium? You can see the dilemma for Western Canada, and for reasonable people here. Some of you questioned my colleague, Minister ( Jeremy) Harrison, a few weeks ago about why we can’t just focus on the port of Vancouver...or the U.S. coast...Why we care about gaining access to northern B.C.? The answer is: We Ź3DJH$


PIPELINE NEWS June 2019

A7

Saskatchewan sees double standards abounding with C-48 ŝ3DJH$ already do focus on the Lower Mainland and U.S. coastal ports ... and we need access from anywhere we can get it...access to global markets to ease our hyperdependency on the US. As some of you pointed out, the U.S. clearly benefits from Canada’s continued lack of market diversification. US refiners do access discounted barrels of Canadian crude oil and sell refined products to continental and global markets at full market price. But we could begin to fix this situation if we built more Canadian pipelines! That was the whole point of Energy East and Northern Gateway and Trans Mountain, and why we are so concerned about more and more delays on that project. Producers al-

ready eek out what product they can to the Lower Mainland...by rail, for one. But those same rail tracks are in demand from, and in competition with, other sectors as well: from potash and other mining, to agriculture. That’s why it’s called a transportation bottleneck. Everyone wants access. Western Canada’s regional system of pipeline and rail capacity is highly integrated, so Saskatchewan’s producers would naturally benefit enormously from any new export pipeline.  Saskatchewan companies have become ingenious, highly creative, when it comes to working around the system with trucking... rail...and whatever ports they can get to. They are making the

Senator Raymonde GagnĂŠÍ•ĹŻÄžĹŒÍ•Ć?ŚŽŽŏƚŚĞŚĂŜĚŽĨ ^Ä‚Ć?ĹŹÄ‚ĆšÄ?ĹšÄžÇ Ä‚ĹśĹśÄžĆŒĹ?LJĂŜĚZÄžĆ?Ĺ˝ĆľĆŒÄ?ÄžĆ?DĹ?ĹśĹ?Ć?ĆšÄžĆŒBronwyn Eyre.WŚŽƚŽÄ?LJĆŒĹ?Ä‚ĹśĹ?ĹśÄ?Śƾŏ

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best of a very bad situation. But why we are focused on northern B.C. today, and its deep-water ports, and the global access that they would afford, is because they would help assuage the Canadian energy crisis. Those northern ports would give Canadian exporters a fullday export advantage (in other words, better, faster, cheaper shipping arrangements) over other Pacific ports, including ports in the Lower Mainland, to rapidly growing Asian markets. The Prince Rupert area, for example, would lead to a full, 36 hours faster shipping time to the world’s largest port in Shanghai, than the Port of Vancouver would. It would also avoid costly delays that routinely occur as a result of congestion of rail and ports in the Lower Mainland.  And while we’re at it: Northern Gateway, which—along with Energy East—was killed by this federal government, would have reached northern B.C. and would have been just that: a northern gateway to Asian markets, for B.C., Alberta and Saskatchewan producers. But benefiting

all of Canada. But Northern Gateway will never come back to life with Bill C-48. This bill would kill it forever. Eagle Spirit will never come to life with Bill C-48. I understand that you heard, in December, from the Eagle Spirit Chiefs Council, the National Chiefs Coalition, the Indian Resource Council—who, together, represent some 200 First Nations communities. They spoke to you about how the Eagle Spirit Energy Corridor project could help reconciliation through economic empowerment. A $12 billion investment that would create a once-in-alifetime opportunity for the 35 First Nations along the proposed pipeline corridor—and who have indicated ‘in principle’ support for the project. But Eagle Spirit’s prospective port, at Grassy Point, is in the proposed moratorium zone. And as its proponents have said, “Without tankers, there can be no pipeline.�  That’s called a wasted opportunity. Your colleague, Dennis Patterson, Senator for Nun-

^Ä‚Ć?ĹŹÄ‚ĆšÄ?ĹšÄžÇ Ä‚ĹśĹśÄžĆŒĹ?LJĂŜĚZÄžĆ?Ĺ˝ĆľĆŒÄ?ÄžĆ?DĹ?ĹśĹ?Ć?ĆšÄžĆŒBronwyn EyreƚŽůĚƚŚĞ^ĞŜĂƚĞĹšÄžÄ‚ĆŒĹ?ĹśĹ?Í›Ć?ĹŠĆľĆ?ĆšÇ ĹšÄ‚ĆšƚŚĹ?Ć?Ć‰ĆŒĹ˝Ç€Ĺ?ĹśÄ?Äž ƚŚŽƾĹ?ŚƚŽĨĹ?ĹŻĹŻͲϰϴ͕ĂŜĚĹ?ĆšÇ Ä‚Ć?Ŝ͛ƚÄ‚Ç€ÄžĆŒÇ‡Ä¨Ä‚Ç€Ĺ˝ĆľĆŒÄ‚Ä?ĹŻÄž ŽƉĹ?ĹśĹ?Ĺ˝ĹśÍ˜WŚŽƚŽÄ?LJĆŒĹ?Ä‚ĹśĹ?ĹśÄ?Śƾŏ avut has said, “I am struck by the division and acrimony that this Bill breeds. it unnecessarily pits neighbour versus neighbour.â€? That is a tragedy. In terms of solutions that we are putting forward today, as Saskatchewan, we would suggest that you canvas and learn as much as you can from shipping stakeholders in Western and Eastern Canada about the tradition of safe tanker transport of oil products that has been achieved over the years and what excellent managers of marine traffic Canadian ports have been; and how tankers can co-exist in a clean, healthy environment that, of course,

we all want as Canadians. Bill C-48 allows the federal government to arbitrarily exempt oil tankers, but doesn’t address other marine traffic, such as cargo ships, ferries and cruise ships, which bring with them their own, wellknown carbon footprints.  Is that fair?  Meanwhile, let’s not forget that, worldwide, 7,400 oil tankers are currently afloat, sailing around the Galåpagos Islands, the Great Barrier Reef. Jewels of the world, just like the northern coast of B.C. The federal government could also create a tanker corridor, complete with Ś3DJH$

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A8

PIPELINE NEWS June 2019

ĹśÄžĆŒĹ?LJĹľĹ?ĹśĹ?Ć?ĆšÄžĆŒĆŒÄžĆ?ƉŽŜĚĆ?ƚŽÄ?ŽžƉĞĆ&#x;Ć&#x;ǀĞÄ?ĆŒĹ?Ć&#x;Ä?Ĺ?Ć?ĹľĆ? brought up by oil junior producers By Brian Zinchuk Regina – The May edition of Pipeline News featured several stories highlighting concerns raised by Saskatchewan-based junior oil producers regarding this province’s competitiveness for oil investment, especially given the election of Jason Kenney as the new Alberta premier. Kenney’s platform included reducing red tape and cutting corporate taxes. Those stories were entitled “Saskatchewan’s ever-increasing regulations are making this province uncompetitive: Hromek,â€? (viewable at pipelinenews.ca/1.23814126) and “Competitiveness is a provincial issue, not federal, and Saskatchewan has issues there,â€? (pipelinenews. ca/1.23814160).

The editorial was entitled “By becoming more like Alberta, has Saskatchewan lost its competitive edge?� and can be found at pipelinenews.ca/1.23814176. Energy and Resources Minister Bronwyn Eyre, prior to providing testimony to the Senate committee looking into Bill C-48, the tanker moratorium, approached Pipeline News on May 1 with a request to respond to the concerns raised by those producers. That took place by phone on May 10. Competitiveness with Alberta “Clearly, I feel we’re competitive,� Eyre said. “On the provincial side of things, obviously our royalty regime is competitive with Alberta. There was talk of the ‘Kenney factor,’

in some of those pieces in the May issue. I get that. But on horizontal drilling, our (royalty) is 2.5, Alberta introduced a flat rate of 5 per cent, the CStar royalty rate, a few years back. Yes, Kenney could lower that to levels closer to Saskatchewan’s, but we would still be competitive. Of course, we have to stay on top of our game, but just in terms of stability and the incentives we do have around EOR (enhanced oil recovery), around horizontal, obviously it’s led to massive investment. They are topin-class incentives that are Saskatchewan-specific.� “I know the regulations come up, such as Directive 17 (on measurement). I think we do have to look at that, or relook at some of that. But let’s not forget,

This bill would kill Northern Gateway forever, says Eyre Ż3DJH$ rescue tugs and spill recovery equipment that could safeguard all shipping. Or create a Particularly Sensitive Sea Area (PSSA), which would protect against oil spills and safeguard coastal waters while, at the same time, not explicitly discriminate against oil shipments.  Oil shipments from one area of the country. Federal Minister for Trade Diversification Jim Carr, said back in Novem-

ber: “Our competitiveness depends in large part on making Canada the most globally-connected economy. The investments we are making will connect our people, their ideas and the products they sell to the world.� We couldn’t agree more. But those products, that competitiveness and globally connected economy, surely include Western energy. Our understanding is there are no oil-tanker

moratoriums in the entire world. With this bill, Canada would have the only one. There are other options, other alternatives, at your disposal. Again I say: the time for sober second thought is now.  Let this bill—which amounts to a self-imposed export ban, by Canada, on its own, Canadian oil products—die on the order paper.  And let’s go back to the drawing board. Thank you. 

it’s been around for a while, and industry consultations began in 2014. The directive came in in April 2016 for the new facilities. But for the facilities build before 2016, they were given a four-year phase-in window. They have until April 2020 to meet all the requirements. Operators of the phased-in facilities are required to implement 25 per cent each year, but they do have that phase-in window overall to April 2020.� Recent land sales The editorial pointed out that the $1.5 million Crown land sale in April was one of the worst land sales in the last 11 years. “I would say those have to be read in context. In December, our land sale brought in about $47 million, of the $61 million that had been forecast in Q2. But the previous December, it’s my understanding, we had made about $9.5 million,� Eyre said. (Eyre referred to the December 2018 land sale which brought in $20.1 million, with the fiscal year to date cumulative land sale revenues being $47.3 million, according to the government press release at the time.) She said that went up significantly over the year, and that “on both the fiscal and calendar year basis, we continue to post the highest average per hectare revenues among western provinces.� “For the 19-20 fiscal

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year, Saskatchewan dollars per hectare averaged $278.32. Alberta averaged, at the time of the April 2019 news release, $155.61 per hectare. B.C. had averaged $180.� While the April gross amount was low, she said, “It is, but not if you look at what December was. That was pretty good. So you have to look at it in context, not just that one time. And for the calendar year, Saskatchewan averaged $524.42 (per hectare), Alberta averaged $175.72. B.C. was $504, and B.C. had no sale in February in 2019 because there was a lack of interest from industry. “I think it’s important to have that context.� “We can safely say, the sector has not been booming. So that is, of course, a factor. But it’s not a Saskatchewan specific thing.� Flowlines Regarding the licensing of flowlines, she said, “The provincial auditor’s report in 2012 identified that as an issue. There were a number of issues with the current pipeline and flowline regs, and Energy and Resources (ER) had to address that. Obviously, the Husky incident highlighted the need for that. But I think what isn’t getting out, or isn’t getting out enough, is that licensing flowlines first of all brings Saskatchewan into line with other provinces. It ensures the pipelines are well regulated.

But the cost of the first phase of that pipeline regulation and the IT (information technology) development was accommodated within the existing levy. “The Phase 2 automations plans are being substantially reduced, in scope, to avoid increasing the levy and to minimize the impact on operators on licensing flowlines. Those retroactive licenses will be based on minimal data – eight data fields. And once the flowline licensing is required, operators will have four years to complete that retroactive licensing. We feel, at ER, that isn’t necessarily out there.â€? Methane Action Plan Regarding incoming federal regulations on methane, referred to as the Methane Action Plan, Eyre said, “I’m not sure it is understood, this is not something we did to the industry for the good of our health. We had to come up with a plan, or the feds would do if for us, or do it to us. She expressed frustration with the reference to that, saying, “Our side isn’t mentioned there.â€? “About 20 per cent of natural gas is wasted by oil producers through venting and flaring. Fine. But our plan, the Saskatchewan plan, we feel, is not just based on presumed, theoretical reductions, based on models and assumptions like the feds. Ours is about flexibility. We don’t target Ĺš3DJH$

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PIPELINE NEWS June 2019

Flowlines, methane and tying in infrastructure Ĺť3DJH$ specific equipment, facility by facility. We do it results-based. It’s designed to establish company-wide levels of reductions of emissions annually. They can make investment decisions for all their facilities. “The feds’ is completely different. It’s much more like Alberta’s program was, very prescriptive. “There’s also a significant accommodation for smaller operators. So (Warren) Waldegger is talking about this, but these regulations only apply to companies that exceed the threshold of more than 50,000 tonnes

of CO2 equivalent. Companies may not need to reduce their emissions if they’re already conserving or combusting a certain portion of their associated gas. But believe me, operators say they want our plan over the federal plan. “It’s about the federal plan, which would be backstopped. Some of this work was ongoing anyway. But we really had to act, otherwise we would have had the federal methane plan. Tie in of infrastructure In the one story, Fire Sky Energy CEO Warren Waldegger referred to the economic practicality (or

lack thereof ) of tying into infrastructure. “Waldegger makes this point about the tie in of infrastructure, and about the different geology, and I get that. That’s why we’re bringing in the Saskatchewan Petroleum Innovation Incentive (SPII), which is more around research and development. We’ve also announced the OGPII, which is the oil and gas processing investment incentive, which is more around infrastructure. It incentivizes tying in, which is why it is being brought in. And we’ve heard very positive things about that, and you’ll see

very positive announcements around that,� Eyre said. She noted that small oil producers will be able to qualify for new and expanded infrastructure for any project that qualifies under that incentive, including gas processing, waste flare, power generation and regional gas gathering. “That would allow them to directly access the royalty credits based on investment.� Rural municipalities “We’re really digging deep on the RM issue, and the crazy patchwork of rules and fees,� she said. “It’s the number one issue

for competitiveness.� Indeed, the day of the interview, the issue of certain rural municipalities charging high dollar, and perhaps questionable permits and causing other costs came up in three different conversations Pipeline News had earlier in the day. When the price of oil was high, these practices were tolerated as a cost of doing business, but now the frustration is starting to rise to the surface. No one wants to speak about it on the record, however, because they fear the RMs will just beat them up more. Eyre said, “There are

huge issues around that. But we’re on it. I know it’s a big issue. It’s the number one issue, including from CAPP (Canadian Association of Petroleum Producers). It’s a huge issue. We are working on that, both Government Relations and Energy and Resources, so watch the space on that, for sure.� She noted some competitiveness items, like flow-through shares for small companies, are a federal issue, but they are looking at it. “You will hear things in the not-too-distant future about the red tape issues,� she said.

WĆ?ÄžÄ?ĆľĆŒÄžĆ?ĹľĹ?ĹśÄžĆŒÄ‚ĹŻĆŒĹ?Ĺ?ŚƚĆ?Ä¨Ĺ˝ĆŒĆ‰ĆŒĹ˝ÄšĆľÄ?ĞĚŇƾĹ?ÄšĆ? By Brian Zinchuk Estevan – Things are coming along for the Deep Earth Energy Production Corp. (DEEP) geothermal electrical power production project south of Torquay. They’ve drilled their first well, and have now secured the mineral rights to the fluids from the area around it. DEEP’s name came up in a government press release on April 25, announcing Saskatchewan’s Subsurface Mineral Crown Disposition Public Offering held April 23. It was the first offering of the 2019-20 fiscal year, raised

$10,000 in revenue for the province based on interest in resource exploration in the Estevan area. A single subsurface mineral permit block totalling 1,554 hectares (3840 acres, or six sections) was posted and received a bonus bid of $10,000. Deep Earth Energy Production Corp. was the successful bidder. The permit block is located along the Saskatchewan-North Dakota border, approximately 30 kilometres southwest of Estevan, an area that is prospective for brine minerals such as lithium, the government release noted.

The permit block land is in the vicinity of the initial DEEP well, which is close enough to the U.S. border that you can see America for its lease. “The public offering process helps facilitate exploration activity by Saskatchewan’s mining industry for this specific class of minerals in an orderly, transparent way,â€? Energy and Resources Minister Bronwyn Eyre said in a release. “Enabling global access to our diverse resource potential will help sustain Saskatchewan mining in the long term.â€? Ĺš3DJH$

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Box 178 Carndu, SK S0C 0S0


PIPELINE NEWS June 2019

A11

Pre-Owned Inventory 2018 Chevrolet Tahoe Premier

Stock #: 19049A

66,900

$

2018 Jeep Grand Cherokee Limited

Stock #: S18241

53,120

$

2018 Jeep Cherokee Sport

Stock #: S18083

36,250

$

2017 Jeep Grand Cherokee Limited

Stock #: 18266A

43,900

$

2017 Dodge Journey GT

Stock #: S17289

38,900

$

2017 Dodge Journey SE Plus SUV

Stock #: 18289A

29,950

$

2016 Ram 1500 SLT

Stock #: 19195A

29,990

$

2015 Nissan Juke SV

Stock #: 19061A

20,600

$

2018 Ford F-150 Lariat

Stock #: 18290A

$

58,990

2018 Dodge Charger R/T

Stock #: S18058

56,850

$

2018 Jeep Grand Cherokee Limited 2018 Jeep Grand Cherokee Limited

Stock #: S18261

55,224

$

2018 Jeep Grand Cherokee Trailhawk 2018 Jeep Cherokee Trailhawk 2018 Jeep Compass Trailhawk

Stock #: 18282A

$

47,900

2017 Ram 2500 Power Wagon

Stock #: 19186A

$

54,990

2017 Ram 1500 Laramie

Stock #: 19166A

$

42,990

2017 Ram 1500 ST

Stock #: 18201A

$

36,600

2017 Chrysler Pacifica LX

Stock #: S17511

$

29,991

2016 Jeep Patriot Sport

Stock #: 17497A

$

24,990

2015 Jeep Grand Cherokee Limited

Stock #: 19127A

$

28,900

Stock #: S18078

$

42,500

2017 GMC Sierra 1500 Denali

Stock #: 19144A

$

47,990

2017 Jeep Grand Cherokee Limited

Stock #: 18274A

$

42,400

2017 Jeep Cherokee Trailhawk

Stock #: 19009A

$

34,976

2016 Ram 1500 Sport

Stock #: 19055A

$

42,900

2016 Dodge Grand Caravan SXT

Stock #: 19150A

$

19,990

2014 Dodge Durango R/T

Stock #: 19046A

$

31,900

Stock #: S18002

$

41,403

2017 Ram 2500 Power Wagon

Stock #: 19177A

$

47,000

2017 Ram 1500 Sport

Stock #: 18230B

$

41,900

2017 Dodge Journey GT

Stock #: 19157A

$

34,900

Stock #: S18251

$

53,284

2018 Dodge Charger GT

Stock #: 18272A

$

37,500

2017 Ram 1500 Rebel

Stock #: 19071A

$

46,990

2017 Dodge Journey GT

Stock #: S17450

$

38,900

2017 Dodge Grand Caravan SXT

Stock #: 18302A

$

34,100

2016 Ram 1500 Limited Crew Cab 2016 Dodge Durango Citadel

Stock #: 19043A

$

40,600

2016 Jeep Compass Sport

Stock #: 18240A

$

23,990

2014 Ram 1500 Sport

Stock #: 18254C

$

31,900

Stock #: 19120A

$

39,900

2015 Ram 1500 SLT

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$

29,990

2014 Ram 1500 Sport

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29,990

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A12

PIPELINE NEWS June 2019

^ĞƌǀŝĐĞƌŝŐŽǁŶĞƌƚĞůůƐ^ĞŶĂƚĞĐŽŵŵŝƩĞĞĂƚZĞŐŝŶĂ hearings what’s wrong with Bill C-48 By Brian Zinchuk Regina – Brian Crossman, one of the partners in Independent Well Servicing, testified before the Senate Transport and Communications Committee in Regina on May 1, as part of their travelling hearings into Bill C-48, the Oil Tanker Moratorium Act. On May 15, the committee voted against the act, but it still has to be considered by the Senate as a whole. Here is Crossman’s testimony, verbatim:

My name is Brian Crossman, and I am representing Independent Well Servicing Ltd. based out of Estevan Saskatchewan. I believe I speak for all my colleagues in the western Canadian oil industry. I would like to thank the Senate Committee for the opportunity to testify on this very important issue. It is moments like this that I remember how blessed I am to be a Canadian. Who we are: Our Company is Independent

Well Servicing. We are a privately-owned company based in Estevan and we have been in business for over 15 years. Our primary focus is working on oil wells in southeast Saskatchewan. We are 100% invested in Canadian operations, and have had as many as 68 people working in our team at peak times. Currently we have 42 employees. We are a people focused company, doing our best to provide safe, high-paying careers for

our people with room for advancement. We achieve this by providing our teams with the very best, safest, well-maintained equipment. Independent Well Servicing has hired people from every province in Canada. Many of these people are female, First Nations, minorities, LGBT and of course new Canadians. We have a very diverse work force at our company. How does Bill C-48 affect southeast Saskatch-

ewan: This is not just about the microcosm of a tanker ban on the northwest coast of British Columbia. This is about a much larger picture. Realistically, we are in a carbon-based economy right now and for the foreseeable future. The entire world needs reasonably priced, ethically produced, accessible energy to both maintain our Canadian standard of living and to raise the standard of living in the rest of the world. By not allowing Canadians

the opportunity to sell our products to the world only allows other, less ethical and less environmentally friendly countries to sell at a higher price to the rest of the world, including Eastern Canada. This ties our hands in the most unfair, unethical way. Our own Canadian government allows U.S. based groups to fund activists to protest and block the movement of Canadian crude oil to tidewater. These groups are Ź3DJH$

which includes building a pilot plant that would be supplying five megawatts of electricity to the power grid in about 2.5 years. Its initial well was spudded in mid-November and completed in late December. That included the retrieval of over 200 metres of core, were recovered across the targeted reservoir. The core captured the Winnipeg and Deadwood Formations and terminating in the Precambrian bedrock. Detailed geo-

technical core analysis will be conducted in the near term. This core data will tie into specialized geophysical data including detailed micro-images of the reservoir rocks captured inside the well. Marcia will be one of the presenters at the Williston Basin Petroleum Conference in Regina. She is scheduled to speak on May 29 at 10:45 a.m., as part of a session entitled “Where are the new opportunities?”

Drilling next well expected in July Ż3DJH$ DEEP is planning on a production test of their first well, drilled this last winter. The well will be produced into a tank farm, and those fluids will then be reinjected into the well. The test is expected to take about three weeks. DEEP president and CEO Kirsten Marcia said on April 29, “This is for the mineral rights for any minerals in those fluids.” “We’re planning our flow and built up test to

come in June.” That test will be used for the final design of the next well, which is planned to be drilled approximately 1.5 kilometres away from the first. Drilling is expected to commence in July. Introduced in 2018, subsurface mineral public offerings use an open and competitive bidding system similar to the existing process for issuing periodic oil and gas dispositions in Sas-

katchewan. The system covers all natural mineral salts and their compounds found more than 60 metres below the land surface.  These include boron, calcium, lithium, magnesium, potassium (of which potash is a compound), sodium, bromine, chlorine, fluorine, iodine, nitrogen, phosphorus and sulfur. The next scheduled date for a subsurface mineral public offering in Saskatchewan is Decem-

ber 17, 2019. DEEP’s initial well is the deepest in Saskatchewan, measuring 3,530 metres true vertical depth. A piece of that core was shown to Prime Minister Justin Trudeau in Regina on Jan. 11 when he announced $25.6 million in federal funding for the project. The federal funding makes up approximately half of the funds needed to complete this, the second phase of the project,

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PIPELINE NEWS June 2019

A13

tŚĂůĞƐĐĂŶ͛ƚƚĞůůƚŚĞĚŝīĞƌĞŶĐĞďĞƚǁĞĞŶĂŶŽŝůƚĂŶŬĞƌ ĂŶĚĂĐĂƌŐŽƐŚŝƉĨƌŽŵŚŝŶĂ Ż3DJH$ funded by corporations that buy our oil at very cheap, discounted prices, and then sell it at a large profit. Studies have shown the money lost to the Canadian people to be as high as 80 million dollars a day! That is $29 billion in only one year! Without more pipelines to provide an economical and safe way to move oil by ship, we continue to sell our crude at a severe discount. This means that oil producers do not invest in drilling, optimize production and do not repair uneconomical wells. If Canada was able to ship and sell our oil and gas to world markets like other oil producing nations do, the amount of money that would be brought into the Canadian economy is staggering. This revenue could be used to invest in cleaner energy and environmental technologies, instead of burdening every Canadian taxpayer. This situation also means that oil producers have to cut costs somehow. These cuts are passed down

the line to the contractors that perform work on the oil wells and it spirals outwardly, ultimately resulting in less tax revenue for all levels of government. This does not even factor in the huge reduction in the spin off benefits for local business and charities. The community benefits created by the Canadian oil patch are too numerous to mention here today. But among them, they include funding for infrastructure, hospitals, schools, universities and parks. Some local examples are Crescent Point Place in Weyburn, the Murray Edwards School of Business at the University of Saskatchewan, and various facilities in every oil town in western Canada. The tanker ban: There are over 50,000 merchant ships responsible for the carriage of about 90 per cent of world trade. Some 4,300 of these (so less than 10 per cent) are oil tankers that move crude oil around the world safely and efficiently every day of the year. Modern tankers with the latest and best tech-

nology and construction would be the only tankers allowed in our waters. It seems somewhat disingenuous to allow all manner of material to be shipped in and out of Canadian ports, but not Canadian oil. Oil is shipped all the time down the St. Lawrence seaway. Oil tankers regularly move oil down the west coast from Valdez, Alaska to the lower 48 states. Shipping off the west coast should not be a problem if it is done correctly with safety being the top priority. Whales and marine life can’t tell the difference between an oil tanker and a cargo ship full of iPads from China. As a side note, my wife Val is from British Columbia and I have been salmon fishing at the Haida Gwaii. So I personally would not be in favour of anything that I believe would unnecessarily endanger the west coast of Canada, no matter what my career was. The benefits of increased revenue: If Canada had the opportunity to sell oil on the current world market, it’s very easy to see

Brian Crossman͕ĐĞŶƚƌĞ͕ǁĂƐŽŶĞŽĨƚŚĞǁŝƚŶĞƐƐĞƐƚĞƐƟĨLJŝŶŐďĞĨŽƌĞƚŚĞ^ĞŶĂƚĞ dƌĂŶƐƉŽƌƚĂŶĚŽŵŵƵŶŝĐĂƟŽŶƐŽŵŵŝƩĞĞƌĞŐĂƌĚŝŶŐŝůůͲϰϴ͘KŶƚŚĞůĞŌǁĂƐ John BreakeyĂŶĚŽŶƚŚĞƌŝŐŚƚǁĂƐDĂƩŚĞǁƵŐŶĞƚ͘WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ the benefits to our entire country. Without the revenue, investing in our children’s future is much more problematic. We need funding for schools, universities, hospitals, health care, infrastructure and so much more. Where could we possibly get this revenue? From oil. We need funding to develop clean, long term energy sources for the future. Where could this money come from? Again, from oil revenue. We are Canadians, not Saudi oil sheiks. We will spend our oil revenue

on our children’s future, not yachts and gold-plated Mercedes. We need to invest in Canada and control our own destiny, and not leave it to the rest of the world. We need a plan. A good, well-researched plan. Can we do it better? Absolutely. Will Canadians do it better? Yes, as we always have in the past and always will. It’s who we are. Canadians want a bright future for our children and grandchildren. We are the country that cares for each other, and cares for the rest of the world.

If given the opportunity, Canada will always follow through and do the right thing. Period. A brief description of what we do: Our company works primarily on the completion, repair, optimization and abandonment of oil and gas wells in southeast Saskatchewan. We have also performed workovers and repaired wells at potash mines, natural gas storage cavern wells and the soon to be completed Deep Earth Geothermal Power project, Ź3DJH$

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A14

PIPELINE NEWS June 2019

LJƌĞƚĂŬĞƐŽŶ&ƌĂƐĞƌ/ŶƐƟƚƵƚĞƌĞƉŽƌƚ By Brian Zinchuk Regina – Minister of Energy and Resources Bronwyn Eyre takes serious issue with a recent Fraser Institute report which says Saskatchewan is a high tax regime when it comes to oil and gas. The minister says the report is flawed and does not take substantial drilling incentives into account, but rather looks at the last dollar invested into old wells.

In last months’ Pipeline News story were entitled “Saskatchewan’s everincreasing regulations are making this province uncompetitive: Hromek,” Jon Hromek of Adonai Resources II pointed out that a recent report from the Fraser Institute said Saskatchewan had the highest the marginal effective tax and royalty rate (METRR) on oil investments between Canadian provinces and

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American States, at 35.9 per cent. Effective Tax and Royalty Rates on new Investment in Oil and Gas after Canadian and American Tax Reform, by Philip Bazel and Jack M. Mintz, was released in the spring of 2019. The press release for the report, published on

2019

21.3 per cent for oil sands investments.” It said, “In response to recent tax changes in the U.S., which eroded Canada’s previous corporate and investment tax advantage over American states, the federal government last year introduced a series of temporary measures designed to incentivize new

investment. But despite Ottawa’s tax changes, the study finds Saskatchewan still has the highest effective tax rate on new investments in both the conventional oil and natural gas sectors. “The study’s calculations include everything from corporate income Ź3DJH$

We will spend our oil revenue on our children’s future, not yachts and goldplated Mercedes Ż3DJH$ southwest of Estevan. The work is often complex and requires well-trained teams to perform all duties safely, efficiently and to high environmental standards. How we do it: As with all operations in the Canadian oil patch, we perform all duties safely, ethically and with full respect for the environment and all the stakeholders involved. This means using good, sound best practices, top shelf training and using the best available technol-

Philip Bazel and Jack M. Mintz

March 5, said, “Saskatchewan’s tax rate on new oil investments in 2018 was 35.9 per cent, well above the Canadian average of 22.7 per cent and the U.S. average of 28.6 per cent. In fact, Saskatchewan’s tax rate on new oil investments is more than 10 percentage points higher than Alberta’s, which last year was

ogies to perform the duties safely with absolutely minimal environmental impact. Why we do it: We are a business, so obviously we do what we do to provide a good return on investment to our shareholders. Having said that, we also do it to provide a good standard of living to our employees and their families. We support our community, through corporate donations to hospitals, schools and local charities. We pay taxes, which support our city, our municipali-

ties and the provincial and federal governments. To summarize, our company and other companies in our industry, are economically, environmentally and socially responsible. My story: I started out as a floorhand (or roughneck) on an oil well service rig in May of 1985. I have worked hard, and made my way up to a supervisory role, as well as a company shareholder with some outstanding partners. I spent three years working in the Siberian oilfields. As a side note,

that was an environmental disaster when I worked there in the 1990s. There is simply no comparison to Canada as far as environmental stewardship goes. We are so much better in every respect. I have made a good living and I have paid a lot of taxes towards the greater good of all members of Canadian society. I have been able to donate to many charities and put three daughters through post-secondary education. Thank-you for this opportunity.

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Terms: Cash, Cheque, Certified Cheque or Letter of Credit from Bank or Credit Union on major purchases. Not responsible for errors, omissions, and deletions. Description of property is supplied by seller. We are not responsible for any misdiscription or misrepresentation as to the type or quality of any item.

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PIPELINE NEWS June 2019

A15

Small drilling program planned for Weyburn Unit, looking at possible natural gas liquids plant By Brian Zinchuk Goodwater – When oil differentials widened late last year, and the price of oil dropped it had an impact on planned drilling in the Whitecap Resources Inc.-operated Weyburn Unit. But the price of oil has improved, and now some activity is expected to pick up for the second half of the year.

That’s according to Darcy Cretin, the longtime superintendent of the Weyburn Unit. Asked on April 24 how things are looking for this summer, he said, “We have a small capital program for the year. So we’re doing to drill a small drilling program, and roll out a few CO2 patterns. So it’s probably a little bit smaller

than last year. But I think we’re also at a point where we’ve skewed our capital budget so more of the capital budget is going to happen in the second half of the year. I think we’ve given ourselves the ability to move work from 2020 into late 2019. “I think if oil prices continue to hang in where they are, I think there’s a

chance for us to accelerate some of our 2020 work into 2019.” For this year, only seven wells are planned. However, that’s an increase from the zero that happened in the Unit from when the downturn hit until last year, when Whitecap started drilling again. For four years, Cenovus had not done any drilling or rolled

out any additional CO2 patterns. When oil dropped from the US$70 range to the US$50 range, it deferred some activity from the first half of 2019. “Our budget initially anticipated starting drilling in the winter, taking a break through breakup, and finishing off in the middle of the year.” Those decisions were

made late last year, when the widening heavy oil price differential was having a substantial impact on the industry. “We deferred a lot of our drilling capital. “With Whitecap, we’re committed to doing it. It’s just a matter of pace.” The additional pattern rollouts are expected to be along the fringes, in the Ź3DJH$

^ĂƐŬĂƚĐŚĞǁĂŶŐŽǀĞƌŶŵĞŶƚƐĂLJƐƚĂdžƐƚƵĚLJƵƐĞƐŇĂǁĞĚŵĞƚŚŽĚŽůŽŐLJ Ż3DJH$ taxes to royalty payments to provincial sales taxes if they apply.” Eyre had some significant concerns about this report, and its methodology. She said, “Our message is about the flawed methodology in the report, and it has to get out. This particular Fraser report is based on flawed theoretical methodology that does not reflect the reality on the ground.” The report assumes the average well produces 50 bpd, at an average price of US$50 per barrel, a production level much higher that the reality in

Saskatchewan. She said the Scotiabank playbook, 2018, lists the top 20 oil plays in North America, and Saskatchewan has six in that top 20 list. “That’s what investors look at. Academics might not look at it, but investors do. “The major problems with this report is that it focuses solely on the last incremental marginal investment into an existing oil or gas asset. Contrary to the report’s title, which is supposed to focus on allnew investment, this actually doesn’t. It just reflects the very small subsection of investment based on the

last marginal dollar into an existing well or facility. “So the methodology they used ignores the drilling of a new well, ignores the incentives received on that new drilling, and focuses instead on the last maintenance into an old well. So it totally ignores Saskatchewan’s royalty regime incentives. And over 95 per cent of newly drilled wells in Saskatchewan receive a royalty rate of 2.5 per cent for at least the first 38,000 barrels of production. So how can a report that’s supposed to be about new investment fail to consider that?” Eyre said. “Mintz also takes the

average production rate for Alberta oil and gas wells, he ignores our price production-sensitive royalty regime, he uses Alberta’s averages, and by doing that, he really overestimates our provincial royalty rate. The average Tier IV well in Saskatchewan produces 14.5 barrels per day. That creates a royalty rate of approximately 5.5 per cent, at a price of US$50 per barrel, whereas the report assumes Saskatchewan wells have a production rate of 50 barrels per day, and at US$50 per barrel, a royalty rate of approximately 23.5 per cent would be generated,” she explained.

“And that means the reports assumed resource surcharge is way overstated, because it’s calculated as 1.7 per cent of the value of production.” She noted the report includes an analysis of Alberta’s oilsands royalty regime, but does not includes a similar analysis of Saskatchewan’s royalty regime for large scale thermal SAGD (steam assisted gravity drainage). “It’s as if the authors are completely unaware of the EOR (enhanced oil recovery) royalty regime,” she noted. “They also rely on the marginal effective tax and royalty rate, this METRR,

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methodology. It tries to account for everything – corporate income taxes, sales taxes on capital purchases, capital taxes, transfer taxes, stamp duties, profit-based resource royalties and levies as a share of the pre-tax rate on investment. It just isn’t very well suited to the landscape here.” Eyre said Mintz’s specialty is on harmonized sales tax, and that fits well under METRR analysis, but HST is a policy decision. It isn’t in place in Alberta and was abandoned in British Columbia. “What is he saying, that we should adopt HST?” “That’s my rant.”

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A16

PIPELINE NEWS June 2019

Blending heavy oil from western Saskatchewan most of last year Ż3DJH$ southwest and the north, and then the east. The southwest and north ones are essentially “tuck in,” as they can largely use existing infrastructure. “We did a fairly extensive 4D seismic shoot late last year. We’ll probably do another shoot in 2020. We’ve kinda settled into a two-year cycle. Every two years we strategically shoot some 4D seismic in areas where we want to understand the reservoir better, to see where the CO2 is going.” 4D seismic is a three-

dimensional seismic survey shot numerous times over the course of years. The fourth dimension is time. Potential NGL recovery plant “The other big one for us is a potential NGL (natural gas liquids) recovery plant. Right now we have what we call NGL-1. We process about 15 million cubic feet a day of solution gas from our battery – gas that is still entrained in the oil that comes off the treaters and tanks. We recover about 100 cubic meters of

ĨĞǁŵŽƌĞǁĞůůƐĂƌĞƉůĂŶŶĞĚĨŽƌƚŚĞtĞLJďƵƌŶhŶŝƚůĂƚĞƌ ƚŚŝƐLJĞĂƌ͘WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ

C4+, and sell it with our oil. We also make about 30 cubic metres per day of propane. We’re contemplating a similar NGL recovery plant on our entire recycle stream, up to 250 cubic million cubic feet of CO2. That’s about 16x bigger, volume-wise, for the volume of gas. The gas that we would be targeting is the CO2 that gets separated in the field. It comes in here, gets recompressed and reinjected. We’re doing that right now, but this would divert it through an NGL plant, recover whatever hydrocarbon liquids we could and then continue with reinjection,” Cretin said. “We’ve been doing quite a bit of review for the last couple of years. We might be close on making a decision on that this year.” If a decision is made to go ahead, it would take likely two years to complete. If it started late this year, the earliest it could be in service would be late 2021. One thing they do have on site now is a blending skid. “We’ve been hauling in heavy oil and blending

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tŚŝƚĞĐĂƉŝƐĐŽŶƐŝĚĞƌŝŶŐĂĚĚŝŶŐĂŶĂƚƵƌĂůŐĂƐůŝƋƵŝĚƐ;E'>ͿƉůĂŶƚƚŽŝƚƐďĂƩĞƌLJŶĞĂƌ 'ŽŽĚǁĂƚĞƌ͕ŝŶƚŚĞtĞLJďƵƌŶhŶŝƚ͘WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ it with our crude,” Cretin said. It’s determined by playing the price differential. “As long as the price differential between heavy oil and our Midale crude is more than the cost to truck it to Goodwater, then it makes sense. We buy the lower priced heavy oil, pay to truck it here and then sell it at Midale prices and make a few dollars per barrel.” “We were trucking

in oil, pretty much all of last year until March of this year,” Cretin said. “A lot of it was southwest Saskatchewan, some of our Whitecap properties in the Swift Current and Kerrobert area. There was some pipeline apportionment in Alberta. I think we had some oil coming in from Wainwright, one or two loads a day, not significant volumes.” There are 60 employees in the Weyburn Unit,

Keep Your Business Strategy in Fighting Form MNP offers hands-on management and operational expertise in every producing region in Western Canada to help you stay sustainable – no matter where the markets go. Contact your local MNP Oil and Gas Services consultant or visit www.mnp.ca ESTEVAN David Hammermeister, CPA, CA T: 306.637.2310 E: david.hammermeister@mnp.ca

SWIFT CURRENT Jeremy Rondeau, CPA, CA T: 306.770.3679 E: jeremy.rondeau@mnp.ca

Daryl Donovan, CPA, CA T: 306.637.2325 E: daryl.donovan@mnp.ca

WEYBURN Melissa Swayze, CPA, CA T: 306.848.5600 E: melissa.swayze@mnp.ca

LLOYDMINSTER Michael Freeman, CPA, CGA T: 306.825.9855 E: michael.freeman@mnp.ca

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and 50 to 100 contractors working on any given day. That includes four to five service rigs, some small pipeline projects. Whitecap will have a booth at the oil show in their usual spot. “We’re going to have representation from here and from Calgary,” he said. The Weyburn Unit produced just under 23,000 bpd, of which Whitecap’s share is 62 per cent.


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Estevan strongly represented at Regina Senate hearings on Bill C-48 By Brian Zinchuk Regina – The Senate Transportation and Communications Committee got an earful when it held a hearing May 1 in Regina, looking into Bill C-48, the Oil Tanker Moratorium Act. Nearly all the presentations were dead set against the bill save one. In a curious juxtaposition, Davide Latremouille, a fisheries habitat biologist originally from the Maritimes was representing the Skeena Fisheries Commission, whose membership included the hereditary leadership of several First Nations in the Skeena, British Columbia, watershed. He was calling for the tanker ban, while Sean Willy, president and chief executive officer of Des Nedhe Developments from Saskatchewan’s English River First Nation, expressed that the ban would be an impediment to northern jobs. The hearings were set up in panels made up of roughly similar interest groups, with up to four witnesses allotted an hour-long block. The witnesses each had five minutes to make an initial statement, and the rest of the time was made up by the senators asking more in-depth questions into their

positions. Speaking on behalf of the provincial government was Energy and Resources Minister Bronwyn Eyre, who got a half-hour panel to herself. Eyre said, “This Canadian energy crisis that we are in—because it is a crisis— represents; and is having on people. This crisis continues to put Canadian jobs at risk: thousands across Western Canada. “And these are Canadian jobs. Just like GM or Chrysler jobs or SNC-Lavalin jobs.  “We like to say that energy jobs are ‘people too.’� She stressed the double standard of allowing tankers off the East Coast, but banning them from the West Coast. There was a substantial Estevan contingent, especially after Senator Denise Batters put out a request for such representation. Other Saskatchewan legislators made similar urgings for people to come forward. John Breakey of Estevan-based Fire Sky Energy said, “The message to investors is Canada is not prepared to develop or maintain its economic engines. Canada is not open for business.� Independent Well Ser-

vicing’s Bryan Crossman said, “This is not just about the microcosm of a tanker ban on the northwest coast of British Columbia. This is about a much larger picture. Realistically, we are in a carbon-based economy right now and for the foreseeable future. The entire world needs reasonably priced, ethically produced, accessible energy to both maintain our Canadian standard of living and to raise the standard of living in the rest of the world. By not allowing Canadians the opportunity to sell our products to the world only allows other, less ethical and less environmentally friendly countries to sell at a higher price to the rest of the world, including Eastern Canada. This ties our hands in the most unfair, unethical way. Our own Canadian government allows U.S. based groups to fund activists to protest and block the movement of Canadian crude oil to tidewater. These groups are funded by corporations that buy our oil at very cheap, discounted prices, and then sell it at a large profit.� Jim Wilson of WilTech Industries spoke said, “Estevan is experiencing difficult business conditions.� He pointed out that in addi-

Senator Mike MacDonaldÍ•ĹŻÄžĹŒÍ•ŽĨEŽǀĂ^Ä?Ĺ˝Ć&#x;Ä‚Í•Ä‚Ć?ŏĞĚžĂŜLJƋƾĞĆ?Ć&#x;ŽŜĆ?ŽĨƚŚĞÇ Ĺ?ƚŜĞĆ?Ć?ÄžĆ?͘ KŜĞŽĨƚŚŽĆ?ÄžÇ Ĺ?ƚŜĞĆ?Ć?ÄžĆ?Ç Ä‚Ć?Jim WilsonÍ•ĆŒĹ?Ĺ?Śƚ͕ŽĨĆ?ĆšÄžÇ€Ä‚ĹśÍ˜WŚŽƚŽÄ?LJĆŒĹ?Ä‚ĹśĹ?ĹśÄ?Śƾŏ tion to the uncertainty in the oilpatch, the community has two coal-fired power plants, one with the world’s largest clean coal project. “Uncertainty is at its highest. We were a vibrant, growing community five years ago, and we are struggling for our existence. This federal government has regulated us into extreme uncertainty,â€? Wilson said. “We need access to global markets, via our rails and ports. The Saskatchewan oil and gas industry needs that same access, and we have seen that access denied. Presently, investor confidence has been lost due to the inability to get the oil to

market outside of the USA. We need pipelines and global shipping lanes, not promises of pipelines and barriers to global shipping.� Estevan Mayor Roy Ludwig said, “This is a bill that could potentially damage our chances to get our product, which of course, is oil, to the world market via the West Coast. At the very least, we need shipping lanes from the West Coast so we can offload our oil from the Prairies to China and other international markets.� Since 2014, hundreds of jobs have been lost in Estevan, “Something very daunting for a city of our size,� Ludwig said.

“Moving forward, somehow we have to reconcile environmental issues along with transportation of oil. This issue is dividing our country between east and west. We need a comprehensive, cohesive policy that we can put in place that will allow us to transport our oil, and, at the same time, to allow our fellow Canadians to the east, and even some out west, to understand and agree. “We are, as a country, being seen as a place where no longer big projects can be completed.â€? Representatives of municipalities and the oil Ĺš3DJH$

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PIPELINE NEWS June 2019

tĞLJÄ?ĆľĆŒĹśĹľÄ‚Ç‡Ĺ˝ĆŒĆ?ĂLJĆ?ĆšĹšÄžĆŒÄžĹ?Ć?ŽƉĆ&#x;ĹľĹ?Ć?ĹľĹ?ĹśƚŚĞĹ˝Ĺ?ůƉĂƚÄ?Ĺš By Brian Zinchuk Weyburn – Weyburn Mayor Marcel Roy said, “There’s a lot of optimism,â€? with regards to the oilpatch, which he works in. On May 14 he spoke highly of the two headline speakers at the Saskatchewan Oil and Gas Show June 4-5, saying, “Vivian Krause and Rex Murphy are coming, and that’s very exciting.â€? As for what’s new in Weyburn, there’s some construction happening along Highway 13 in the city’s northeastern corner, where ground preparation is taking place. However, Roy said the new project has not yet been announced. The city is completing a clean water reservoir which will be enough to supply up to 20,000 people. In early May there was a sod-turning for new

$33 million school. A $25 million community centre is also in the works. It will include a half-size soccer field, art gallery, kids climbing centre, upstairs walking track, pickleball court, four sports simulators and an outdoor hockey rink. “This is very much a regional centre,� he said. The most recent provincial budget announced $2.5 million for the planning and development of a new hospital in Weyburn. Roy estimates it will cost something around $100 to $120 million. He noted that’s unfortunate, because in the late 1980s, it would have been more like $15 to $17 million. The community has raised $20 million for the new hospital, and the city has nearly raised its contribution.

Roy works in the oilpatch where he owns a safety business. “It’s steady, but nothing like it was,� he said. But he added there’s optimism for the third and fourth quarters this year. One of the key issues in the region is Crescent Point Energy Corp.’s sale of six parcels of properties, five in southeast Saskatchewan and one in southwest Manitoba. The company has field offices in Weyburn and Carlyle. “I would hope they keep it together,� Roy said. “They’ve done well for this community.� Asked if there were any new oilfield ventures in Weyburn he was aware of, Roy said no, but business has been basically stable. He pointed out the community has several service rig companies and

trucking outfits. Weyburn has rescue and fire truck agreements with all the rural municipalities south of Weyburn, to the border, he added. As the downturn in the oilpatch hit the provincial government’s coffers, it, in turn, reduced money for Weyburn. Roy pointed out that the city lost $1.4 million per year in grants-inlieu, which used to be paid by Crown corporations instead of property taxes. Roy said that was actually a royalty, dating back to 1950. “Weyburn’s been cut back through the years from the province. That’s reflective on lost revenue that was from oil,� he said. As oil prices and royalties build, dollars will be handed back to the city, Roy expects. The city has over 500

Weyburn Mayor Marcel Roy lots available, and plenty of existing homes for sale. There are also rentals available. “There’s lots of houses for sale,� he said. “Companies have downsized, right-sized. They’ve become more lean. “This is the lowest, longest slump I’ve seen, but we’re on an optimistic upturn. It’ll be a while before it comes back,� he said. Two things keep Roy

up at night – ensuring Weyburn has sufficient water supply as it grows, and robotics. “I can see where robotics and automation are taking over. I think it’s going to have an impact on jobs,� he said. “But how much it’s going to impact the oilfield, I’m not sure. “It’ll increase safety, but reduce people. How much is yet to be seen.�

Lloydminster and Kindersley mayors among witnesses Ĺť3DJH$ industry from throughout Saskatchewan testified before the committee. The full slate of witnesses included several representing municipalities. This included Lloydminster Mayor Gerald S. Aalbers, Estevan Mayor

tation included John Breakey, vice president land (Fire Sky Energy Inc.); Brian Crossman, field supervisor/marketing  (Independent Well Servicing Ltd.); Matthew K. Cugnet, president  (Valleyview Petroleums Ltd.); Dale Mainil,

Roy Ludwig, Kindersley Mayor Rod Perkins, Swift Current Mayor Denis Perrault, Kindersley Councillor Gary Becker and Saskatchewan Association of Rural Municipalities president Ray Orb. Oilfield represen-

vice president, acquisitions ( Jerry Mainil Limited), Blair Stewart, former chief executive officer and founder of Stewart Southern Railway  (as an Individual); Jim Wilson, president  (Wil-Tech Industries Ltd.); Mark Prystupa, director, gov-

ernment, Indigenous and community relations (Suncor Energy); Sean Willy, president and chief executive officer (Des Nedhe Developments) and Cal Broder, president and chief executive officer (BFH Corp.) Other organizations

were also scheduled to provide testimony. Their representatives included John Hopkins, chief executive officer (Regina & District Chamber of Commerce); and Keith Moen, executive director  (North Saskatoon Business Association).

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PIPELINE NEWS June 2019

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By Brian Zinchuk Weyburn – Miller Well Servicing was an early adopter of freestanding service rigs. They grew through the boom years, have slogged through the bust years, and now see optimism on the horizon. To that end, they’ve just retrofitted their very first rig, adapting it to the demands of the current market. Bruce Miller is president and owner of Miller Well Servicing of Weyburn. He spoke to Pipeline News on May 10. Miller said, “I started in 1987 for Lawrence Woodard, for Woodard Well Servicing.� He started on the floor, like just about everybody else. He grew up on a farm just north of McTaggart. He did well at school, but it just wasn’t his thing. He originally planned to be a farmer. “Coming through the 80s, it wasn’t very pretty,� he said. “I kinda fell in love with the money of being a roughneck,� he said. Miller worked his way up to toolpush by 1997. Woodard sold out to a group called Petro Well Servicing, which was later sold to Precision Drilling. He worked with them until 2000, then got a job battery operating with Startech at Lougheed, south of Weyburn. He only did that for a year before seeing an opportunity to get back into the service rig business. He got a couple partners together and fired up Miller Well Servicing in 2001. The first rig arrived in time for the oil show that year, and the brand new rig got a special spot. “We got it home the day before,� he said. “We took it to the truck wash

and stood it up in the oilshow yard. That rig was a freestanding single, “At the time, it was fairly unique. There were a couple freestanding rigs around, but this was one of the first, in this area.� A freestanding rig uses its own guy wire system without anchors. The previously common design involved an anchor truck drilling anchors into the lease before the rig arrived. The rig’s guy wires would then be attached to the anchors while it was standing so as to stabilize it. Freestanding rigs did away with that system. Over the next decade, freestanding rigs became the norm, and the use of anchors became dinosaurs. “In 2002, we bought out Lyndale Well Servicing of Lampman. They had been in business a long time, since around 1983, with one single rig. “We worked it until October 2002 then retrofitted it for freestanding,� he said. Since then, Miller Well Servicing has only had freestanding rigs. They bought another used rig from a company in Alberta, then built a new freestanding double in 2005. “That was our first double. That was pretty unique, to be a freestanding double in 2005,� Miller said. They were working for a lot of little customers, several based in Weyburn. “Have rig, will travel, anywhere in southeast Saskatchewan that someone has a job for us,� he said. There for the initial Bakken boom Around this time, oil began its climb, eventually reaching the dizzying height of US$147

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Bruce Miller stands at the brake handle of Rig 1, the rig that started it all for Miller Well Servicing. Originally one of ƚŚĞÄŽĆŒĆ?ĆšÄ¨ĆŒÄžÄžĆ?ƚĂŜĚĹ?ĹśĹ?Ć?Ĺ?ĹśĹ?ĹŻÄžĆ?Ĺ?ĹśƚŚĞÄ‚ĆŒÄžÄ‚Í•Ĺ?ĆšŚĂĆ?Ä‚ĹśÄžÇ ĚŽƾÄ?ĹŻÄžÄšÄžĆŒĆŒĹ?Ä?ĹŹÍ•Ä‚Ć?ƚŚĞĹľÄ‚ĆŒĹŹÄžĆšÄ¨Ĺ˝ĆŒĆ?Ĺ?ĹśĹ?ĹŻÄžĆ?ŚĂĆ?ÄšĆŒĹ?ĞĚĆľĆ‰Í˜ WŚŽƚŽÄ?LJĆŒĹ?Ä‚ĹśĹ?ĹśÄ?Śƾŏ per barrel in the summer of 2008. That same year, Saskatchewan set a record with over a billion dollars in Crown land sales. “When we got Rig 4, it went to work for Mission Oil & Gas,â€? he said. Mission was one of the pioneers in the early days of the Viewfield Bakken play near Stoughton. “It was so busy, you didn’t have time to talk about it,â€? he said. Initially Miller had hoped his company would become a two or three rig company. “Everywhere you went, people were looking for more equipment,â€? he said. “We pretty much built a rig a year. Rig 9 was our last rig, around 2012.â€? In southeast Saskatchewan, it’s pretty common for service rig companies to have around

10 rigs. Asked why that is, Miller responded, “For us, we’re still trying to maintain the small family-operated business. At a certain point, it’s no longer small.� Getting much bigger takes away from that. “If you have nine rigs running, that’s 50plus employees. I like to be able to walk up to any rig and know everybody’s name,� he said. They have their own in-house safety coordinator as well as a mechanic. “Relatively speaking, from 2001 to 2014, I would say we never really had a slowdown. Obviously, there were some peaks and valleys, but really nothing like 2014.� When it came to the downturn, he said, “It was the spring of 2015, you really started to notice it.�

He noted that the activity level in 2015 was around 85 per cent, and it dropped about 10 per cent each year. Last winter it hit 50 per cent. Staff was reduced. The low point was the spring of 2018. “It started coming back, but when the price goes below US$50, boom, a lot of wells come off the list,� he said. With the price of oil in the US$60s, a lot of those wells are back on the list. “We’ve brought some people back,� he said. Help wanted However, as most service rig companies have told Pipeline News over the past couple years, finding workers has been hard. “It’s a real issue in all of southeast Saskatchewan,� he said. “There’s a lot of people

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who got burnt.â€? Like many service rig companies, they’ve got a help wanted sign. Theirs went up near the Tim Hortons early this year. It’s tough finding enough people. Miller noted that just that week, he got a call to send an additional rig out, and he had to scrape to find enough people to staff it. “We have five rigs working today.â€? Most of their work is within a 100 kilometre circle around Weyburn. The fleet is now made up of three singles and six doubles, but one of the singles is mothballed. There’s no market for singles, he noted. It’s double or nothing, so to speak. To that end, they recently retrofitted Rig 1 from a freestanding single Ĺš3DJH$


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PIPELINE NEWS June 2019


PIPELINE NEWS June 2019

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PIPELINE NEWS June 2019

DŽƌĞŽƉƟŵŝƐŵ͕ďƵƚ dŚŝŶŐƐĂƌĞůŽŽŬŝŶŐďĞƩĞƌ ƚŚĞƌĞ͛ƐĂƐŚŽƌƚĂŐĞŽĨŚĂŶĚƐ ĨŽƌ&ŝƌĞŵĂƐƚĞƌ Ż3DJH$ to a freestanding double. “It was not going to leave the yard without it,”

Miller said of the double derrick. They sent it away in October. “We just got it

Miller Well Servicing was an early adopter of freestanding rigs. Photo by Brian Zinchuk

back in February.” Optimism “There does seem to be more optimism right now than earlier. The change in government in Alberta creates more optimism there. That trickles down. Alberta’s always the big brother of the West,” he said. Asked what are some of the challenges for the industry, he said the first one is staffing. If you expect more work, it’s tough to get enough guys in time. The second issue is overcapacity. “Southeast Saskatchewan is flooded with a lot of service rigs,” he said. Some have moved to Alberta, but there’s a surplus of iron, according to Miller. The third issue is the price of oil, obviously, he said. The fourth challenge, according to Miller, is drilling activity. He noted for every drilling rig, there’s a service rig following it. “If there’s drilling in the area, I consider the area active,” he said. No matter what, there will always be service work, Miller concluded.

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Weyburn – Firemaster, which offers industrial fire truck, H2S safety and medic services in Weyburn, is seeing things improve this year. “No doubt, it’s challenging in the industry with the downturn, oil prices and everything. We’ve definitely had to adjust accordingly,” said Dennis O’Connor, station manager in Weyburn. Like most oilfield service companies, they’ve had to make adjustments to sustain their business. But things are looking better now. “I think we’re on the right path and things are looking a little better down the road. At the end of the tunnel, we can see a little bit of light,” he said with a laugh. O’Connor has been there since 2005, the same year they fired up in Weyburn. They have 17 people on staff in Weyburn. In recent years medics have been integrated in the operation, having been amalgamated from another division. “Medical right now is the lion’s share, and has been for the last couple years because of a contract we have to fulfill. Their working areas are

primarily south and east of Weyburn. They stretch a little into Manitoba, he noted. All their medics are qualified as NFPA 1001 trained firefighters as well as primary care paramedics. The Weyburn fleet includes three mobile treatment centres, a firetruck/ shower unit, seven air trailers and a vapour suppression unit. That vapour suppression unit was added five years ago. It is used to pump foam into a sealed unit. That foam encapsulated the explosive vapours and the H2S vapours. It’s water-based, and goes out premixed so you don’t need an additional water source on location. The firetruck is used when pumping flammables on location. “We go out and do fire standby,” he said. Firemaster offers 24hour emergency response. Their fire truck will often be called out in the summer when lightning strikes oilfield facilities, causing fires. The tire truck pumps a foam concentrate through an e-ductor, and that meters how much foam goes into the water stream. “Last year we went to three,” O’Connor said of

Dennis O’Connor runs Firemaster’s Weyburn ůŽĐĂƟŽŶ͘WŚŽƚŽďLJƌŝĂŶ Zinchuk lightning strikes. The company moved to its current location on the northeast corner of Weyburn in 2011, just before that year’s oilshow. They will be in this year’s show again. Spring is traditionally busy due to turnarounds, he noted. By mid-May, they had done three turnarounds already. For the summer of 2019, O’Connor said, “I think it looks positive, but I’m optimistically cautious.” He noted the whole industry can act like a yoyo, depending on the price of oil.

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PIPELINE NEWS June 2019

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Conquest Equipment now calls Estevan home By Brian Zinchuk Estevan – Conquest Equipment Inc. is the new owner and occupant of the former Canyon Technical Services building in Estevan’s Glenn Peterson Industrial Park, having relocated from Oxbow at the beginning of the year. Greg Hodgson is the managing partner of Conquest. He was one of the founders of a steel fabricating business and has a background in manufacturing.

Sam Shimwell handles marketing and is part of the sales team. “Our business has been growing fairly rapidly the last three years,” Hodgson said on April 2. The company has been in business since 2011. Some of the staff is community from Oxbow. Some live in Estevan. The real estate was pretty attractive he said, as not much had been selling and there was a lot

on the market. “It’s gone quite well, there weren’t many hiccups” Hodgson said of the move. “Our focus is Western Canada; Manitoba, Saskatchewan, Alberta and B.C, and also the northern states,” he added. “We’ve been busy and growing quite quickly.” They noted that percentage-wise, the company has grown 25 per cent per year for the last three years.

Oil used to be a larger part of their business, as much as 80 per cent, but diversifying into other markets and the downturn means it is now 10 to 15 per cent of Conquest’s work, they noted. Asked if the oilpatch picked up, he would expect their sales to up as well, Hodgson replied, “Definitely.” “It’s not just survival. We’ve been growing. If the oilfield came back, it would be gravy.”

Shimwell said they are targeting roadbuilders, mines, pipelines and civil construction. “We’ve really changed our business model in the last three years. “We refocused the types of equipment we were renting and the types of people we were marketing to,” Hodgson said. “We’re bringing on some new lines of equipment. “We just started manufacturing our own

line of tow-behind compactors.” Those are the rollers often seen towed behind tractors during road construction. Conquest has also started selling some lines of hydraulic attachments. In the shop they had rows of excavator-mounted compactors and hydraulic hammers. “Compaction is the majority of our focus now,” Shimwell said. Ź3DJH$

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PIPELINE NEWS June 2019

ŽŵƉĂĐƟŽŶŝƐŬĞLJĨŽƌŽŶƋƵĞƐƚ Ż3DJH$ “They complement all the compaction products we offer.” The lineup includes sheep’s foot and smooth drum compactors in a range of sizes, from trench rollers to 84 inches wide. Their largest roller is 20 tons. They have dozers, excavators, wheel loaders and skid steer loaders They used to carry more dozers and excavators, but the lineup changed as the nature of their business changed. Compaction, they noted, is not just roadbuilding, but also on leases, in civil construction and mining applications. The new location provides 4.5 acres of land and a larger building, at 20,000 square feet. Hodgson said, “Another segment we sell a lot of equip-

ment for our customers on a brokerage or consignment basis. Customers can take advantage of Conquest’s extensive network to help move surplus equipment.” This is done through Conquest’s various marketing avenues. “It’s really been a growing part of our business,” he said. Conquest offers rentals, purchases, leasing and rental purchase options. Another part of the business is carrying an inventory of replacement parts, including chisels, hoses, seal kits, rims and tires. The company has their own semi and trailer as well as a knuckleboom picker for deliveries. They also use third parties for that purpose.

Conquest Equipment Inc. moved into the former Canyon Technical Services shop in Estevan early in 2019. Photo by Brian Zinchuk

A line of rollers await going out for the season.

Sam Shimwell,ůĞŌ͕ĂŶĚGreg Hodgson ƐƚĂŶĚďĞĨŽƌĞĂƌŽůůĞƌ͘ŽŵƉĂĐƟŽŶŚĂƐďĞĐŽŵĞ a key component of Conquest’s business.

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PIPELINE NEWS June 2019

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New service rig for John Kmita Ltd. By Brian Zinchuk Weyburn – When the downturn hit, pretty much every oilfield services company quit buying new iron, from trucking companies to drilling rigs to service rigs. As the downturn went on for year after year, a new piece of iron became a rare thing, indeed. But breaking out of the doldrums is John Kmita Ltd., a Weyburnbased service rig outfit. Jonathan Kmita said they picked up the new rig in November, a double-triple, meaning it can handle two joints of pipe or three joints of rod at a time. “I should have pulled the trigger a couple months before I did,” Kmita said. If he had, he would have been able to get a Tier III engine, but this engine is a Tier IV. “It was one of the only rigs being built in the country, it was two months longer than it was supposed to be. So when we picked it up, they were standing at the door, damned near crying, because it was their only work leaving out the

door.” It was built in Leduc. “Part of my reasoning was I didn’t have much for debt load. Hopefully we’ll see a little rebound and things will start looking up by the time we have to start paying for it.” The new rig is Rig 6. Rigs 1 and 2 are retired now. Rig 1 was purchased by his late father, John Kmita, and put to work over 4 decades ago, being rebuilt several times over that time. “It wasn’t the plan, but it seems everyone fell out of love with the singles again,” he said. Thus, the new rig was a double. Three of the four rigs have been busy. Much of their work is in the Weyburn Unit, with two rigs focused on that area. The third was working near Stoughton. Asked how the last few years have been going, he said, “We got lucky with having the right customers. Last year, with Rig 1 sitting from the end of May until it did a little work in November, it hurt the pocketbook. Being down 30, 35 per cent on revenue, you’re just keep-

ing your head above water. All it took was for that rig to sit for six months. “I decided to retire it before it sat. Once it did sit, breakup came and it never did go back out again until November. It worked for a month. We got the new rig in the end of November, and it went to work in February. Now we’re trying to get it back to work.” If there was work for it, Rig 1 could go back to work. “There’s nothing wrong with it. Just people fell out of love with singles,” he said. He tried to time the new rig coming out of the downturn while equipment was cheaper. “I paid less for it than Rig 5 in 2013.” They have enough hands for four rigs, but that could change in a day or two, he noted. “Maybe just enough guys right now," he said. The total is around 26 people, all in. John Kmita passed away in March 2015. “It’s a big change. He wasn’t that involved, but he was still involved. He always had his finger on the

dŚŝƐŝƐŽŶĞŽĨƚŚĞĮƌƐƚŶĞǁƐĞƌǀŝĐĞƌŝŐƐƐĞĞŶŝŶLJĞĂƌƐŝŶƐŽƵƚŚĞĂƐƚ^ĂƐŬĂƚĐŚĞǁĂŶ͘ Jonathan Kmita ŽĨ:ŽŚŶ<ŵŝƚĂ>ƚĚ͘ĨĞůƚŝƚǁĂƐŶĞĐĞƐƐĂƌLJƚŽƌĞƉůĂĐĞĂƐŝŶŐůĞǁŝƚŚĂ ĚŽƵďůĞ͕ĂŶĚŚĞƌĞŝƚŝƐ͘WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ pulse. In this downturn, you would look to him for advice, and he’s not there to ask anymore. He’d been through several of them.” Indeed, when Pipeline News wrote the 40th anniversary story of John Kmita Ltd., he told a tale about the kids getting frostbite, looking into an empty fridge. “I loved that story,” Jonathan said. Jonathan and his brother Tyler run the company together. Tyler

looks after the safety aspect. “Between him and I, we look after the rigs, and the farm, and the cows. And I’ve got all my bucking horses. We’re never short of anything to do.” How does he find time for all that? “There’s 24 hours in a day,” he said with a laugh. “Sometimes you use up quite a bit of it. “That’s the nice thing about having long term employees. They require minimal supervision at

times, especially the busy summer months, when you’re between farming, ranching, rigs and rodeo.” They seed 2,500 to 3,000 acres, and have that again in grass and hayland. There’s just under 200 head of cattle, and 60-70 bucking horses, not including the saddle horses. Those bucking horses supply the pro rodeo circuit in Alberta, British Columbia, Idaho, Oregon and Washington. Ź3DJH$

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A26

PIPELINE NEWS June 2019

18 Biennial th

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Join us for an informational address from our keynote speakers.

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7:30 a.m.

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Sponsored by: Badger Daylighting Location: Weyburn Golf Club

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1:00 p.m.

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Opening ceremonies/chain cutting with City of Weyburn Mayor Marcel Roy

10:00 a.m. 12:00 p.m.

SHOW OPENS - Weyburn Curling Rink Luncheon

12:15 p.m. 12:30 p.m.

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Guest Speaker: VIVIAN KRAUSE

7:00 p.m.

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8:30 p.m.

Awards Ceremony: SASK & SE OILMAN OF THE YEAR

11:00 p.m.

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PIPELINE NEWS June 2019

A27

John Kmita Ltd. took part in the convoy to Regina Ĺť3DJH$ When things are slow on the rigs, the guys sometimes find themselves working on the farm/ranch. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s the nice part about working in the Weyburn Unit. In the spring, I find make-work projects on the farm and ranch that gives them a paycheck. You invest in them, and they invest in you, so that when the rig goes back to work, theyâ&#x20AC;&#x2122;re ready to go. It makes it easier to find guys, especially with the downturn, where thereâ&#x20AC;&#x2122;s not a lot of people wanting to make careers in oil and gas right now,â&#x20AC;? he said. For the rest of 2019, he said, â&#x20AC;&#x153;It looks like the status

quo. That hinges on the price being relatively stable.â&#x20AC;? John Kmita Ltd. sent some guys and equipment to the Regina Rally Against the Carbon Tax in early April. â&#x20AC;&#x153;For us, in oil and gas, itâ&#x20AC;&#x2122;s a bit of a kneejerk reaction. In Western Canada, weâ&#x20AC;&#x2122;re always reactive, and have to try to be proactive.â&#x20AC;? Kmita thinks if federal policies are going to be the death of the industry, so you better say something before its too late. He noted Rig 3 was bought in 1985, during the days of the National Energy Program. â&#x20AC;&#x153;The first Trudeau nearly did us in,â&#x20AC;? he said. â&#x20AC;&#x153;A new rig, and another Trudeau is in government.â&#x20AC;?

Thatâ&#x20AC;&#x2122;s a shiny new service rig for John Kmita Ltd. This is Rig 6.

What fuels the oilpatch? By Brian Zinchuk Weyburn â&#x20AC;&#x201C; Quick question: what fuels the oilpatch? If you thought diesel, or gasoline, youâ&#x20AC;&#x2122;d be wrong. Anyone whose worked in the field and has spent time in a doghouse knows itâ&#x20AC;&#x2122;s coffee. And thatâ&#x20AC;&#x2122;s why Apex Distribution carries it. And sugar. And cups. Because no oneâ&#x20AC;&#x2122;s turning to the right without their Folgers or Maxwell House. When you walk into the back of their Weyburn shop, itâ&#x20AC;&#x2122;s the

The blue trucks in the April 4 Regina Rally Against the Ä&#x201A;Ć&#x152;Ä?ŽŜdÄ&#x201A;Ç&#x2020;Ä?ŽŜÇ&#x20AC;Ĺ˝Ç&#x2021;Ç Ä&#x17E;Ć&#x152;Ä&#x17E;:Ĺ˝Ĺ&#x161;Ĺś<ĹľĹ?Ć&#x161;Ä&#x201A;>Ć&#x161;Ä&#x161;Í&#x2DC;Í&#x203A;Ć?Ä?ŽŜĆ&#x161;Ć&#x152;Ĺ?Ä?ĆľĆ&#x;ŽŜ Ć&#x161;Ĺ˝Ć&#x161;Ĺ&#x161;Ä&#x17E;Ć&#x2030;Ć&#x152;Ĺ˝Ć&#x161;Ä&#x17E;Ć?Ć&#x161;Í&#x2DC;Í&#x17E;zŽƾÄ?Ä&#x17E;ĆŠÄ&#x17E;Ć&#x152;Ć?Ä&#x201A;Ç&#x2021;Ć?ŽžÄ&#x17E;Ć&#x161;Ĺ&#x161;Ĺ?ĹśĹ?Í&#x2022;Ä?Ä&#x17E;ĨŽĆ&#x152;Ä&#x17E;Ĺ?Ć&#x161;Í&#x203A;Ć?Ć&#x161;ŽŽ ĹŻÄ&#x201A;Ć&#x161;Ä&#x17E;Í&#x2022;Í&#x;Ć?Ä&#x201A;Ĺ?Ä&#x161;:ŽŜÄ&#x201A;Ć&#x161;Ĺ&#x161;Ä&#x201A;Ĺś<ĹľĹ?Ć&#x161;Ä&#x201A;Í&#x2DC;WĹ&#x161;Ĺ˝Ć&#x161;Ĺ˝Ä?Ç&#x2021;Ć&#x152;Ĺ?Ä&#x201A;ĹśĹ?ĹśÄ?Ĺ&#x161;ƾŏ

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closest thing to the door. â&#x20AC;&#x153;Rig crews donâ&#x20AC;&#x2122;t want to drive all over town to pick up a can of coffee,â&#x20AC;? said Trevor Pandachuk on May 14. The same thing goes for five-gallon jugs of water. Pandachuk does inside sales with Apex in Weyburn. In his younger days, he worked in the field, doing oilfield maintenance. â&#x20AC;&#x153;I used to work in the field. I worked in maintenance for Midale Petroleums for 16 years. I turned 40 and realized you know, Iâ&#x20AC;&#x2122;m too old for this, pulling pipe wrench-

es in -30 C.â&#x20AC;? Back in 1978, he was driving from his home in Moose Jaw to a party in Estevan when he saw a sign for the distillery in Weyburn. He initially got a job there, but eventually ended up working in the oilpatch. That perspective of having working in the field is useful when youâ&#x20AC;&#x2122;re on the other side of the counter, supplying rope, soap and dope. Apex specializes in oilfield supply, but they also have safety supplies and provide a fair bit for

farmers, especially during seeding and harvest. The hydraulic hose area in the back is particularly important during those times of the year. Lately, theyâ&#x20AC;&#x2122;ve been selling some water hoses to famers who are trying to fill up their dugouts, Pandachuk said. Heâ&#x20AC;&#x2122;s one of four people working at Apexâ&#x20AC;&#x2122;s Weyburn location. Between them, the offer 24/7 on call service. â&#x20AC;&#x153;Youâ&#x20AC;&#x2122;ve got to a little bit of everything,â&#x20AC;? he said. â&#x20AC;&#x153;If you need it, weâ&#x20AC;&#x2122;ll Ĺš3DJH$

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A28

PIPELINE NEWS June 2019

They'll get 'it', whatever 'it' is Ż3DJH$ have it, or we’ll get it.” However, sometimes after a request comes in, there’s a little head scratching as to how they’ll get “it,” whatever “it” is, but that’s part of

the job. It could be a pallet of water softener salt, or batteries, or hose. The store is open 6:30 a.m. until 6 p.m. “You’ll see customers first thing in the morning, then at the end of the day,” Pan-

^ƵƉƉůLJƐƚŽƌĞƐŽŌĞŶƚĂůŬĂďŽƵƚĐĂƌƌLJŝŶŐ͞ƌŽƉĞ͕ƐŽĂƉĂŶĚ ĚŽƉĞ͘͟tĞůů͕ŚĞƌĞ͛ƐƐŽŵĞŽĨƚŚĞƐŽĂƉĂƚƉĞdžŝƐƚƌŝďƵƟŽŶ ŝŶtĞLJďƵƌŶ͘

dachuk said of their busy times, as crews go out or come in. Sometimes they’ll get called in after hours as many as three times in one day. “We don’t charge to be on call. It’s a service,” Pandachuk said. He doesn’t mind being called in, because he used to be the guy on the other end of the phone. “You understand what the guys are doing. Been there, done that. It used to be me, making the call,” he said. “I much prefer being the guy getting the call, and not driving the hours to go fix it.” At the upcoming Saskatchewan Oil & Gas

Show, to be held June 5-6, you’ll likely see Pandachuk moving around on a side-by-side. This year, the 19th show, marks something approaching 38 years that he’s been volunteering for the show, starting right at the beginning. Pandachuk’s been on the board for 10 or 12 years, he said. “It’s a good board.” His role is “show services.” What that means is he looks after anything affecting the grounds, facilities, and security. While there are committees looking after different areas, he’s the overview guy.

What fuels the oilpatch? Trevor Pandachuk knows, and ŝƚ͛ƐƐƉĞůůĞĚ͞ĐŽīĞĞ͘͟WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ

Every two years he takes two weeks of his own holiday time to work with the show. “It’s a volunteer thing, and you’ve got to step up,” Pandachuk said. That involves a lot of 10 to 12 hour days over those “holidays,” if you can call them that. But this will be the

last year he handles show services. He’s not resigning from the board, but he will not be doing the same role. “Trevor Sealy is going to take over for me. I think he’s a good choice. I think he’ll be dedicated.” “I don’t mind it, but I’m tired,” he said. This is Pandachuk’s fifth show in this role.

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PIPELINE NEWS June 2019

A29

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A30

PIPELINE NEWS June 2019

KƉƉŽƌƚƵŶŝƟĞƐĨŽƌďŽůƚͲŽŶ͕ŽƌŐĂŶŝĐŐƌŽǁƚŚ͗sĞƌƚĞdž By Brian Zinchuk Weyburn – Vertex Resource Group Ltd. has been growing in the last several years through numerous acquisitions. One of those, Sonic Oilfield Services, resulted in a Weyburn branch. Deon Walsh is vice president of environmental services. Donna Juravle is the office manager at the Weyburn station, Scott Juravle, is the operations manager. They spoke to Pipeline News on May 9 at their shop south a few kilometres south of Weyburn on Highway 35, where the company moved in July 2018. “Over the past year with Vertex, we’ve been looking at strategic acquisitions that would give us a good geographical footprint within various regions where we felt the market would remain steady, and where we felt we would have an opportunity to grow our business, at the same time as creating employment opportunities for people in the various communities in which we acquired companies. “Over the past year, we’ve acquired Sonic Oilfield Services. They had

sĞƌƚĞdžE'>ƚĂŶŬĞƌ͕ǁĞĂƌŝŶŐƚŚĞĚĞĐĂůƐŽĨŝƚƐƌĞĐĞŶƚůLJĂĐƋƵŝƌĞĚdŚƌĞĞ^ƚĂƌdƌƵĐŬŝŶŐĚŝǀŝƐŝŽŶ͕ĚƌŝǀĞƐƉĂƐƚƚŚĞĐŽŵƉĂŶLJ͛ƐtĞLJďƵƌŶďƌĂŶĐŚ͘ operations in Weyburn and Kindersley,” he said. Donna came on as part of the Sonic acquisition. “And then the other acquisition we made was TSL Industries. They have operations in Kola, Manitoba, and Waskada, Manitoba. So again, looking for strategic acquisitions and growth opportunities, TSL was one we felt would fit out strategic plan in growing the business. “The other acquisition was Three Star Trucking out of Alida, Saskatchewan. The acquisition, again, with Three Star, gave

us another geographical footprint within southeast Saskatchewan, being in Alida. It also helped strengthen our operations in Grande Prairie and surrounding areas including our operations in Rycroft, Valleyview, and Whitecourt.” The Three Star acquisition brought Vertex into the natural gas liquids (NGL) business – NGL, propane, butane. He noted, “That allowed us to get into a market which Vertex had not had any exposure in, in the past. It also gave us the opportunity to go north-south of the border, so we haul liquid into the

Deon Walsh͕ůĞŌ͕ Donna Juravle and^ĐŽƩ:ƵƌĂǀůĞand stand before Vertex’s Weyburn ůŽĐĂƟŽŶ͘WŚŽƚŽďLJƌŝĂŶŝŶĐŚƵŬ

U.S. as well. “So with those acquisitions, and some organic growth, it gives us a footprint in the trucking business, from Fort Nelson, B.C., to Waskada, Manitoba,” Deon said. Looking at power units, including light trucks, semis and power units, Vertex as a whole has about 520 units, of which about one third is in southeast Saskatchewan and southwest Manitoba. They have about 150 people working in the region. Donna said they have close to 20 people working out of Weyburn, four in the office, and 13 trucks,

with a few additional drivers in excess of the number of trucks. Weyburn is pretty much all tank trucks, as well as a combo vac. If they need additional or different units to meet client needs, they can be pulled from other sites like Regina, for example. A lot of their work in the Weyburn area involves a drive straight south, to the Oungre-Torquay area. Asked about the rest of 2019, Scott said, “As it stands right now, I think it looks good.” Deon said, “For growth plans, following an acquisition, we look at what other services our clients may need and bolt those on to the existing work that we have with them. I think, in the near future, there’s going to be more organic growth in the assets we have. Is there an opportunity to put more of our specialized cleaning services, turnaround services, semi-vacs, vac trucks, in the area?” In the Lloydminster area they run about 40 units, including vac trucks, combo vacs, chemical cleaning units, high-pressure water blasting units,

pressure trucks, bundle blasting and hot oilers. “In the Lloyd area, we do a lot of production service work in the field, but we also have our industrial cleaning group, which do a lot of turnarounds in petrochemical facilities, pulp mills, and various batteries. They do turnaround work in the oilsands as well,” he said. Vertex bought Hurricane Industries in Lloydminster 1.5 years ago. “That group also has a satellite office in Regina as well. We provide services to ethanol plants, fertilizer plants.” Their Saskatchewan locations include Alida, Regina, Weyburn, Kindersley, Lloydminster and Edam. Asked if they’ve been aggressive, Deon said, “We look for strategic opportunities that will give us a good geographical footprint. We call it responsible growth, making sure we look at the various areas, the potential acquisition, and how it would suit our organization and our growth strategy, and how it would give the customers the option for additional services and create an overall better Ź3DJH$

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PIPELINE NEWS June 2019

A31

Dividend increase for Whitecap; ‘defensive’ capital ƉƌŽŐƌĂŵŝŶĮƌƐƚƋƵĂƌƚĞƌϮϬϭϵ (Daily Oil Bulletin) – Whitecap Resources Inc. announced a 5.6 per cent increase to its monthly dividend.

The dividend will climb to $0.0285 per share ($0.342 per share annualized) from $0.027 per share ($0.324 per share an-

nualized) effective for the May 2019 dividend, payable in June. The dividend increase represents three per cent of

anticipated free funds flow in 2019 and demonstrates confidence in its ability to generate free funds flow along with a commitment

Weyburn is tank trucks, but perhaps there will be more services in the future Ż3DJH$ service offering.” Saskatchewan and Manitoba account for roughly 30 per cent of Vertex’s business. Many trucking firms put the brakes on buying new iron when the downturn hit, and those brakes are just starting to come off. As for Vertex, Deon said the company has been buying some new iron.

“We got four new power units last year out of Estevan. In 2017, we built some new combo vacs and high pressure units. We bought some trailers. But the reality is, we’re also looking at what we had, and making the most sense of refurbishing, repaint, making sure they’re mechanically sound, and being smart with the equipment we have. Can we extend the life of it, or do

we replace it?” he said. They set aside some capital each year for the purchase of new equipment. Deon said they have cautious optimism going forward. “Things have picked up some,” he said, noting they are cautious on decision making, but making smart decisions. “When you come in and buy, you look to grow and expand the business,” he

said. “We see potential and new growth opportunities as well. He noted it’s important to support the local and be part of the community. This includes taking part in events and creating employment. To that end, Vertex will be taking part in the Saskatchewan Oil and Gas Show on June 5-6 as an outdoor exhibitor.

to return cash to shareholders. Defensive strategy As a result of the wide Canadian crude oil price differentials experienced in the fourth quarter of 2018, Whitecap elected for a defensive first quarter capital program. Capital spending in the first quarter was only $124.9 million, representing approximately 28 per cent of its capital budget for 2019. This compares to $182.6 million invested in the first quarter of 2018, representing 41 per cent of the capital budget for 2018. Whitecap’s commitment to capital discipline and strong operational performance resulted in a total payout ratio of 98 per cent after capital spending and dividend payments during

the quarter. Whitecap continues to have a strong balance sheet with net debt at $1.3 billion on debt capacity of $1.7 billion. On strip pricing, the company anticipates net debt to annualized fourth quarter funds flow to be 1.3 times as the company ramps up production to 77,000 – 79,000 barrels of oil equivalent per day ( boepd). Financial highlights Funds flow for the quarter was $161.2 million compared to $138.8 million in Q4 18, an increase of 16 per cent (18 per cent per share). It was down, though, from $164.8 million the previous year. Net loss climbed to $52.56 million from $7.76 Ź3DJH$

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A32

PIPELINE NEWS June 2019

Weyburn drilling program in second half of 2019 Ż3DJH$ million the previous year. Revenue dropped in Q1 to $343.24 million from $368.05 million. Average production of 70,666 boepd with capital expenditures of $124.9 million in Q1 19 compared to 73,120 boepd with capital expenditures of $182.6 million in Q1 18. Average production decreased three per cent and capital expenditures decreased by 32 per cent. The company continued to layer on additional hedges mainly with costless collars for downside price protection and upside participation. Forty-two per cent of the company’s second half 2019 crude oil production (net of royalties) and 12 per cent of 2020 crude oil production (net of royalties) are hedged using a combination of swaps and costless collars. Operational update The company executed on a defensive capital program in the first quarter investing $124.9 million in the drilling of 56 (52.1 net) wells of which six (5.1 net) were waterflood injection wells, continuing its strategy of mitigating corporate production declines through the optimization of its enhanced oil recovery (EOR) projects. West Central Saskatchewan The company drilled a total of 23 (22.9 net) Viking horizontal wells in the first quarter including two targeted horizontal water injection wells in Ker-

robert. Results from both drilling and waterflood optimization programs are exceeding expectations. This improved performance positively impacted first quarter production by over 10 per cent compared to budget forecast for this area. The company has an additional 77 (71.3 net) horizontal wells planned for the remainder of the year. Southwest Saskatchewan The company drilled a total of 17 (13.7 net) wells in the first quarter including nine (8.0 net) horizontal oil wells in the Atlas, one (0.5 net) in the Success, one (0.7 net) in the Upper Shaunavon, five (4.0 net) in the Lower Shaunavon and one (0.5 net) horizontal injector. Drilling results on average have met expectations with the exception being the Lower Shaunavon program. This program has exceeded productivity expectations with an average IP60 rate of 122 boepd, 39 per cent higher than its production expectation of 88 boepd. This is another significant step in de-risking and improving the economics of  the company’s Lower Shaunavon inventory of more than 200 locations. The company has a further 49 (34.3 net) wells planned for the remainder of the year including seven (5.4 net) in the Lower Shaunavon. Southeast Saskatchewan Capital spending in the first quarter was focused on maintenance, optimization and CO2

Whitecap intends on drilling again in the Weyburn Unit later this year. Photo by Brian Zinchuk purchases. Its 2018 infill and CO2 roll-out programs continue to perform at or above expectations, and Whitecap anticipates commencing its next Weyburn drilling program in the second half of 2019. Northwest Alberta and British Columbia In the first quarter, the company drilled five (5.0 net) wells in the Deep Basin, all of which are now on production. Early results are encouraging and are anticipated to meet or ex-

ceed expectations. Whitecap reported a 10 per cent cost savings on its Wapiti Cardium  completions compared to prior programs by utilizing new completion strategies and anticipate further savings with the larger second half 2019 program. The company’s 18 (18.0 net) wells planned for the remainder of the year in the Deep Basin. First quarter capital activity in Boundary Lake was focused on waterflood

optimization with its drilling program anticipated to start in the fourth quarter of 2019 with the drilling of two (2.0 net) wells. West central Alberta In West Pembina the company drilled five (4.5 net) horizontal wells, including three (2.6 net) injection wells to enhance production and recovery in its operated waterfloods. It has an additional nine (8.3 net) horizontal production wells planned for the second half of 2019 in West Pembina. In Ferrier the company

drilled four (4.0 net) horizontal wells in the quarter with an average IP30 rate of 562 boepd, 88 per cent higher than production forecasts. The company has another four (3.3 net) horizontal oil wells planned in Ferrier for the remainder of 2019. It had similar success in Willesden Green where the company drilled two (2.0 net) wells in the quarter with an IP30 rate of 717 boepd for the one well that has more than 30 days of production. This compares to its production expectation of 351 boepd.

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PIPELINE NEWS June 2019

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A33


A34

PIPELINE NEWS June 2019

^ƾžžĹ?Ć&#x161;^WůŽŽŏĹ?ĹśĹ?Ć&#x161;Ĺ˝Ä&#x161;ŽƾÄ?ĹŻÄ&#x17E;Ĺ?Ć&#x161;Ć?tÄ&#x17E;Ç&#x2021;Ä?ĆľĆ&#x152;ĹśĆ?Ć&#x161;Ä&#x201A;ÄŤ By Brian Zinchuk Weyburn â&#x20AC;&#x201C; Summit ESP, A Halliburton Service, is showing enough optimism that they are in the process of doubling their Weyburn staff in the coming months. Brendon Billings, business development manager out of Weyburn, spoke to Pipeline News on May 10. At the beginning of 2018 Summit moved into its current shop, the former Bob Mauer Construction facility on Weyburnâ&#x20AC;&#x2122;s south end. Billings noted that Halliburton had bought Summit the previous July, and combined their operations in one facility. â&#x20AC;&#x153;We do ESPs (electric submersible pumps) and

horizontal pumping systems (HPS) out of this location. We donâ&#x20AC;&#x2122;t assemble them here, but we service them here,â&#x20AC;? said Billings. â&#x20AC;&#x153;For the Canadian market conditions, weâ&#x20AC;&#x2122;ve had very good success. We came in with very modest expectations, because the other guys here were doing a very good job.â&#x20AC;? Billings said Summit was â&#x20AC;&#x153;a strong service-based companyâ&#x20AC;? which found traction with small independents as well as major operators. He referred to it as â&#x20AC;&#x153;gold standard service,â&#x20AC;? a Summit initiative. â&#x20AC;&#x153;Our technicians are trained to work on all competitorsâ&#x20AC;&#x2122; equipment. We guarantee to our clients, when we show up on

This is the up close and personal view of a spool of wire for an electric submersible pump, as seen at Summit ESP

location, the job is done right when we leave.â&#x20AC;? One of the largest efficiency gains a company can have is through the use of the assets it already owns. The Weyburn office has a fulltime staff of four. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re in the midst of adding two more right now and possibly adding two more by the end of the third quarter,â&#x20AC;? Billings said. â&#x20AC;&#x153;We should be eight here by the end of the year.â&#x20AC;? One of their techs will be heading to Tulsa, Okla. for a month of training. Asked whatâ&#x20AC;&#x2122;s driving the growth, Billings said, â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re doing a good job.â&#x20AC;? One driving factor has been new technology Summit is offering â&#x20AC;&#x201C; low volume ESPs. Electric submersible pumps are typically used in higher volume wells. These new low-volume EPS have a board range, he said. Before, a new drill might see a big ESP put on it for the first 1.5 years, then as volumes fell, they would pull the ESP and put a pumpjack on. â&#x20AC;&#x153;Now we have an option that we can put a

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Brendon BillingsĹ?Ć?ůŽŽŏĹ?ĹśĹ?Ć&#x161;Ĺ˝Ĺ&#x161;Ĺ?Ć&#x152;Ä&#x17E;žŽĆ&#x152;Ä&#x17E;Ć&#x2030;Ä&#x17E;Ĺ˝Ć&#x2030;ĹŻÄ&#x17E;ĨŽĆ&#x152;^ƾžžĹ?Ć&#x161;^WÍ&#x203A;Ć?tÄ&#x17E;Ç&#x2021;Ä?ĆľĆ&#x152;ŜůŽÄ?Ä&#x201A;Ć&#x;ŽŜÍ&#x2DC; competitively-priced ESP which can run down to seven or eight cubic metres a day, with high gas volumes,â&#x20AC;? he said. By swapping the big ESP for the low volume one, the oil company saves in the cost of putting a pumpjack on, as the surface facilities for an ESP are already in place. â&#x20AC;&#x153;This have been very well accepted in the Grand Prairie region. Weâ&#x20AC;&#x2122;re about to start down here,â&#x20AC;? Billings said. Their smallest unit of this variety has a range of seven to 60 cubic metres

per day with high gas volumes. â&#x20AC;&#x153;I hope to install one before the end of the year,â&#x20AC;? Billings said. The other side of the business are HPS units. Billings said Summitâ&#x20AC;&#x2122;s HPS business in Canada has grown substantially. They also service competitive units. Theyâ&#x20AC;&#x2122;ve had one client do a gas plant conversion where it was powered by Waukasha natural gas-powered driver. They took the gas compressor off, put a speed increaser (gearbox) on the Waukasha connected with a

big HPS unit, and used it for water disposal. Billings called it a real success. â&#x20AC;&#x153;Our HPS business is quite strong,â&#x20AC;? he said. They have one fulltime technician for HPS, and are about to bring another one on who will split their time between ESPs and HPSs. Summit has one spool unit in Weyburn and another on the western side of the province. Spool units carry the cable used to power EPSs downhole. â&#x20AC;&#x153;We always like to say, sales gets us the opportunity, and service keeps us engaged,â&#x20AC;? Billings concluded.

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PIPELINE NEWS June 2019

A35

Southern Range could use a few more hands By Brian Zinchuk Weyburn – Things have picked up for Weyburnbased Southern Range Well Servicing such that the limiting factor is not so much the available work or equipment, but the availability of staff. Ron Newett, president of Southern Range, spoke to Pipeline News on May 17. Six months ago, he bought out his partner, Al Vilcu. “I guess I’m sticking in the business a few years more, by the looks of it,” he said. Southern Range is a nine-rig service rig company. They used to have 10, but sold one rig five years ago. The fleet is made up of three singles and six doubles. Two of those singles have been working in Man-

itoba, where the shallower wells are more appropriate for singles. Southern Range broke into the Manitoba market one and a half years ago, and have been running those two singles and a double in the region, with crews originating in Virden, Brandon and Elkhorn. The rigs stay out there come back to Weyburn for annual certifications during breakup before going back out. Asked how they got into that market, Newett said, “I went looking for work out there. You have to get in with a company, and wherever their work is, you go.” This summer he’s hoping to have most of the fleet working. “We’ll have six or seven out of eight, maybe eight. I have six that have a

Welder Chris Sheldon ďƵŝůĚƐĂŶĞǁĚƌŝůůŇŽŽƌĨŽƌŽŶĞŽĨ ^ŽƵƚŚĞƌŶZĂŶŐĞ͛ƐƐĞƌǀŝĐĞƌŝŐƐ͘

permanent home.” Most of Southern Range’s work is within 80 kilometres of home, east, south and southwest of Weyburn. Some of that is for a group of smaller firms, and other work is for larger oil companies. They do work throughout all of southeast Saskatchewan. There’s a lot of property for sale right now, which is bound to shake up the industry. Asked about that, he said, “I’m on the fence. I think, whichever way it goes. It depends on who picks up what.” “I was a little concerned after my business partner left. Fall came and we had five to six rigs working. Winter was six to seven. We had the eighth rig ready to go, but like everyone else, I couldn’t find men. We advertised everywhere. We couldn’t even find one roughneck.” Newett spoke of having a man fly out from Ontario who came, did his orientation, and went to work. “He worked three days,” Newett said, noting other service rig companies have had similar difficulties. “If oil stays US$70 to US$75, then maybe we can get our rates up a little bit

^ŽƵƚŚĞƌŶZĂŶŐĞtĞůů^ĞƌǀŝĐŝŶŐŽƉĞƌĂƚĞƐŶŝŶĞƐĞƌǀŝĐĞƌŝŐƐ͘ and our wages up and maybe people will come back.” He noted that with the ups and downs, some people would rather make $22 an hour doing other work than $29 an hour as a floorhand, if that lower paying work was more consistent. On the wages front, he said, “I gave my guys a raise not that long ago. I raised the shop rate, too.” Newett said he could use five to ten more people. “If I could get eight rigs going, I could use ten people. If I had seven rigs working tomorrow, my two field supervisors would be going

out.” Those two field supervisors are Daniel Koszman and Quintin Beckstead. Newett said they work together on everything. “They discuss everything. It’s awesome. “They both started out early. They were brought up on the farm. All they do is work. They’ll be rig owners one day,” he said. They might be cleaning trucks one day or pulling a transmission another. “They love it. They kinda run the company,” Newett said. Southern Range has two in the office – admin-

istrator Trudy Morken and safety coordinator Jamie Wright. Welder Chris Sheldon puts together what’s broken. On the day Pipeline News stopped by, he was building a new drill floor. Southern Range took part in the recent Regina Rally Against the Carbon Tax and its associated convoy, sending a Peterbilt picker truck. “Now we need a change out east. People out east, with a normal job, don’t understand how the oil economy helps, so they keep voting for Justin (Trudeau),” Newett said.

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A36

PIPELINE NEWS June 2019

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PIPELINE NEWS June 2019

A37

In an area full of service rigs, itâ&#x20AC;&#x2122;s good place to ŽčÄ&#x17E;Ć&#x152;Ć?Ä&#x17E;Ć&#x152;Ç&#x20AC;Ĺ?Ä?Ä&#x17E;Ć&#x152;Ĺ?Ĺ?Ć&#x152;Ä&#x17E;ĹśĆ&#x161;Ä&#x201A;ĹŻĹ?Ć&#x161;Ä&#x17E;ĹľĆ? Weyburn â&#x20AC;&#x201C; When it comes to the tools and equipment service rigs need, CFO Rentals Inc. of Weyburn does their best to have it available. CFO Rentals is locally-owned and operated by Darcy Carter and Greg Fortune. CFO began operations in August 2014 on a family farm southwest of Weyburn. They moved to their current location on Hwy 39 in Weyburn in October 2017. Carter and Fortune are big believers in having sufficient inventory. Carter noted that generally inventories in the industry have decreased, not just locally, but with suppliers everywhere. â&#x20AC;&#x153;If you donâ&#x20AC;&#x2122;t have it, you canâ&#x20AC;&#x2122;t rent it.â&#x20AC;? He found working with larger companies, one might only be allowed to stock limited quantities. But, he adds, â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s easy for us to put stock on the shelves. When a customer needs it, we have it,â&#x20AC;? That means having multiple quantities of saleables and rentals. The inventory includes things like tubing handling equipment, such as elevators, wellbore cleanout packages, sand bailers, 4.5 inch handling equipment, and a wide selection of rod overshots. â&#x20AC;&#x153;We also have drill collars, heavyweight drill pipe, portable power swivels by Venturetech, casing scrapers and magnets,â&#x20AC;? he said. CFO Rentals is always looking for opportunities to add new and innovative equipment to their rental fleet. A recent offering is

the rod coupling breakout tongs. Once rod collars are worn down to the point of needing to be changed, it allows those collars to be loosened without the need of rod wrenches, pipe wrenches and snipes. The tong, which is a similar size to rod tongs, can be flipped over to remove both ends of the collar within seconds. Like rod tongs, it has a two-lever operation, controlling the top dies and backup. Although it can be put in the back of a pickup truck, the system typically comes on a small utility trailer and is completely self contained with its own power pack. CFO will have four units; two are being utilized in the field, and two are in production. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve had absolutely positive feedback on every application,â&#x20AC;? he added. â&#x20AC;&#x153;Our tools come with our knowledge and experience,â&#x20AC;? he said. Both owners have worked on service rigs and have over 39 years combined experience. One business philosophy they follow is having a commonality of equipment and consistency in offerings. â&#x20AC;&#x153;We have committed to purchasing top quality equipment. Though years of experience and building business relationships, we have been able to determine who we believe to be the best suppliers for our equipment. We are purchasing identical equipment so as not have different styles of the same product. By doing this, the oil company, oil company representative, and rig

crews will know the equipment they are working with every time we deliver our products.â&#x20AC;? Their coverage currently includes south eastern Saskatchewan and western Manitoba, and they are looking to expand in other areas. CFO Rentals is on call, 24/7. In addition to the two owners, they have two more employees. When asked about the rest of 2019, Carter said, â&#x20AC;&#x153;The oil industry is always unpredictable, but we feel optimistic.â&#x20AC;? Carter noted that wells generally need to be fixed. â&#x20AC;&#x153;The service rig industry is a good place to be.â&#x20AC;?

Darcy Carter Ć&#x2030;Ä&#x17E;Ä&#x17E;Ć&#x152;Ć?Ć&#x161;Ĺ&#x161;Ć&#x152;ŽƾĹ?Ĺ&#x161;Ä&#x201A;Ć&#x152;Ĺ˝Ä&#x161;Ĺ˝Ç&#x20AC;Ä&#x17E;Ć&#x152;Ć?Ĺ&#x161;Ĺ˝Ć&#x161;Í&#x2022;ĆľĆ?Ä&#x17E;Ä&#x161;ĨŽĆ&#x152;ÄŽĆ?Ĺ&#x161;Ĺ?ĹśĹ?Ć&#x152;Ĺ˝Ä&#x161;Ć?Í&#x2DC;Ä&#x17E;Ĺ&#x161;Ĺ?ĹśÄ&#x161;Ĺ&#x161;Ĺ?ĹľĹ?Ć?Ä&#x201A;Ç Ä&#x201A;ĹŻĹŻ ŽĨĆ&#x152;Ĺ˝Ä&#x161;Ĺ˝Ç&#x20AC;Ä&#x17E;Ć&#x152;Ć?Ĺ&#x161;Ĺ˝Ć&#x161;Ć?Ĺ?ĹśŜƾžÄ&#x17E;Ć&#x152;ŽƾĆ?Ç&#x20AC;Ä&#x201A;Ć&#x152;Ĺ?Ä&#x17E;Ć&#x;Ä&#x17E;Ć?Í&#x2DC;WĹ&#x161;Ĺ˝Ć&#x161;Ĺ˝Ä?Ç&#x2021;Ć&#x152;Ĺ?Ä&#x201A;ĹśĹ?ĹśÄ?Ĺ&#x161;ƾŏ

Darcy Carter,ĹŻÄ&#x17E;Ĺ&#x152;Í&#x2022;Ä&#x201A;ĹśÄ&#x161;Greg FortuneÄ&#x201A;Ć&#x152;Ä&#x17E;Ć?Ć&#x161;Ć&#x152;ŽŜĹ?Ä?Ä&#x17E;ĹŻĹ?Ä&#x17E;Ç&#x20AC;Ä&#x17E;Ć&#x152;Ć?Ĺ?ĹśĹ&#x161;Ä&#x201A;Ç&#x20AC;Ĺ?ĹśĹ?Ć?ƾĸÄ?Ĺ?Ä&#x17E;ĹśĆ&#x161;Ĺ?ĹśÇ&#x20AC;Ä&#x17E;ĹśĆ&#x161;Ĺ˝Ć&#x152;Ç&#x2021;ŽŜĹ&#x161;Ä&#x201A;ĹśÄ&#x161;Ä&#x201A;Ć&#x161;&KZÄ&#x17E;ĹśĆ&#x161;Ä&#x201A;ĹŻĆ?Í&#x2DC; WĹ&#x161;Ĺ˝Ć&#x161;Ĺ˝Ä?Ç&#x2021;Ć&#x152;Ĺ?Ä&#x201A;ĹśĹ?ĹśÄ?Ĺ&#x161;ƾŏ

6Â&#x2C6;Ă&#x192;Â&#x2C6;Ă&#x152;Ă&#x160;Ă&#x2022;Ă&#x192;Ă&#x160;>Ă&#x152;Ă&#x160;Ă&#x152;Â&#x2026;iĂ&#x160;7iĂ&#x17E;LĂ&#x2022;Ă&#x20AC;Â&#x2DC;Ă&#x160;"Â&#x2C6;Â?Ă&#x160;-Â&#x2026;Â&#x153;Ă&#x153;Ă&#x160;Â&#x2021;Ă&#x160; Â&#x153;Â&#x153;Ă&#x152;Â&#x2026;Ă&#x160;Â&#x203A;Ă&#x201C;Ă&#x2C6;ÂŁĂ&#x160;EĂ&#x160;Â&#x203A;Ă&#x201C;Ă&#x2C6;Ă&#x201C;

Expertise when the pressure is on. Metra Equipment Inc. is now part of Weir Oil & Gas. Our products and services address the industryâ&#x20AC;&#x2122;s most pressing operational and economic challenges. Sales New and remanufactured wellhead equipment and valves Now offering sucker rod guiding capabilities Services Wellhead and frac tree installations Rentals 2*,*+  &   2,.$.+    &

1  2Miscellaneous wellhead equipment

&KZÄ&#x17E;ĹśĆ&#x161;Ä&#x201A;ĹŻĆ?Ĺ&#x161;Ä&#x201A;Ć?Ć&#x152;Ä&#x17E;Ä?Ä&#x17E;ĹśĆ&#x161;ĹŻÇ&#x2021;Ä&#x201A;Ä&#x161;Ä&#x161;Ä&#x17E;Ä&#x161;Ć?Ä&#x17E;Ç&#x20AC;Ä&#x17E;Ć&#x152;Ä&#x201A;ĹŻƾŜĹ?Ć&#x161;Ć?ŽĨĆ&#x152;Ĺ˝Ä&#x161; Ä?ŽƾĆ&#x2030;ĹŻĹ?ĹśĹ?Ä?Ć&#x152;Ä&#x17E;Ä&#x201A;ŏŽƾĆ&#x161;Ć&#x161;ŽŜĹ?Ć?Í&#x2DC;/Ć&#x161;Ä&#x201A;Ä?Ć&#x161;Ć?ĹŻĹ?ĹŹÄ&#x17E;Ć&#x2030;Ĺ˝Ç Ä&#x17E;Ć&#x152;Ć&#x161;ŽŜĹ?Ć?Í&#x2022;Ä?ĆľĆ&#x161;ĨŽĆ&#x152; Ć&#x152;Ĺ˝Ä&#x161;Ć?Í&#x2022;Ä&#x201A;ĹśÄ&#x161;Ä&#x17E;ĹŻĹ?ĹľĹ?ĹśÄ&#x201A;Ć&#x161;Ä&#x17E;Ć?Ć&#x2030;Ĺ?Ć&#x2030;Ä&#x17E;Ç Ć&#x152;Ä&#x17E;ĹśÄ?Ĺ&#x161;Ä&#x201A;ĹśÄ&#x161;Ć?ĹśĹ?Ć&#x2030;Ä&#x17E;Ç Ĺ˝Ć&#x152;ĹŹÍ&#x2DC;

Oil & Gas 116 Supreme Street Estevan, SK 306 634 6325


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PIPELINE NEWS June 2019

DĂƚƌŝdž^ŽůƵƟŽŶƐǁĂƐŝŶƚŽĚƌŽŶĞƐůŽŶŐďĞĨŽƌĞƚŚĞLJǁĞƌĞĐŽŽů By Brian Zinchuk Weyburn – Long before you couple pick up a highly capable quadcopter drone from an electronics store for a few grand, Matrix Solutions was one of the leaders in the usage of unmanned aerial vehicles for environmental work. Starting around 2006, their Weyburn office had both a helicopter and fixed wing drone, both large enough to take up a substantial part of pickup truck bed. These days they’re using something much smaller, a system that fits in a large Pelican case. “We’ve gone away from the big drone, the airplane one, and the helicopter, and we’ve got DJI Phantoms,” said Trevor McMorris, general manager in Weyburn. The newer technology is dramatically improved as time as gone on. “For us, the biggest thing with the UAVs is keeping up with the changing regulations,” he noted. Volumetric measurement is a recent development. Flying a drone overhead now allows the operator to determine

how much volume is in something like a pile. “We can fly over a landfill and get the volume. We compared to an actual survey, and it was within two per cent,” McMorris said. So why’s this important? “We are an environmental consulting company that focuses on predevelopment, remediation and reclamation for oil and gas.” They also work in the potash sector and emergency spill response. In Weyburn, 90 per cent of their work is oil and gas, 10 per cent is mining. A recent project included doing work with some Indigenous monitors on the Line 3 Replacement project. Matrix employs 22 people in Weyburn and a further six in Oxbow. The have other locations in Lloydminster, Swift Current, Kindersley, Saskatoon, and Virden, Manitoba, as well as multiple locations in Alberta and British Columbia. Headquarters is in Calgary. “We’ve got a pretty significant group in On-

tario, now,” he added. “Here we’ve got environmental engineers, engineering techs, agrologists, agricultural technicians, biologists, chemists, geologists and hydrogeologists.” McMorris’ specialty is as an agrologist. He’s been with Matrix for 16 years in Weyburn. “It’s nice to have. It’s easy. We can go to a spill or fly a site and be able to send a photo from the field into somebody in the office here, or even in Calgary, so they can see in almost real-time what we’re seeing. And they’ve gotten to the point where the technology is so much better. They’re easier to fly. They fit in a briefcase, not a half-ton truck box to haul them around.” Sometimes they mount near-infrared cameras on airplanes for certain uses. “We’ve got it to the point where our people in Regina have developed algorithms for it to tell the difference in colour between coshe and canola in a field.” The UAVs get used weekly, if not daily. Asked how they handled the downturn,

McMorris said, “When oil dropped, we slowed down. When things were busy, we had people with banked hours, so we were able to get through.” Their staff each had hundreds of hours of banked time from when things were busier that they were able to draw from. But several years into this, there’s been something of a change of perspective on the business climate, according to McMorris. “The last couple years have been good. This isn’t a downturn. It’s more of a reality now, and we’ve stopped feeling sorry for ourselves and have turned it around and are going after things and trying to live with the new norm. “We hired three people at the end of last year, probably the first new people we’ve hired in five years. We just hired four fulltime people and one summer student for Weyburn and Oxbow last month, in addition to the three last fall.” This backfilled some attrition over the years as people advanced with their career.

Trevor McMorris holds up a drone that is used on a regular basis. Photo by Brian Zinchuk “The nice thing with the company in general is just because you’re an agrologist or engineer, it doesn’t mean you’re pigeon-holed into that type of work. We like to crosstrain everybody to diversify their skill set. I think that’s where it’s helped

during these slow times. Everybody can do a little of everything. They’re not so specialized that if that work has completely dried up, they can’t pick up something else,” he said. Asked about the mood, he said, “For our Ź3DJH$

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PIPELINE NEWS June 2019

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Reduced drilling has had its impact When downturns hit, some say that those closest to the drillbit get hit the hardest. But what if youâ&#x20AC;&#x2122;re there, before the drilling rig drill bit, with a drill bit of your own? Such is the case for South Sask Rathole, a Weyburn-based, familyowned and operated rathole company. Dean Hodgkin is the general manager, and also fills the role of safety coordinator. Asked how things were going on May 9, he said, â&#x20AC;&#x153;Currently, not great. The road bans are lifted, but thereâ&#x20AC;&#x2122;s not a whole lot of action.â&#x20AC;? Indeed, a week later, Rig Locator was only reporting two drilling rigs working in the entire region. At the same time, 65 rigs work working south of the border, in North Dakota. Just what does a rathole company do? They use a specialized rig to do the preliminary drilling before the full-scale drilling rig arrives on location. If you think of carpentry, they drill the pilot hole, so to speak. â&#x20AC;&#x153;On the oil side, typically we drill conductors for the drilling rigs. We predrill 40 feet of 16 inch conductor pipe,â&#x20AC;? he said.

Doing so allows the drilling rig to get some weight on the bit when they start drilling. That pipe deals with the sand and rocks encountered close to surface. Geologists call the initial layers â&#x20AC;&#x153;glacial till,â&#x20AC;? the leftover detritus from the ice sheets that used to cover much of Canada. The conductor pipe also serves to protect groundwater in shallow aquifers. The blowout preventor system, or BOPS, for the drilling rig is attached to the conductor as well. Typically there are three holes drilled â&#x20AC;&#x201C; the main hole, where the primary drilling will take place, the mousehole and the rathole. The rathole is used to temporarily store the Kelly bar during drilling operations. On a typical Kelly drilling rig, the Kelly bar is used to provide rotational force to the drill string. Square in cross section, itâ&#x20AC;&#x2122;s shape and function is reminiscent of the business end of a ratchet found in a typical tool set. The rathole and mousehole are drilled in a pattern specific to each rig. Not only are they adjacent to the main hole,

Shelton Stepp,ĹŻÄ&#x17E;Ĺ&#x152;Í&#x2022;Ĺ?Ć?Ä&#x201A;Ä&#x161;Ć&#x152;Ĺ?ĹŻĹŻÄ&#x17E;Ć&#x152;Ç Ĺ?Ć&#x161;Ĺ&#x161;^ŽƾĆ&#x161;Ĺ&#x161;^Ä&#x201A;Ć?ĹŹZÄ&#x201A;Ć&#x161;Ĺ&#x161;ŽůÄ&#x17E;Í&#x2022;Ç Ĺ&#x161;Ĺ?ĹŻÄ&#x17E;Dean HodgkinĹ?Ć?Ĺ?Ä&#x17E;ĹśÄ&#x17E;Ć&#x152;Ä&#x201A;ĹŻĹľÄ&#x201A;ĹśÄ&#x201A;Ĺ?Ä&#x17E;Ć&#x152;Í&#x2DC; WĹ&#x161;Ĺ˝Ć&#x161;Ĺ˝Ä?Ç&#x2021;Ć&#x152;Ĺ?Ä&#x201A;ĹśĹ?ĹśÄ?Ĺ&#x161;ƾŏ but they are drilled at a specific angle, thus requiring the rathole rig to be maneuverable and precise to make those holes. The mousehole is used to store the next joint of pipe while drilling. After a connection is made, the rig will use a winch line to pull up the next joint from the catwalk. It is then lowered into the vertical mouse

Two rounds of hiring in recent žŽŜĆ&#x161;Ĺ&#x161;Ć?ĨŽĆ&#x152;DÄ&#x201A;Ć&#x161;Ć&#x152;Ĺ?Ç&#x2020;^ŽůƾĆ&#x;ŽŜĆ? Ĺť3DJH$ office, specifically, itâ&#x20AC;&#x2122;s a lot more optimism. Weâ&#x20AC;&#x2122;re not waiting for $120 per barrel oil. â&#x20AC;&#x153;There is work to be had.â&#x20AC;? â&#x20AC;&#x153;I think all the clients we work for, down here, are very proactive. Theyâ&#x20AC;&#x2122;re managing their liabilities on their own, rather than being forced by a government policy. Theyâ&#x20AC;&#x2122;re very proactive. Theyâ&#x20AC;&#x2122;ve got plans that arenâ&#x20AC;&#x2122;t just one year, or a certain period of time. Theyâ&#x20AC;&#x2122;re looking at longer term issues,â&#x20AC;? he said. Will abandonments be a growth area?

â&#x20AC;&#x153;If they canâ&#x20AC;&#x2122;t sit suspended for a certain length of time, it will, for sure, help us out, if we can get the work.â&#x20AC;? The aftershocks of Trident Explorationâ&#x20AC;&#x2122;s shutting down in Alberta recently will have an impact on the industry. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s definitely going to have them looking harder on what that levy is and how they calculate who has to pay what,â&#x20AC;? McMorris said. Regarding trends, he said over the last 16 years, the regulations have tightened up. That includes more specific remediation criteria, and

specialists like agrologists or environmental engineers needed. One area that will soon be getting a lot of attention are new federal methane regulations. To that end, he said Matrix Solutions has looking into getting infrared cameras for leak detection. â&#x20AC;&#x153;The biggest thing for us has been a change in mentality. This is the new reality. This is where weâ&#x20AC;&#x2122;re at. Weâ&#x20AC;&#x2122;ve done hiring because we feel we have the workload. Our clients are really good, and theyâ&#x20AC;&#x2122;re proactive with the environmental work theyâ&#x20AC;&#x2122;re doing.â&#x20AC;?

hole until needed, ready for the next connection. The nature of drilling rigs is changing that three-hole setup, however. Top drive rigs donâ&#x20AC;&#x2122;t use a Kelly bar, thus they donâ&#x20AC;&#x2122;t need a rathole. And with automated pipe handling systems, super single rigs (which are also top drives) donâ&#x20AC;&#x2122;t use a mousehole, either. â&#x20AC;&#x153;A lot of these rigs are going to top drives, and donâ&#x20AC;&#x2122;t require a rathole,â&#x20AC;? Hodgkin said. The

result is a reduction in work done for those rigs. â&#x20AC;&#x153;Newer rigs donâ&#x20AC;&#x2122;t require mouseholes, either.â&#x20AC;? The main work is the conductor, which goes into the 24-inch â&#x20AC;&#x153;We do work for potash mines as well, from mid to late summer, as well as some foundation work,â&#x20AC;? Hodgkin said. They donâ&#x20AC;&#x2122;t do screw piles. South Sask Rathole has been in business for 25 years, or 26, depending on how you look at it.

There was a brief break in 1998-1999, when another downturn took its toll. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re trying to think of other ventures,â&#x20AC;? Hodkin said. The company operates three drill units, as well as support unites like backhoes, skid steers and equipment trailers. Thatâ&#x20AC;&#x2122;s down from six drill units before the current downturn began. As the number of active drilling rigs fell by half, or more, so did demand.

dƾŜÄ&#x161;Ć&#x152;Ä&#x201A;ĹśÄ&#x17E;Ć&#x152;Ĺ?Ç&#x2021;DÄ&#x201A;Ć&#x152;ĹŹÄ&#x17E;Ć&#x;ĹśĹ?>Ć&#x161;Ä&#x161;Í&#x2DC;ÍždD>ÍżÍ&#x2022;Ä?Ç&#x2021;Ç Ä&#x201A;Ç&#x2021;ŽĨĆ&#x161;Ĺ&#x161;Ä&#x17E;ZĹ?Ä?Ĺ&#x161;Ä&#x201A;Ć&#x152;Ä&#x161;Ć?ŽŜ&ŽƾŜÄ&#x161;Ä&#x201A;Ć&#x;ŽŜÍ&#x2022; ĹľÄ&#x201A;Ä&#x161;Ä&#x17E;Ä&#x201A;Ä&#x161;ŽŜÄ&#x201A;Ć&#x;ŽŜŽĨΨϲϏÍ&#x2022;ĎŹĎŹĎŹĆ&#x161;Ĺ˝Ć&#x161;Ĺ&#x161;Ä&#x17E;ĹŻĹ?Ä&#x161;Ä&#x201A;ZĹ?ŜŏĹ˝Ä&#x201A;Ć&#x152;Ä&#x161;Í&#x2DC;dĹ&#x161;Ĺ?Ć?Ä&#x161;ŽŜÄ&#x201A;Ć&#x;ŽŜÇ Ä&#x17E;ĹśĆ&#x161;Ć&#x161;Ĺ˝ Ć&#x152;Ä&#x17E;ĨƾĆ&#x152;Ä?Ĺ?Ć?Ĺ&#x161;Ĺ?ĹśĹ?Ć&#x161;Ĺ&#x161;Ä&#x17E;ĹŻĹ?Ä&#x161;Ä&#x201A;ZĹ?ŜŏĆ&#x161;Ĺ&#x161;Ä&#x201A;Ć&#x161;Ç Ä&#x201A;Ć?Ä&#x161;Ä&#x17E;Ç&#x20AC;Ä&#x201A;Ć?Ć&#x161;Ä&#x201A;Ć&#x161;Ä&#x17E;Ä&#x161;Ĺ?ĹśÄ&#x201A;Ĺ&#x2021;ŽŽÄ&#x161;Í&#x2DC;Ä&#x201A;Ä?ĹŹĆ&#x152;Ĺ˝Ç Í&#x2022;ĨĆ&#x152;ŽžĹŻÄ&#x17E;Ĺ&#x152;Í&#x2014; Rebecca CassidyÍ&#x2022;dD>WĆľÄ?ĹŻĹ?Ä?ÄŤÄ&#x201A;Ĺ?Ć&#x152;Ć?Ä&#x161;Ç&#x20AC;Ĺ?Ć?Ĺ˝Ć&#x152;Í&#x2022; Brad Cosgrove , dD>Ć&#x152;Ä&#x17E;Ä&#x201A;^ĆľĆ&#x2030;Ä&#x17E;Ć&#x152;Ç&#x20AC;Ĺ?Ć?Ĺ˝Ć&#x152;Í&#x2013;Bryce MerkleyͲdD>&Ĺ?Ä&#x17E;ĹŻÄ&#x161;KĆ&#x2030;Ä&#x17E;Ć&#x152;Ä&#x201A;Ć&#x161;Ĺ˝Ć&#x152;Í&#x2013; 'Ć&#x152;Ä&#x17E;Ĺ?DÄ&#x201A;Ć&#x152;Ć&#x;ŜʹdD>DÄ&#x17E;Ä&#x201A;Ć?ĆľĆ&#x152;Ä&#x17E;ĹľÄ&#x17E;ĹśĆ&#x161;dÄ&#x17E;Ä?Ĺ&#x161;ĹśĹ?Ä?Ĺ?Ä&#x201A;Ĺś&Ć&#x152;ŽŜĆ&#x161;Ć&#x152;Ĺ˝Ç Í&#x2022;Leanne DebucÍ&#x2022; ĹŻĹ?Ä&#x161;Ä&#x201A;ZÄ&#x17E;Ä?Ĺ˝Ä&#x201A;Ć&#x152;Ä&#x161;dĆ&#x152;Ä&#x17E;Ä&#x201A;Ć?ĆľĆ&#x152;Ä&#x17E;Í&#x2013;Margaret PeetÍ&#x2022;ĹŻĹ?Ä&#x161;Ä&#x201A;ZÄ&#x17E;Ä?Ĺ˝Ä&#x201A;Ć&#x152;Ä&#x161;DÄ&#x17E;ĹľÄ?Ä&#x17E;Ć&#x152;Í&#x2013; Candance McLeanÍ&#x2014;dD>Ä&#x161;ĹľĹ?ĹśĹ?Ć?Ć&#x161;Ć&#x152;Ä&#x201A;Ć&#x;ŽŜÍ&#x2DC;WĹ&#x161;Ĺ˝Ć&#x161;Ĺ˝Ć?ĆľÄ?ĹľĹ?ĆŠÄ&#x17E;Ä&#x161;Í&#x2DC;

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PIPELINE NEWS June 2019

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