There’s not a lot of drilling happening around Torquay these days. A few years ago, there was over a half dozen rigs working in an area not much larger than a township. Photo by Brian Zinchuk

Dear Editor: 

Regarding last week’s columns Brian Zinchuk: With oil prices now at US$94 per barrel, why is industry activity akin to when it was half that? and Brian Zinchuk: Some suggestions for the Saskatchewan government to stimulate activity in the province’s oilpatch:

I read your articles regularly and with interest as I have been involved in the Saskatchewan oilpatch for the last 27 years, finding oil and building and selling small private companies. I think all your points about industry activity levels and how the provincial government can help are correct and appropriate. We should encourage them as much as possible.

I would like to add a couple more thoughts as to why activity levels are so low. 

First is economics and investment rates of return. 

WTI at $90/bbl today is approximately WTI $67/bbl on an inflation adjusted basis. Ninety dollars per barrel sounds high and given that costs have increased at similar inflation rates the economics of payout, rates of return, return on investment are no different today than back when oil was $67/bbl. Incidentally the average inflated oil price between 2000 to 2020 was $74.54/bbl and we have a ways to go to get to that level which would be $100/bbl in 2023 dollars.

To put that in perspective the highest-ever average inflated oil price was $99/bbl in 2008 which would be about $129/bbl today. Activity levels in Saskatchewan were much higher when oil prices were in the then equivalent of $100/bbl to $120/bbl in today’s dollars. Crescent Point (CPG), for example, exited Mississippian and Bakken drilling in favour of plays with more growth potential and better economic returns. Whitecap is the new CPG, albeit at lower activity levels, and essentially uses their Saskatchewan production as the cash cow to fund other drilling activity in the Montney liquids rich plays in Alberta also with enhanced economics and enormous numbers of low risk drilling locations. 

  • 0075 Fast Trucking OutlaW Buckers 01
    0075 Fast Trucking OutlaW Buckers 01
  • 0074 General Well Servicing Outlaw Buckers
    0074 General Well Servicing Outlaw Buckers
  • 0073 SaskWorks-Pipeline Online
    0073 SaskWorks-Pipeline Online
  • 0072 Outlaw Buckers and Oil Kings 2024
    0072 Outlaw Buckers and Oil Kings 2024
  • 0069 Sask Oil Show 2024 banquet tickets
    0069 Sask Oil Show 2024 banquet tickets
  • 0071 Pride Upkeep 2024 Packages
    0071 Pride Upkeep 2024 Packages
  • 0070 Sask Oil Show 2024 pre-register
    0070 Sask Oil Show 2024 pre-register
  • 0068 Sask Oil Show 2024 booth
    0068 Sask Oil Show 2024 booth
  • 0067 PFM SaskWorks Payroll Investment Plan
    0067 PFM SaskWorks Payroll Investment Plan
  • 0066 WBPC Promo video 30 seconds
    0066 WBPC Promo video 30 seconds
  • 0064 Estevan OTS
    0064 Estevan OTS
  • 0063 Turnbull Excavating hiring crusher
    0063 Turnbull Excavating hiring crusher
  • 0062 TED_EPAC_Technology_30
    0062 TED_EPAC_Technology_30
  • 0061 SIMSA 2024 For Sask Buy Sask
    0061 SIMSA 2024 For Sask Buy Sask
  • 0058 Royal Helium Steveville opens anonymous rocket
    0058 Royal Helium Steveville opens anonymous rocket
  • 0055 Smart Power Be Smart with your Power office
    0055 Smart Power Be Smart with your Power office
  • 0052 Predator Inspections
    0052 Predator Inspections
  • 0051 JML Hiring Pumpjack assembly
    0051 JML Hiring Pumpjack assembly
  • 0049 Scotsburn Dental soft guitar
    0049 Scotsburn Dental soft guitar
  • 0046 City of Estevan This is Estevan
    0046 City of Estevan This is Estevan
  • 0041 DEEP Since 2018 now we are going to build
    0041 DEEP Since 2018 now we are going to build
  • 0032 IWS Summer hiring rock trailer music
  • 0022 Grimes winter hiring
  • 0021 OSY Rentals S8 Promo
  • 0018 IWS Hiring Royal Summer
  • 0015 Latus Viro
    0015 Latus Viro
  • 0013 Panther Drilling PO ad 03 top drive rigs
  • 0011
  • 0006 JK Junior
  • 0002 gilliss casing services
    0002 gilliss casing services
  • 9002 Pipeline Online 30 sec EBEX
    9002 Pipeline Online 30 sec EBEX
  • 9001

 

Second is a lack of capital investment in the energy industry that would drive activity in Saskatchewan, compared to investment in the late 90’s though mid 2010’s.

Institutional and private interest in oil and gas equity investment is near zero, unless you are a large public company. Even then, most funds raised are through debenture type debt instruments. For our private company, equity investment is currently non existent and bank debt unavailable. We started with about $2 million raised from family, friends and business associates, as they say. We have drilled only five wells since 2019 because we live on cash flow and are forced to proceed slowly and cautiously and have to let funds accumulate and build up for each well we drill or participate in. In prior companies with more equity available we would have drilled 30 to 40 wells in the five year period we have been active. This year we will participate in one well this fall and drill another in the first quarter next year, and possibly more after that depending on production results. I suspect many small companies are in a similar financially constrained position. 

The lack of equity funds is due to the uncertainty in investment conditions and outlook for the energy industry in Western Canada generally, which of course impacts Saskatchewan. This is directly due to the current federal government policies. I speak to colleagues in the US and UK who express disbelief that Canada will not build pipelines internally, prefer to import Middle East oil, banned tankers on the West Coast and are actively discouraging domestic oil production. The refrain I hear is ‘Who would want to invest in Canada? What you are doing makes no sense.’

  • 0075 Fast Trucking OutlaW Buckers 01
    0075 Fast Trucking OutlaW Buckers 01
  • 0074 General Well Servicing Outlaw Buckers
    0074 General Well Servicing Outlaw Buckers
  • 0073 SaskWorks-Pipeline Online
    0073 SaskWorks-Pipeline Online
  • 0072 Outlaw Buckers and Oil Kings 2024
    0072 Outlaw Buckers and Oil Kings 2024
  • 0069 Sask Oil Show 2024 banquet tickets
    0069 Sask Oil Show 2024 banquet tickets
  • 0071 Pride Upkeep 2024 Packages
    0071 Pride Upkeep 2024 Packages
  • 0070 Sask Oil Show 2024 pre-register
    0070 Sask Oil Show 2024 pre-register
  • 0068 Sask Oil Show 2024 booth
    0068 Sask Oil Show 2024 booth
  • 0067 PFM SaskWorks Payroll Investment Plan
    0067 PFM SaskWorks Payroll Investment Plan
  • 0066 WBPC Promo video 30 seconds
    0066 WBPC Promo video 30 seconds
  • 0064 Estevan OTS
    0064 Estevan OTS
  • 0063 Turnbull Excavating hiring crusher
    0063 Turnbull Excavating hiring crusher
  • 0062 TED_EPAC_Technology_30
    0062 TED_EPAC_Technology_30
  • 0061 SIMSA 2024 For Sask Buy Sask
    0061 SIMSA 2024 For Sask Buy Sask
  • 0058 Royal Helium Steveville opens anonymous rocket
    0058 Royal Helium Steveville opens anonymous rocket
  • 0055 Smart Power Be Smart with your Power office
    0055 Smart Power Be Smart with your Power office
  • 0052 Predator Inspections
    0052 Predator Inspections
  • 0051 JML Hiring Pumpjack assembly
    0051 JML Hiring Pumpjack assembly
  • 0049 Scotsburn Dental soft guitar
    0049 Scotsburn Dental soft guitar
  • 0046 City of Estevan This is Estevan
    0046 City of Estevan This is Estevan
  • 0041 DEEP Since 2018 now we are going to build
    0041 DEEP Since 2018 now we are going to build
  • 0032 IWS Summer hiring rock trailer music
  • 0022 Grimes winter hiring
  • 0021 OSY Rentals S8 Promo
  • 0018 IWS Hiring Royal Summer
  • 0015 Latus Viro
    0015 Latus Viro
  • 0013 Panther Drilling PO ad 03 top drive rigs
  • 0011
  • 0006 JK Junior
  • 0002 gilliss casing services
    0002 gilliss casing services
  • 9002 Pipeline Online 30 sec EBEX
    9002 Pipeline Online 30 sec EBEX
  • 9001

 

This is even though we have the ‘cleanest’ industry in the world due to high standards of emission regulations and operating practices. Canada should be a highly desirable place to invest even when oil prices are modest as today, but is regarded as too risky due to uncertainty.

The current provincial government and the Ministry of Energy and Resources is more helpful than ever in encouraging and promoting business activity, despite regulatory creep which is real, and are not responsible for the current malaise. The blame for lack of activity lies firmly at the feet of the federal Liberal Party and their policies punitive to the energy industry that are responsible for discouraging investment. It is seemingly their goal.

I am the COO of a 50 bbl/d, small private company solely active in southeast Saskatchewan that employs local services and consultants to conduct field and operating activities. We have lands with development drilling locations held by production and other land. We would like to drill to prove new reserves though we have to be patient, work with cash flow and drill when we can. It is a shame as had we been able to access more equity we would have drilled a lot more wells by now and hence the lack of our activity.  

Cheers,

Tobin Webb,

Calgary

 

  • 0075 Fast Trucking OutlaW Buckers 01
    0075 Fast Trucking OutlaW Buckers 01
  • 0074 General Well Servicing Outlaw Buckers
    0074 General Well Servicing Outlaw Buckers
  • 0073 SaskWorks-Pipeline Online
    0073 SaskWorks-Pipeline Online
  • 0072 Outlaw Buckers and Oil Kings 2024
    0072 Outlaw Buckers and Oil Kings 2024
  • 0069 Sask Oil Show 2024 banquet tickets
    0069 Sask Oil Show 2024 banquet tickets
  • 0071 Pride Upkeep 2024 Packages
    0071 Pride Upkeep 2024 Packages
  • 0070 Sask Oil Show 2024 pre-register
    0070 Sask Oil Show 2024 pre-register
  • 0068 Sask Oil Show 2024 booth
    0068 Sask Oil Show 2024 booth
  • 0067 PFM SaskWorks Payroll Investment Plan
    0067 PFM SaskWorks Payroll Investment Plan
  • 0066 WBPC Promo video 30 seconds
    0066 WBPC Promo video 30 seconds
  • 0064 Estevan OTS
    0064 Estevan OTS
  • 0063 Turnbull Excavating hiring crusher
    0063 Turnbull Excavating hiring crusher
  • 0062 TED_EPAC_Technology_30
    0062 TED_EPAC_Technology_30
  • 0061 SIMSA 2024 For Sask Buy Sask
    0061 SIMSA 2024 For Sask Buy Sask
  • 0058 Royal Helium Steveville opens anonymous rocket
    0058 Royal Helium Steveville opens anonymous rocket
  • 0055 Smart Power Be Smart with your Power office
    0055 Smart Power Be Smart with your Power office
  • 0052 Predator Inspections
    0052 Predator Inspections
  • 0051 JML Hiring Pumpjack assembly
    0051 JML Hiring Pumpjack assembly
  • 0049 Scotsburn Dental soft guitar
    0049 Scotsburn Dental soft guitar
  • 0046 City of Estevan This is Estevan
    0046 City of Estevan This is Estevan
  • 0041 DEEP Since 2018 now we are going to build
    0041 DEEP Since 2018 now we are going to build
  • 0032 IWS Summer hiring rock trailer music
  • 0022 Grimes winter hiring
  • 0021 OSY Rentals S8 Promo
  • 0018 IWS Hiring Royal Summer
  • 0015 Latus Viro
    0015 Latus Viro
  • 0013 Panther Drilling PO ad 03 top drive rigs
  • 0011
  • 0006 JK Junior
  • 0002 gilliss casing services
    0002 gilliss casing services
  • 9002 Pipeline Online 30 sec EBEX
    9002 Pipeline Online 30 sec EBEX
  • 9001

 

Pipeline Online provides the in-depth coverage on energy issues in this province that no other media comes close to. It does NOT receive federal journalism subsidies, and it will NOT allow the federal government to limit its freedom of speech, as it is now moving to regulate podcasts. With recent action from Facebook to block news links, it’s important to follow Pipeline Online in other manners. The easiest is to check each morning at PipelineOnline.ca, with the top story posted at 7 a.m. Monday to Friday, and additional coverage throughout the day and weekend. But you can also follow on LinkedIn and Twitter. You can follow editor Brian Zinchuk online at LinkedIn as well (you’ll see more stories that way). You can subscribe to a weekly newsletter. And if you wish to advertise and support this journalism, call 306-461-5599.

 

Brian Zinchuk: Some suggestions for the Saskatchewan government to stimulate activity in the province’s oilpatch

Brian Zinchuk: With oil prices now at US$94 per barrel, why is industry activity akin to when it was half that?