well construction journal - march/april 2013

The offi cial publication of the Canadian Association of Drilling Engineers

MARCH / APRIL • 2013

PLUSCorralling Costs: six strategies to defend against low natural gas prices

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Highlights from the CADE Student Industry Night

Is the ship about to come in for operators in northeastern B.C.?

Predicting Prices: two analysts provide insight into the natural gas market

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www.cadecanada.com MARCH/APRIL 2013 3

The offi cial publication of the Canadian Association of Drilling Engineers

DEPARTMENTS

5 THE DRAWING BOARDEditor’s note, member’s corner, news and notes, technical luncheons

10 MEMBER PROFILE

11 STUDENT PROFILES

12 STUDENT INDUSTRY NIGHT

24 BY THE NUMBERS

26 DRILLING DEEPERNatural gas drilling still profi table in Pennsylvania

22

FEATURES

14 NORTHEASTERN B.C.Great expectations for B.C.’s natural gas industry are being tempered by uncertain economics

20 COST CONTAINMENTDealing with low gas prices in the fi eld and in the offi ce

22 A FLICKER OF HOPEIf everything goes according to plan, natural gas prices should get a boost

The mandate of the Canadian Association of Drilling Engineers is to provide high-quality technical meetings and to promote awareness on behalf of the drilling and well servicing industry. With more than 500 members from more than 300 companies, CADE represents a broad spectrum of experience in all areas of operations and technologies. Through CADE, members and the public can learn about the tech-nical challenges and the in-depth experience of our members that continue to drive the industry forward. For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry.

CANADIAN ASSOCIATION OF DRILLING ENGINEERS560, 400 – 5 Avenue SW

Calgary, AB T2P 0L2Phone: 403-532-0220

Fax: 403-263-2722www.cadecanada.com

PRESIDENT: Robert JacksonPAST PRESIDENT: Eric Schmelzl

WELL CONSTRUCTION JOURNAL EDITOR: Christian Gillis

WELL CONSTRUCTION JOURNAL IS PUBLISHED FOR CADE BY VENTURE PUBLISHING INC.

10259 105 StreetEdmonton, AB T5J 1E3Phone: 780-990-0839

Fax: 780-425-4921Toll Free: 1-866-227-4276

[email protected]

PUBLISHER: Ruth KellyASSOCIATE PUBLISHER: Joyce Byrne

MANAGING EDITOR: Steve MacleodART DIRECTOR: Charles Burke

ASSOCIATE ART DIRECTOR: Andrea deBoerASSISTANT ART DIRECTOR: Colin SpencePRODUCTION MANAGER: Betty-Lou SmithPRODUCTION TECHNICIAN: Brent Felzien

CIRCULATION COORDINATOR: Jennifer KingACCOUNT EXECUTIVE: David Frazier

CONTRIBUTING WRITERS: Graham Chandler, J. Lynn Fraser, Jacqueline Louie, Jordan Wilkins

MARCH/APRIL • 2013

20

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PUBLICATION MAIL AGREEMENT #40020055 CONTENTS © 2013 CADE. NOT TO BE REPRINTED OR

REPRODUCED WITHOUT PERMISSION.

12

14

Fracceleration.

Fast frac isolation, mechanical sleeve shift

Circulation path adds capabilities

TM

ncsfrac.com US: 281.453.2222 Canada: 404.862.0870 [email protected]

The unique resettable frac plug grips and shifts the sliding sleeve and isolates the frac zone.

Frac ports

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Global Steel Ltd. is a private corporation founded in 1990. From modest beginnings Global Steel

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manufactured Oil Country Tubular Goods (OCTG). Today, this Calgary-based company enjoys an un-

matched reputation for product quality, innovation and customer service.

Global Steel maintains key relationships with several major domestic steel mills. Strategic alli-

ances with each mill guarantee reliable and secure access to a full range of high-quality ERW OCTG, Seamless

OCTG and Line Pipe products. We are committed to providing oil and gas producers with

exceptional service, high quality oilfield tubular goods and personalized logistical support.

One call to Global Steel provides customers with com-petitively priced products and efficient, safe dispatch to the job site. Global Steel currently maintains 18 inventory stock points strategically located across Canada. Each stock point is supported by veteran trucking companies specializing in oilfield transportation and providing 24 hour service.

An unwavering focus on operating and service excellence is what separates Global Steel from everyone else. It is a commitment that shows in our products and services. At Global Steel we are focused on your business.

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One call to Global Steel provides customers with com-petitively priced products and efficient, safe dispatch to the job site. Global Steel currently maintains 18 inventory stock points strategically located across Canada. Each stock point is supported by veteran trucking companies specializing in oilfield transportation and providing 24 hour service.

An unwavering focus on operating and service excellence is what separates Global Steel from everyone else. It is a commitment that shows in our products and services. At Global Steel we are focused on your business.

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MARCH/APRIL 2013 5 www.cadecanada.com

BOARDThe Drawing

A Forward LookELL, IT IS GETTING TO BE THAT TIME OF YEAR AGAIN. By the time this month’s issue of Well Construction Journal is out, we will be pretty close to spring breakup. There is plenty of talk

about road bans and projects shutting down.Some people are glad this time of year is here and are

looking forward to a spring vacation. While for other people it means the chance to pick up extra equipment and try to squeeze in a few more wells. It is hard to believe that another winter season is almost behind us; hopefully it was a success for everyone.

The March/April edition of Well Construction Journal last year focused on the history behind natural gas drill-ing in northeastern B.C.’s Montney formation. Once again, our second edition of the journal this year takes a look at natural gas drilling in northeastern B.C., but this time the focus of the stories is on the future. Our lineup of feature articles examines what the future might hold for the region with several liquefi ed natural gas (LNG) projects on the horizon, but low market prices for the commodity.

We are continuing to look for ideas for the 2013 Technical Luncheon Presentations. Please don’t hesitate to contact us if you have any ideas for upcoming topics

or issues you’d like to see presented at the luncheons or in the magazine. We hope you, the membership, will participate and continue to make these events interest-ing and successful.

We are also looking for topics that tie into the forma-tion we discuss in each edition of the journal. If you have any issues you’d like to see covered, please email me and we will do our best to get to the story.

Don’t forget, we would like to publish any of your information and announcements on new products, new technologies and senior personnel changes for publica-tion each month. Please forward any announcements to us, as we would be excited to run them in our new feature section.

We appreciate your continued support and look for-ward to seeing you at the upcoming luncheons.

CHRISTIAN GILLIS, EditorWell Construction [email protected]

WE D I T O R ’ S N O T E

CADE Executive Team 2012/2013President Robert Jackson 403-615-9504Past President Eric Schmelzl 403-862-0870Secretary Tammy Todd 403 613-8844Treasurer Cecil Conaghan 403-667-9812Membership Chairman John Burnell 403-265-4973Education Chairman Jeff Arvidson 403-232-7100Social Chairman Dan Schlosser 403-531-5284WCJ Editor Christian Gillis 403-265-4973IT Chairman Matthew Stuart 403-605-3790Communications Chairman Andy Newsome 403-532-0220Member At-large John Garden 403-265-4973Sponsorship & Marketing Kyle Klam 403-532-0220Administrator Kali Charron 403-532-0220

E X E C U T I V E T E A M

Member At-large John Garden Member At-large John Garden Sponsorship & Marketing Kyle Klam Sponsorship & Marketing Kyle Klam


Well Construction Journal6 MARCH/APRIL 2013

WELCOME NEW MEMBERSDAVID ANDERSONGLENN BEATTIEDAVID BEDDOMEDEREK BENTMATTHEW BLOOMJASON BROWNWILLIAM BROWNJOHN DICKEYPHIL DOODYNICK FARRELLROBIN FINLEYPHILIP GUNNSHEA HALABURDACOLTON HERNCHUDI IBEZIAKORICHARD JOHNSONGARY JOHNSTONBRAD MALLEYDAVID MUELLERBLAIR NEILIFEOLU OKEMATTHEW PARRALTON PAYNEBRIAN PHAMCLINT RUSSELLTERRACE SMIDRORY STONESSANDREW VAN DER ELSTREECE WINTER

WHY BECOME A CADE MEMBER?As of 2013, the Canadian Association of Drilling Engineers (CADE) has been active for 38 years. With more than 500 members from more than 300 companies, CADE represents a large spectrum of experience in all areas of operations and technologies.

For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. The skills and knowledge obtained by your participation in CADE will benefi t you and your employer, with direct application to your professional career.

CADE offers various means for members to connect and share their insights. Monthly technical luncheons are held with topical industry presentations.

Other membership benefi ts include our monthly publication Well Construction Journal and a membership directory, which is the who’s who of the Canadian drilling industry. Our website – www.cadecanada.com – is an excellent focal point for industry events, blogs and other news. We are also active on LinkedIn and Twitter.

WHO CAN BECOME A CADE MEMBER?CADE members can be anyone employed in the drilling and completions industry or with merely an interest in the industry.

Typical members include drilling and completions engineers, geologists,

technical personnel, sales personnel and students. Student memberships are available to any post-secondary student interested in learning more about drilling and completions.

Please feel free to share information about CADE with all the people in your organization who are interested in the drilling and completions industry.

CADE MEMBERSHIP RENEWALSCADE’s membership year is from September to September. During the summer, CADE members will receive an email and link for the renewal process on our website.

Please remember the benefi ts of being a CADE member include APEGA’s professional development hour, staying abreast of technological and industry advances, drilling conferences and a great opportunity to network. Thank you for your support.

CADE MEMBERSHIP CHANGESLog on to www.cadecanada.com to become a member or to update your contact information.

M E M B E R ’ S C O R N E RWELCOME NEW MEMBERS

CADE MEMBERSHIP CHANGES

WHY BECOME A CADE MEMBER?

WHO CAN BECOME A CADE MEMBER?

CADE MEMBERSHIP RENEWALS

BOARDThe Drawing



ExxonMobil Enters the Montney and DuvernayINDUSTRY CANADA APPROVED THE SALE OF CELTIC Exploration Ltd. to the Canadian subsidiary of ExxonMobil Corp. in February. The U.S.-based giant made an offer to purchase the Calgary-based company in October 2012. The deal was valued at $3.1 billion.

The acquisition provides Exxon with estimated production of 29,900 barrels of oil equivalent per day in emerging resource plays located in the Montney and Duvernay. Celtic’s proved plus probable reserves were estimated to be 138 million boe at the end of 2011, with about half of the volume located in the Montney.

N E W S A N D N O T E S

The End of the ERCBTHE PROVINCIAL GOVERNMENT IS CURRENTLY ON the hunt for someone to head up the Alberta Energy Regulator. The new agency will regulate oil, gas, coal and oil sands development in the province.

The new regulatory authority will take on the responsibility for work currently done by the Energy Resources Conservation Board (ERCB), and by parts of Alberta Environment and Sustainable Resource Development.

“We are creating a world-class organization and are relying on it to build a regulatory process that is effi cient and effective for industry, protects the environment and respects landowners,” said Alberta Energy Minister Ken Hughes in a news release.

The Alberta government is recruiting a chair and an executive offi cer who will fi rst serve on a transition committee. They will then move into permanent roles as the chair of the board of directors and the CEO of the Alberta Energy Regulator.

The Alberta Energy Regulator is expected to be operational in June 2013. The new agency will include nearly 1,000 staff, process tens of thousands of applications a year and manage a budget of more than $200 million.

During the past 75 years, the ERCB has served as Alberta’s primary energy regulator and established

the rules under which oil and gas development could take place. The recent Responsible Energy Development Act created a transition committee to oversee the transfer of duties, functions, staff and property from the ERCB to the new Alberta Energy Regulator.

The Alberta government is holding 19 public consultations across the province in February and March to seek input on the role of the new Alberta Energy Regulator. Suggestions can also be submitted through the Alberta Department of Energy website until March 29.



BOARDThe Drawing


AltaGas Reaches Out to the Far East for an LNG Partner

ALTAGAS LTD. CONTINUES TO EMBED ITSELF IN B.C.’s emerging liquefi ed natural gas (LNG) export industry through a recent joint venture with a Japanese company.

AltaGas was the fi rst midstream company to secure a natural gas pipeline that could provide a link for B.C.’s natural gas producers to the West Coast. The Calgary-based company purchased Pacifi c Northern Gas Ltd. in December 2011 for about $145 million to obtain the 115 million cubic feet per day pipeline that stretches from northeastern B.C. to Kitimat.

The public company’s subsidiary, Pacifi c Northern Gas, began a feasibility study in December 2012 to expand its pipeline system to 600 mmcf/d. The expanded pipeline would provide the capacity needed to support the joint venture AltaGas signed in January with Idemitsu Kosan Company Ltd. of Japan.

Each company will have a 50 per cent stake in the newly formed AltaGas Idemitsu Joint Venture Limited Partnership. The partnership plans to pursue opportunities long-term arrangements involving exports of both LNG and liquefi ed petroleum gas (LPG) from Canada to markets in Asia. As Asia’s largest LNG consumer, Japan would benefi t from a new and dependable source of LNG from the partnership.

“Canada is one of the world’s most resource-rich countries and has proven to be a very promising new

supplier of gas to Japan,” said Kazuhisa Nakano, president of Idemitsu, in a news release.

The partnership will undertake feasibility studies for the development and construction of liquefaction facilities as part of the proposed project to export LNG to markets in Asia. The feasibility study is expected to be completed by early 2014. Subject to consultations with First Nations, and the completion of the feasibility study, permitting, regulatory approvals and facility construction, the proposed LNG exports could begin as early as 2017.

The partnership also plans to pursue opportunities to develop an LPG export business, including logistics, plant refrigeration and storage facilities. The feasibility study is expected to be completed in 2013. Idemitsu is a shareholder of Astomos Energy Corporation, one of the world’s largest LPG suppliers. Subject to consultations with First Nations, and the completion of the feasibility study, permitting, regulatory approvals and facility construction, the proposed LPG export business could begin as early as 2016.

The partnership will also evaluate additional opportunities to own and operate infrastructure assets for other energy businesses in North America, as well as to supply energy from North America to Japan, and other countries in Asia.



T E C H N I C A L L U N C H E O N S

Luncheon Tickets

Save the Date

MEMBERS: $47.50 (plus GST)NON-MEMBERS: $55 (plus GST)FULL TABLES OF 10: $475 (plus GST)STUDENT: $20 (plus GST)WALK-UP: $55 (plus GST)

GST REGISTRATION #R123175036Visit www.cadecanada.com for all ticket purchases

CADE Technical LuncheonsMarch 6 and April 3

The Westin320 4th Avenue SWCalgary 11:30 a.m. Reception 12:00 p.m. Lunch 12:30 p.m. Presentation

Keep an eye on www.cadecanada.com for updates on technical luncheon topics and presentations.


LNG is a Taxing SituationTHE B.C. GOVERNMENT ESTIMATES ABOUT $6 BILLION WAS SPENT DURING THE past year on assets and corporate acquisitions in the province’s natural gas market. The province also fi gures roughly the same amount of capital has been invested so far developing B.C.’s LNG industry.

With the industry on the verge of graduating from visualization to reality, B.C.’s Finance ministry and Energy, Mines and Natural Gas ministry analyzed other jurisdictions in the world with LNG industries.

“This review has concluded that B.C.’s main competitor is Australia, which has an LNG tax and royalty regime that is up to one-third higher than B.C.’s. By introducing an additional tax applicable to LNG in B.C., we can maximize the benefi ts to British Columbians while still remaining competitive,” the government stated in a recent note about introducing a new tax.

The province reviewed estimates for direct taxes that would be paid by the LNG facilities and the royalties received by the government from natural gas extraction needed to support those facilities. The provincial government also included additional revenues that could be earned through personal income taxes from new jobs the industry creates, which another government study estimated to be about 100,000 jobs.

The province’s estimates do not include additional potential revenue from other increased B.C. economic activity generated as a result of the LNG opportunity.

“Based on assumptions and a study undertaken by independent consultants, if British Columbia adopts a new LNG tax regime, fi ve LNG plants – two larger- and three smaller-sized – could potentially produce between $130 billion and $260 billion in revenues to the province over 30 years,” the govern-ment noted.



D

PROFILEMember

By Jacqueline Louie

Ready for TakeoffDalton Hosker entered the drilling industry on the ground fl oor and is making plans to keep moving up

ALTON HOSKER HAS COME A LONG WAYsince sweeping the shop fl oors of a drilling contractor when he was 13 in Fort St. John, B.C. Ten years later and he’s now working

as an engineer-in-training with Trican Well Service Ltd. in Calgary, but he’s already planning the next steps of his career.

He plans to obtain a master of business administration (MBA) degree by 2016, at the earliest. “The idea is to be able to continue my career past being an engineer once I get older,” Hosker says. “I want to do it early, fi ve years from now, because I don’t want to go back to school when I’m 30 or 35.”

Hosker became a member of the Canadian Association of Drilling Engineers (CADE) when he was studying for his bachelor of science degree in petroleum engineering at the University of Alberta. He says there are a number of benefi ts to being a CADE member, including a subscription to

Well Construction Journal. “The WCJ is always very interesting – there are always good stories, and I learn quite a bit by reading that,” he says. “It’s a good way to keep in the loop of what’s going on in the industry.”

However, it’s the networking opportunities offered by CADE that are probably the biggest benefi t to membership, according to Hosker. Networking at the CADE Student Industry Night a few years ago even landed Hosker a summer job during 2011. He was posted in Fort St. John with a cement crew for Trican. He has a Class 1 license, so Hosker was able to drive the twin cement units and he also assisted in coil tubing and hydraulic fracturing jobs while out in the fi eld.

“It was a good way for them to get to know me,” Hosker says. After graduating from university the next spring, Trican brought him on full-time.

In his job as an EIT, Hosker will rotate through each of Trican’s service lines: cementing, frac-turing, acidizing and coiled tubing. “Once I fi nish the rotation I get to spend six months out in the fi eld in the service line that I am assigned to so that when I come back to the offi ce full-time I will have a really thorough understanding of Trican’s fi eld operations,” Hosker says. “There is always something new to learn every day.”

Hosker has been learning about drilling since he was 6. His father was an oilfi eld drilling contractor in northeastern B.C. and Hosker got to watch the rigs in action. After sweeping shop fl oors on weekends and during holidays for several years with a rathole drilling contractor, Hosker got a summer job in 2009 with the company working as a junior driller. He later worked for the company as a roughneck on a snubbing unit.

As well as a Class 1 license, Hosker also obtained his commercial pilot’s license when he turned 18, but he sees his future in drilling and completions. “I plan on sticking in the oil and gas industry,” he says.

Dalton Hosker



Angela Haaland is in her fi nal semester of the Petroleum Engineering Technology program at SAIT Polytechnic in Calgary. Before at-tending SAIT, Angela spent fi ve years work-

ing as a medic in the oil and gas industry, and de-veloped a keen interest in drilling and completions operations.

After completing her fi rst year at SAIT, Haaland spent her summer working for Encana Corp. as a completions technologist in the Bighorn Business Unit. After becoming well versed in Encana’s poli-cies and reporting processes in the Calgary offi ce,

she moved out to the fi eld to gain hands-on ex-perience. Haaland participated in several different operations, including slick-water and poly-CO2 hydraulic fracturing, as well as wireline, snubbing and coil tubing operations. She will be continuing her career with Encana in May as a completions wellsite supervisor.

Haaland is also currently serving as the vice-president of operations for the Student Petroleum Society at SAIT. She says the society has played an important role in developing both organizational and leadership skills.

Young TalentHighlighting tomorrow’s best and brightest

StudentPROFILES

Angela HaalandPetroleum Engineering Technology

SAIT Polytechnic

Hassan HagePetroleum EngineeringUniversity of Calgary

assan Hage is in his final year of oil and gas engineering at the University of Calgary. His career in the oil patch started during the summer in 2010 when he worked as a

roughneck on a drilling rig for Ensign Energy Servic-es Inc. in southeast Saskatchewan. Hage also gained hands-on industry experience during a 16-month internship with Suncor Energy Inc.’s in-situ busi-ness unit. The fi rst half of his internship was with the production engineering team, both in Calgary

and out in the fi eld, and the second half was with the drilling and completions team.

Hage is the current director of engagement with the Petroleum and Energy Society (PES) student chapter at the University of Calgary. He says his ex-perience in the fi eld has helped develop a sense of pride towards Canadian technology being used to unlock resources in northern Alberta. He is looking forward to working as a drilling engineer after grad-uating from the University of Calgary in May.

H

VALUE ADDED

The 2012 Value of Professional Services compiled by the Association of Professional Engineers and Geoscientists of Alberta (APEGA) showed a bump in average base salary for all levels of engineers in the province, except those in management.

The association’s annual salary survey breaks down career experience into eight levels of responsibility. The average base salary for engineers in Alberta across all industries ranged from $49,911 for A- level (co-op student) to $212,095 for F+ level in 2012.

The increase in average base salary in 2012 for the fi rst seven levels ranged from 1.8 per cent to 4.9 per cent. Engineers in management at the highest level of responsibility, meanwhile, saw a decrease of 1.5 per cent in their average base salary.

The 2012 survey had participation from 87 companies, which includ-ed 9,500 APEGA members from 10 regional branches in Alberta and 10 industry sectors. Engineers in oil and gas resource exploitation have an average base salary above the provincial average in six of APEGA’s eight levels of responsibility.

HELP WANTED: Career Department

DRILLING SLANG

Here are some unique terms and phrases heard out in the fi eld.BACK WASH: another term for reverse circulation, which is the intentional pumping of wellbore fl uids down the annulus and back up through the drill pipe. This is the opposite of the normal direction of fl uid circulation in a wellbore.

PICKLE: the use of a relatively weak, inhibited acid to remove scale, rust and similar deposits from surfaces of equipment such as treating lines, pumping equip-ment or the tubing string through which an acid or chemical treatment is to be pumped.

ZIP COLLARS: drill collars that have been machined with a reduced diameter at the box end so they can be handled easier with open-and-close elevators.

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It’s a Long Way to the Top

OHN BRANNAN IS A JACK OF ALL TRADES. The executive vice-president and chief operating offi cer with Cenovus Energy Inc. spent time working as a cook, a landscaper,

a carpet layer and a land surveyor before heading off to Texas A&M University to study mechanical engineering.

Since joining the oil and gas industry more than 30 years ago, Brannan’s resume has been just as varied. “I wasn’t the smartest, but I took the jobs that weren’t the best. They were the jobs that people didn’t want,” he said during the Canadian Association of Drilling Engineers (CADE) Student Industry Night.

Brannan’s journey took him all over North America, from the East Coast to California. He also gained experience working in both on-shore and off-shore operations. Brannan’s willingness to take jobs other people weren’t interested in and move to places other people weren’t interested in going to are part of the reason he ended up in Calgary, and eventually in Cenovus’s executive ranks.

“Overall in your career be fl exible, take opportu-nities people don’t want to take and work harder than the next guy,” Brannan said. “As much time as I spent in the fi eld, I have as much respect for the guy cutting sacks as the president. It’s a small world and your reputation will go a long way.”

Brannan’s comments opened the CADE Student Industry Night on Feb. 4 at The Westin in down-town Calgary. About 200 people attended the event, and it was roughly an even split between industry professionals and post-secondary students.

The CADE Student Industry Night was developed three years ago as an opportunity for students in petroleum-related fi elds at the University of Calgary and SAIT Polytechnic to interact with people already in the industry. As well as networking, students also learn about emerging industry developments before leaving school.

The event was organized by students in the

Petroleum and Energy Society at the University of Calgary and the Student Petroleum Society at SAIT. The 2013 edition featured technical presentations by MEG Energy Corp., Packers Plus Energy Services Inc., STEP Energy Services Ltd., Baker Hughes, Ca-nadian Energy Services and Technology Corp., and Resource Energy Solutions Inc.

“Having met a lot of the young people, I can tell you that our industry is in very, very good hands,” said John Garden, an industry contractor and consultant, and member-at-large with the CADE executive.

JCADE Student Industry Night provides a glimpse into the winding career path of a Cenovus Energy Inc. executive

INDUSTRY NIGHTStudent

“Overall in your career be fl exible, take opportunities people don’t want to take

and work harder than the next guy” – John Brannan, executive vice-president and

COO with Cenovus



CADE also presented bursaries to fi ve students during the Student Industry Night. The association distributes bursaries as a part of its commitment to assist individuals in pursuing educational studies in engineering or petroleum technology.

The recipients of the 2013 bursaries are: Michael Christow , Montana Tech, $2500; Sheena Smigelski, Montana Tech, $2250; Kristopher Hauser, Montana Tech, $2000; Julia Tse, University of Calgary, $1750; and Jenn Bhatla, University of British Columbia, $1500.

Hassan Hage, director of engagement from the University of Calgary’s Petroleum and Energy Society, on the left and David Rathgeber, presi-dent of SAIT’s Student Petroleum Society were part of the group of students that organized the networking event.



REPORTSpecial



NORTHEASTERN

HE IMPROVED OUTLOOK FOR THE ENORMOUS VOLUMEof tight gas and shale gas trapped beneath the ground

in northeastern B.C. is due to the continued development – albeit slowly – of liquefi ed natural gas (LNG) shipping outlets along the province’s west coast. Several projects have been proposed to export LNG. Schemes head-ed up by Shell Canada Ltd. and Chevron Corp. have received licenses from the National Energy Board to move their export projects forward, while BC LNG Export Co-opera-tive has secured a license from the NEB and inked a deal to sell 700,000 tonnes of LNG per year to buyers in Asia. The target market in Southeast Asia for B.C.’s uncon-ventional resources, such as China, Japan and Malaysia, is also stoking merger and acquisition activity in Western Canada.

PLAYS: Montney, Horn River, Liard Basin, Cordova Basin

RESOURCE: Natural gas, natural gas liquids, light oil

GEOLOGY: shale, sand, silt

ESTIMATED POTENTIAL RESERVES: 550 – 1,000 trillion cubic feet of unconventional natural gas

PRODUCTION: 3.5 billion cubic feet per day during 2011

MAJOR OPERATORS: Encana Corp., Apache Canada Ltd., Nexen Inc., Devon Energy Corp., Shell Canada Ltd., Talisman Energy Inc., Progress Energy Canada Ltd., ARC Resources Ltd., Murphy Oil Company Ltd.

WCJ_Mar-Apr_13_p14-19.indd 15 3/8/13 4:30:02 PM


British Columbia’s Big Bet

HE PETROLEUM SERVICES ASSOCIATION OF Canada updated its 2013 Canadian Drilling Activity Forecast in January to an estimated 11,475 wells expected to be drilled during

the year. It was only an increase of 75 wells from the original forecast in November 2012, but fully two-thirds of it – 50 wells – was chalked up to “contin-ued natural gas development in northeastern British Columbia,” according to PSAC’s president and CEO Mark Salkeld in a news release.

The improved outlook for the enormous volume of tight gas and shale gas trapped beneath the ground in northeastern B.C. is due to the continued develop-ment – albeit slowly – of liquefi ed natural gas (LNG) shipping outlets along the province’s west coast.

Several projects have been proposed to export LNG. Schemes headed up by Shell Canada Ltd. and Chevron Corp. have received licenses from the National Energy Board (NEB) to move their export projects forward, while BC LNG Export Co-operative has secured a license from the NEB and inked a deal to sell 700,000 tonnes of LNG per year to buyers in Asia.

The target market in Southeast Asia for B.C.’s un-conventional resources, such as China, Japan and Malaysia, is also stoking merger and acquisition ac-tivity in Western Canada. Momentum is gathering.

“Over the next fi ve years, northeast B.C. is ex-pected to see steady growth in drilling and produc-tion activities as gathering, processing and pipeline infrastructure development increase to support B.C.’s emerging LNG export industry,” says Graeme McLaren, assistant deputy minister of B.C.’s Ministry of Energy, Mines and Natural Gas. “There have been

signifi cant investments and mergers/partnerships to fi nance new opportunities through LNG.”

The largest was the US$15.1 billion acquisition of Nexen Inc. by the Chinese National Offshore Oil Corporation Ltd. (Cnooc) which was given the green light by Industry Canada in December 2012. The Committee on Foreign Investment in the Unit-ed States followed suit two months later and was the last regulatory body, from the several countries where Nexen operates, to issue approval.

Cnooc is targeting production during 2013 be-tween 338 million and 348 million barrels of oil

equivalent. The Chinese company is planning capital expenditures for the year be-tween US$12 billion and $14 billion.

Nexen’s landholdings in the Horn River and Cordova basins hold somewhere be-tween 4 and 15 trillion cubic

feet of recoverable gas, while its Liard basin assets have between 5 and 23 tcf of prospective resources. Just how much of Cnooc’s capital spending will end up in northeastern B.C., however, is still being de-termined.

“We don’t have 2013 cap ex estimates available yet,” says company spokesperson Patti Lewis. “We expect to report these numbers once the proposed ac-quisition of Nexen by Cnooc Limited is complete.”

The deal was expected to close during the last week of February. The numbers should be positive for Nexen’s assets as one of Cnooc’s promises in the deal is to enhance capital expenditures on the Cal-gary-based company’s assets.

Nexen has also been active on other fronts to de-velop its northeastern B.C. lands. In August 2012, the company completed a deal to sell 40 per cent of

T

REPORTSpecial

Recent mergers and acquisitions could boost drilling activity in northeastern B.C., but looming uncertainties in LNG economics should temper expectations

By Graham Chandler

“Over the next fi ve years, northeast B.C. is expected to see steady growth in drilling and production activities…

to support B.C.’s emerging LNG export industry.” – Graeme McLaren, assistant

deputy minister of B.C.’s Ministry of Energy, Mines and Natural Gas



British Columbia’s Big Bet

its assets in the Horn River, Cordova and Liard basins for $700 million to a consortium led by Japan-based Inpex Corp.

Encana Corp. also turned to Japan for funding to develop its Cutbank Ridge properties. In February 2012, Mitsubishi Corp. invested about $2.9 billion for a 40 per cent interest in 409,000 net acres of Encana’s undeveloped land in the Montney formation.

Two days after Industry Canada approved the Cnooc-Nexen transac-tion, Progress Energy Resources Corp. also closed a deal with a foreign suitor. The Calgary-based company was purchased by Petronas, Malay-sia’s national oil company, for about $5.5 billion to create Progress En-ergy Canada Ltd.

The capital is expected to further develop Progress’s properties in northeastern B.C., but senior executives with the company declined to discuss the details because the deal had been recently completed.

The two companies had already been working together in a joint venture to develop Progress’s Altares, Lily and Kahta properties in the northern part of the Montney formation. A LNG project had also been proposed through the joint venture. In January, TransCanada Corp. was selected to build and operate a $5 billion pipeline to transport natu-ral gas from northeastern B.C. to Progress’s proposed Pacifi c Northwest LNG export facility near Prince Rupert.

Smaller companies are also positioning themselves to cash in on B.C.’s LNG export potential. Painted Pony Petroleum Ltd. closed a deal in December 2012 to acquire 25 contiguous sections of land adjacent to the public company’s Montney holdings. The Calgary-based company ponied up $108 million for the Kobes assets, which will add about 925 barrels of oil equivalent per day to Painted Pony’s production. The com-pany plans to drill 12 wells in the Montney during 2013, including at least three on its newly acquired land.

Storm Resources Ltd. increased its production in northwestern Alberta and northeastern B.C. by about 2,000 boed in March 2012 when it acquired Bellamont Exploration Ltd. in a deal worth about $60 mil-lion. The Calgary-based company now holds almost 160,000 net acres in the Horn River, Montney and Cordova areas of northeastern B.C.

During 2013, Storm expects to spend $36 million developing its assets, which will include six horizontal development wells at its Umbach property in the Montney formation. In the longer term, Storm continues to eye development of its position in the Muskwa and Otter Park shales of the Horn River Basin, depending upon natural gas price trends.

All these transactions amount to signifi cant funding opportunities. In an ideal economic environment it would point to some intense de-velopment activity within the year for northeastern B.C. But will it? “At this point, it’s diffi cult to gauge how much exploration and develop-ment activity can be directly tied to recent mergers and acquisitions,” says the B.C. government’s McClaren.

There are plenty of other factors at play beyond the capital spending increase that’s expected to follow mergers and acquisitions. In Septem-ber 2012, the B.C. government announced $120 million in royalty de-ductions, which McLaren says could lead to the construction of 21 new infrastructure projects in northeastern B.C. “The program is expected to generate approximately $260 million in new industry capital spend-ing,” he says.

While the move increased optimism from analysts that projects would begin moving forward, the B.C. government began exploring ways to recoup some of that cash in February. The province announced it is examining a new tax for LNG exports to maximize the benefi t

Roughnecks at work on the drilling fl oor of a Precision Drilling rig near Fort Nelson, B.C.



REPORTSpecial

for British Columbians. Enthusiasm for B.C.’s natural gas

industry is also being tempered by continued uncertainties surround-ing west coast LNG startups; and what sort of pricing they may at-tract.

“When you take a look at some of the joint ventures that have been announced and some of the outright corporate acquisitions that we’ve seen, many of these new entrants into northeastern B.C., such as Petronas, PetroChina, Mitsubishi, etcetera, are going to be very motivated to add gas capacity for ultimate take-off to the west coast of B.C.,” says Chris Feltin, managing direc-tor of oil and gas research with Macquarie Securi-ties Group in Calgary. “Over the next few years we do expect activity to ramp up for the services side. There’s well over a bcf a day – close to two bcf a day – that needs to come on-line to fi ll these proposed projects.”

But he fi gures when it comes to how soon the wells actually start to get drilled, it is still a big question of timing.

“If the fi rst LNG project is in the 2017 timeframe, I think that maybe you won’t see a big step up until 2014, or maybe 2015,” Feltin says. “And then the question is: do the operators just kind of drill and let these wells sit, and then complete them when the facilities are getting close to being produced; or do they drill and complete them right away, and then just bring them on at very restricted rates over the next few years? I think it’s going to be a bit of both.”

Feltin’s take is that operators will start to drill just to test areas for deliverability over the land base. Then they will implement a more aggressive drilling program, beginning roughly in 2015 and perhaps later, when there is better defi nition of where the best rock formations are located and which pools will yield the highest production.

That would be the most effi cient, reckons Feltin. “Otherwise you’re drilling wells, completing them and producing into the domestic market right now and that doesn’t really do anyone any good,” he says.

Although Feltin thinks drilling activity in the short-term will be tempered, he is optimistic it will ramp up in the medium-term – with a caveat: “I

think there still needs to be some visibility in terms of actual timing from those LNG projects.”

The timing of projects also hinges on another wildcard: Southeast Asian gas pricing.

LNG export projects around the world are ramp-ing up in an effort to market products to Asia, so

contracts likely won’t be secured on the oil equiva-lent-based pricing that has had northeastern B.C. pro-ducers drooling.

In fact, the contract BC LNG Export Co-operative

reportedly signed is valued at U.S. and Canadian natural gas prices. Chevron, meanwhile, which recently acquired 50 per cent ownership of the Kitimat LNG project, has publicly proclaimed that pricing needs to be close to oil parity or the project won’t get built.

“That’s the golden question right now,” says Feltin. “It’s Macquarie’s view that there is so much gas coming online towards the backend of this cur-rent decade globally that it could actually put some downward pressure on the oil-linked pricing that we are seeing in the Southeast Asian market.

“That’s why I think it becomes imperative for some of these current LNG producers to be trying to lock in some of that favourable pricing right now,” he adds. “The longer they wait, the longer it takes for those agreements to happen, the more chance we see that long-term pricing actually comes under pressure.”

While those are global issues, Feltin says there is also suffi cient competition for LNG projects do-mestically. As activity in the oil sands is expected to ramp up, LNG operators will be competing for shop space, access to labour, materials and other proj-ect expenditures. “What are the true costs of those plants going to be here in Canada?” Feltin asks.

“There’s well over a bcf a day – close to two bcf a day – that needs to come on line to fi ll these proposed projects.”

– Chris Feltin, managing director of oil and gas research with Macquarie Securities Group


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T

Cost ContainmentPragmatic approaches to coping with low gas prices

REPORTTech

By J. Lynn Fraser

HERE’S A LIST OF INTERTWINED FACTORS thwarting the prospects for Western Cana-da’s natural gas industry. According to the Canadian Energy Research Institute (CERI),

it’s a long list.A report released in January 2013 by the organiza-

tion, titled Global LNG: Now, Never, or Later?, high-lighted several of those issues, including: “national energy security, supply fl exibility, infrastructure and capital requirements, the evolving nature of LNG contracts, de-carbonization policies, nuclear policies, energy policies, domestic gas prices, and unconventional gas development abroad.”

CERI notes that “newcomers” to the industry are also affecting what had been a favourable fi nancial undertaking for gas producers. In response, natural gas producers have had to adopt cost containment strategies to limit the impact of low natural gas prices on their operations.

THE RIGHT TOOL The different formations across Western Canada and different types of wells, has led to many specialized drilling projects. Horizontal wells, heavy oil, steam-assisted gravity drainage (SAGD), conventional and monobore, all have different considerations. Ensuring the right style of drilling rig is chosen for a job is even more critical today than it has been in the past.

“Make sure equipment capability is perfectly aligned with the work to be done,” says Howard Crone, executive vice-president and chief operat-ing offi cer with Cequence Energy Ltd. He adds that it is important to use the “right size rig, right style of rig, and the right style of handling system.”

SET UP FOR THE FUTUREOperators should set up large pads and be prepared to drill more than one well in the centre of the pad. Infrastructure should be built so production can be tied-in to large diameter pipelines with large capac-ity. Infrastructure should also be planned so it can be scaled easily and continuous operation can be leveraged to create a lower cost structure once the

fi eld is in full development.“Having infrastructure set up to allow for

year-round drilling operations reduces costs and increases effi ciencies due to less mobilization and cold rig startups,” says Derek Rae, founder of Calgary-based Vanoco Consulting Ltd.

FISCAL RESTRAINTDrilling costs have expanded almost as fast as underground wellbores in recent years. Many com-panies have entered royalty agreements, farm-out arrangements or joint ventures to raise the capital necessary to execute drilling programs.

Cequence’s Crone says companies should look at slowing down drilling activity and only fund operations that can be self-fi nanced, “so you can capitalize programs on a project basis.”

WATCHING THE BALANCE SHEETAs well as curtailing drilling activity to fall in line with an operation’s current fi scal capacity, natural gas operators can also sell equipment and divest of non-core assets to help generate capital. Payouts to investors could also refl ect cost containment measures undertaken by producers.

A story that appeared in The National Post in February highlighted a strategy by producers to fo-cus activity in regions that produce more lucrative commodities such as propane, butane and ethane.

RIGHT PEOPLEWhen companies look to curtail operational spending, labour costs typically get examined closely. Laying off workers often becomes part of a cost containment strategy, but relocating staff is another way to keep productivity high and to retain the employees that will be needed when drilling activity picks up again.

“Many problems encountered in the drilling in-dustry can be attributed to inexperienced person-nel,” Rae says. “Generally during a slowdown in drilling activity, many experienced workers move on to different industries that will provide more stable employment. When the drilling industry



begins to pick up again, many of the experienced workers do not come back to the workforce, which in turn brings an infl ux of inexperienced workers. This increases the number of incidents and opera-tional issues.”

LOOKOUT OVERHEADNatural gas producers should also look beyond the fi eld to reduce operating costs. There are a number of cost containment strategies that can be deployed in the offi ce to help cope with lower commodity prices, such as reducing offi ce space or fi nding a more manageable lease, and reducing travel and administrative budgets.

A recent report from PricewaterhouseCoopers LLP on cost containment strategies for the energy sector recommended companies analyze all third-party contracts and sub-contractor agreements to

ensure a standard rate card is being implemented, and work isn’t being contracted that can be done in-house.

When natural gas demand re-ignites, companies that have shown both fl exibility and adaptability will be poised to take advantage of future demand; and the Conference Board of Canada expects a bright future for energy producers. A recent report from the organization notes that: “Demand for Ca-nadian natural gas will double between 2012 and 2035, driven by production of liquefi ed natural gas (LNG) for Asian export markets and increased use of natural gas within Canada to produce electricity and to produce bitumen in the oil sands.”

The board also estimated that “increase in demand will drive an estimated $386 billion (in 2012 dollars) of investment” of which the western provinces will be the prime benefi ciaries.

Out in the fi eld is an obvious place for natural gas operators to look for cost savings, but rationalizing offi ce operations can also help contain costs.


22 MARCH/APRIL 2013 Well Construction Journal

W

A Flicker of HopeThe development of LNG projects is expected to increase the market price for natural gas – eventually

REPORTMarket

By Jordan Wilkins

ESTERN CANADA’S NATURAL GAS INDUSTRYcould use some stability after a decade of wild price swings. The AECO price hov-ered around $2 per gigajoule at certain

times in 2001 and 2002, before rising above $10/GJ in 2006 and 2008. In April 2012, natural gas hit a 10-year low and bottomed out at $1.43/GJ.

The low price, high transportation costs and in-crease in supply from other regions, has made busi-ness diffi cult for natural gas producers. Traditional markets in Eastern Canada and the United States are fi lling their needs without looking west.

Several planned and proposed liquefi ed natural gas (LNG) export projects are being designed with the intent of increasing exports to over-seas markets and hopefully increasing natural

gas prices in the process.Well Construction Journal spoke with Gil Dawson,

managing partner with SBM Inc., and Ed Kallio, director of gas consulting with Ziff Energy Group, to get their insight on how LNG exports could impact natural gas pricing and drilling activity in Western Canada.

WCJ – With all these potential projects in the planning stages, what affect can we expect LNG development to have on Western Canada’s natural gas prices?GD – It is our view that these projects will essen-tially drive prices to rise for a couple of reasons. One is that it will bring a new global demand to North America and, specifi cally, Western Canada.

BP Plc projects global LNG supply to grow by 25 per cent from 2010 to 2030. China could pace the world’s natural gas consumption during that time, growing by 7.6 per cent to reach 46 bcf/d by 2030.



Another, since these are all LNG projects, we ex-pect that it will allocate a shift of capital to LNG rather than traditional natural gas.

EK – Right now, due to high pipeline tolls on TransCanada, it’s cheaper for Eastern Canadians to bring up low cost [United States] supply than it is to ship gas from Western Canada. The loss of traditional markets in Eastern Canada and the L48 is causing production to decline in the region. In 2001, the [Western Canadian Sedimentary Basin] produced approximately 17 [billion cubic feet] a day and we were exporting about 10 bcf to the U.S. Due to competition from cheap L48 gas, we are heading to 13 bcf a day and lower; and exporting less than 5 bcf a day. Western Canadian natural gas needs a market. Right now, Asian gas demand is growing and they view Western Canadian gas as plentiful and secure. Indeed, many Asian players have announced deals to participate in the Cana-dian upstream and as partners in LNG liquefaction projects. These projects are absolutely vital to the Canadian oil and gas industry. We don’t see prices spiking though because there is a tremendous shale and tight gas resource available under $5/GJ.

WCJ – How will this in turn impact the drilling activity in B.C.?GD – Obviously, to meet the new demand that these projects will create, we’re going to have to drill more gas wells in the area. So that should have a positive affect for drilling companies in the region as well.

EK – This will be very positive for drilling activity. It’ll be positive for drilling companies who will have to build more rigs and it will be great for service companies. We’re going to need more frack crews as well. So overall it will also be really good for the local economies in that region. Hotels and restaurants and other businesses will also benefi t.

WCJ – What are your short-, mid- and long-term projections for natural gas prices?

GD – Predicting exact price is often diffi cult. Our general predication is that gas prices are going to rise as a trend and on the cyclical standpoint. There will be periods where they will drop because of the cyclical nature of the industry, but overall they should continue to rise marginally, especially when looking at the long-term.

EK – Short-term pricing is ugly because we still don’t have the demand for our gas. In the mid-term, the gas price will move up to the full-cycle cost of the marginal gas required to meet demand. As we cycle through the low-cost supply available in the liquids rich areas of the Montney and Duvernay, and require dry gas from the dryer shale basins, we should get into the somewhat higher cost gas, which will be refl ected in gas prices. In the long-term, the gas price will be set by the full-cycle cost of the marginal natural gas required to meet demand; we don’t see a lot of price escalation even out 20 or 30 years due to the availability of gas resource in the U.S. and Canada at a modest full-cycle cost. If I’m a consumer, I wouldn’t be very worried about soaring prices. With the advent of multi-stage frack technology and horizontal drilling, we’ve been able to tap into source rock and that will ensure that prices aren’t going to spike.

WCJ – What do these trends mean to petroleum companies?GD – We’re going to see companies start drilling a lot more gas wells. We predict that it will also move allocation to natural gas, specifi cally LNG, and away from oil.

EK – Petroleum companies right now in Western Canada are not targeting dry gas because the returns are too low. Having more gas demand will enable producers to monetize their gas rather than having it languish undeveloped. There is a huge potential for these companies with undevel-oped land to drill and earn a rate of return for shareholders, and benefi t local economies.



Canadian Rig Counts February 20, 2013

Drilling Down Total Utilization

Alberta 412 192 604 68%

B.C. 54 7 61 89%

Manitoba 19 5 24 79%

New Brunswick 0 1 1 –

Newfoundland 0 0 0 –

Northwest Territories 2 0 2 100%

Quebec 0 1 1 –

Saskatchewan 85 34 119 71%

Totals 570 243 815 70%Source: Divestco

NUMBERSBy the

Stats at a Glance

Alberta Rig Counts February 20, 2013


Northern Alberta 156 47 203 77%

Central Alberta 219 116 335 65%

Southern Alberta 37 29 66 56%


Top 5 Most Active OperatorsNovember 30, 2012

Active Rigs

Husky Energy Inc. 34

Encana Corp. 24

Canadian Natural Resources Ltd. 23

Cenovus Energy Inc. 21

Crescent Point Energy Corp. 18Source: FirstEnergy Capital

Top 5 Most Active Drillers in Western CanadaFebruary 13, 2013

Active Total

Precision Drilling Corp. 149 186

Ensign Energy Services Inc. 85 118

Savanna Energy Services Corp. 62 70

Trinidad Drilling Ltd. 53 59

Nabors Industries Ltd. 42 65

Western Energy Services Corp. 42 45Source: FirstEnergy Capital



Canadian Rig Counts February 20, 2013


Alberta 412 192 604 68%

B.C. 54 7 61 89%

Manitoba 19 5 24 79%

New Brunswick 0 1 1 –

Newfoundland 0 0 0 –

Northwest Territories 2 0 2 100%

Quebec 0 1 1 –

Saskatchewan 85 34 119 71%


Alberta Well LicensesApproval issued by the Alberta Energy Resources Conservation Board

Number of Licences Issued July 2012 Aug. 2012 Sept. 2012 Oct. 2012 Nov. 2012

Development 431 583 498 681 636

Exploration 44 58 51 70 91Source: Alberta Department of Energy

Alberta Spudded WellsDecember 31, 2012

Number of Wells Spudded

2011 2012

January 1812 1751

February 2001 2013

March 1318 973

April 241 261

May 334 356

June 525 488

July 812 625

August 964 464

September 1,018 706

October 955 535

November 971 605

December 754 363Source: Alberta Department of Energy

Top 5 Most Active OperatorsNovember 30, 2012

Active Rigs

Husky Energy Inc. 34

Encana Corp. 24

Canadian Natural Resources Ltd. 23

Cenovus Energy Inc. 21

Crescent Point Energy Corp. 18Source: FirstEnergy Capital

Alberta Completed WellsDecember 31, 2012

Number of Wells Completed

2011 2012

January 413 381

February 774 718

March 1846 717

April 1003 672

May 958 486

June 433 254

July 245 488

August 728 541

September 1,531 524

October 904 692

November 834 750

December 940 692Source: Alberta Department of Energy

Alberta Land SalesDecember 31, 2012

Dec 2012 Dec 2011 YTD 2012 YTD 2011

Oil and Natural Gas

Land Sales $71 million $146 million $1.1 billion $3.5 billion

Price Per Hectare $265.86 $837.14 $360.06 $860.51

Oil Sands

Land Sales – $56 million $11 million $105 million

Price Per Hectare – $1,913.50 $136.27 $210.47Source: Alberta Department of Energy



DEEPERDrilling

Western Canada’s Pain is Pennsylvania’s Gain

OTH THE AECO NATURAL GAS PRICE AND the Henry Hub spot price have seen better days, but the impact on drilling activity is hitting the Western Canadian Sedimentary

Basin a bit harder than it’s hitting the Marcellus formation.

While the domestic benchmark price has recov-ered somewhat from the drastic low of $1.43 per gigajoule in April 2012, the recent improvement likely won’t be enough to spur natural gas produc-ers back to pre-recession drilling levels.

The Petroleum Services Association of Canada (PSAC) is forecasting 11,475 wells to be drilled in Canada during 2013. The association estimates only 1,324 of those will be natural gas wells and bases its prediction on an AECO average price for the year just slightly below the CIBC World Markets forecast of $3.43 per thousand cubic feet.

BBack in 2008, PSAC numbers show 16,933

wells were drilled in Canada and 9,692 of them targeted natural gas. According to CIBC World Markets, AECO averaged $8.20/mcf that year.

The U.S.-based Henry Hub price lost more than $10 per million BTUs between June 2008 and April 2012. Despite the price dropping below $2, operators in the northeastern U.S. continue to drill. Production from the Marcellus is estimated to eclipse 10 billion cubic feet equivalent per day in 2015, according to Peggy Williams of Hart Energy.

“Even with low gas prices these wells are still economic to drill,” she said, during a January breakfast presentation at the Petroleum Club in Calgary. “Even Talisman, in our highest case in the Marcellus, is below $4 for a breakeven price.”

Northeastern U.S. defi es natural gas slowdownComparing a few companies operating in the 50 million acres of the Marcellus formation

COMPANYESTIMATED ULTIMATE

RECOVERY (BCFE)CAPITAL

EXPENDITURESBREAKEVEN GAS

PRICE (MCFE)

Cabot Oil & Gas Corp.(Susquehanna County, Pa.)

10.56 $6.5 million $2.99

Chesapeake Energy Corp.(North Pennsylvania)

5.56 $6 million $3.56

Range Resources Corp.(Super Rich area)

5.12 $4.7 million $2.24

Talisman Energy Inc.(Pennsylvania)

4.61 $5 million $3.93

Source: Hart Energy

Activity IndexHere’s how three of the top 10 natural gas producers in Canada plan to spend 2013

2% The number of the 1,761 wells Canadian Natural Resources Ltd. plans to drill in 2013 that will target natural gas

91% The amount of ARC Resources Ltd.’s $830 million capital budget for 2013 that will focus on oil and liquids drilling

117% The estimated increase in liquids production Encana Corp. expects during 2013 from its total of 30,000 barrels per day during 2012

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YOUR SPONSORSHIP INCLUDES:• Ads in Well Construction Journal, full of relevant industry news and

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Thank You to Our SponsorsThe support of CADE sponsors plays an integral part in our association’s success.

Platinum SponsorsNCS Energy Services Inc.

Gold SponsorsGlobal Steel Ltd.

Hardbanding Solutions

Pacesetter Directional Drilling Ltd.

Q’Max Solutions Inc.

XI Technologies Inc.

Silver SponsorsAkita Drilling Ltd.

Baker Hughes

Cathedral Energy Services Ltd.

Departure Energy Services Inc.

Import Tool Corp. Ltd.

Lory Oilfi eld Rentals Inc.

Packers Plus Energy Services Inc.

Peak Completions

Tristar Resource Management Ltd.

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Western Canada’s Pain is Pennsylvania’s Gain

Northeastern U.S. defi es natural gas slowdownComparing a few companies operating in the 50 million acres of the Marcellus formation

COMPANYESTIMATED ULTIMATE

RECOVERY (BCFE)CAPITAL

EXPENDITURESBREAKEVEN GAS

PRICE (MCFE)

Cabot Oil & Gas Corp.(Susquehanna County, Pa.)

10.56 $6.5 million $2.99

Chesapeake Energy Corp.(North Pennsylvania)

5.56 $6 million $3.56

Range Resources Corp.(Super Rich area)

5.12 $4.7 million $2.24

Talisman Energy Inc.(Pennsylvania)

4.61 $5 million $3.93

Source: Hart Energy

Activity IndexHere’s how three of the top 10 natural gas producers in Canada plan to spend 2013

2% The number of the 1,761 wells Canadian Natural Resources Ltd. plans to drill in 2013 that will target natural gas

91% The amount of ARC Resources Ltd.’s $830 million capital budget for 2013 that will focus on oil and liquids drilling

117% The estimated increase in liquids production Encana Corp. expects during 2013 from its total of 30,000 barrels per day during 2012

For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies, new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your message directly to the entire membership of the leading industry association for Well Construction Professionals in Canada.

YOUR SPONSORSHIP INCLUDES:• Ads in Well Construction Journal, full of relevant industry news and

articles, presented in a high quality, well-read magazine• Your logo in the “Thank you to our sponsors” feature on the CADE

website and in every issue of Well Construction Journal• Your logo on the “Thank you to our sponsors” display at every CADE

Technical Luncheon• Authorized use of the CADE logo on your website and in marketing

materials

Connect with Canada’s Drilling IndustryBecome a CADE Sponsor

2013 SPONSORSHIP PACKAGES ARE NOW AVAILABLEContact CADE at 403.532.0220 or by email at [email protected]

www.cadecanada.com

Support CADE by sponsoring our technical lunches, our website and the Well Construction Journal.

Thank You to Our SponsorsThe support of CADE sponsors plays an integral part in our association’s success.

Platinum SponsorsNCS Energy Services Inc.

Schlumberger

Gold SponsorsGlobal Steel Ltd.

Hardbanding Solutions

Pacesetter Directional Drilling Ltd.

Q’Max Solutions Inc.

XI Technologies Inc.

Ryan Directional Services

Silver SponsorsAkita Drilling Ltd.

Baker Hughes

Cathedral Energy Services Ltd.

Departure Energy Services Inc.

Import Tool Corp. Ltd.

Lory Oilfi eld Rentals Inc.

Packers Plus Energy Services Inc.

Peak Completions

Tristar Resource Management Ltd.

Savanna Energy Services Corp.

Well Control Group

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