ED­I­TOR’S LOG

Alberta Oil - - CONTENTS - NICK WIL­SON nwil­son@al­ber­taoil­magazine.com

Ju­nior com­pa­nies are still a valu­able part of the en­ergy food chain, even if they’re get­ting harder to find

THIS MONTH I TRIED TO GET DE­FIN­I­TIVE

in­for­ma­tion about the to­tal num­ber of ju­nior com­pa­nies in Alberta; their com­bined out­put of oil and gas; the rev­enue they send to gov­ern­ments; the prop­erty tax they pay to mu­nic­i­pal­i­ties; and the value of the work they pro­vide to the ser­vices in­dus­try. I’m still look­ing.

Ju­niors are a mov­ing tar­get, mak­ing it very dif­fi­cult for in­dus­try as­so­ci­a­tions and gov­ern­ment min­istries to col­lect this data. So it’s hard to de­scribe in num­bers what a world with­out ju­niors would look like. It’s eas­ier in words: grim. The en­ergy down­turn, com­bined with the Alberta En­ergy Reg­u­la­tor’s dras­tic tough­en­ing of the sol­vency test it ap­plies to well own­ers, isn’t help­ing things. The cascade ef­fect of ma­jors sell­ing low­pro­duc­ing wells to ju­niors—they’d rather buy higher-pro­duc­ing as­sets than work with lower-out­put wells—is key to the in­dus­try. But the chill­ing blast from the Red­wa­ter En­ergy bank­ruptcy case ear­lier this year, which trig­gered the AER’s in­terim dou­bling of the Li­a­bil­ity Man­age­ment Rat­ing, is cooling this cascade. And if the ma­jors can’t sell these wells, they may sim­ply ce­ment them up as be­ing more trou­ble than they’re worth.

Ju­nior com­pa­nies are cham­pi­ons at nurs­ing lower-value wells to get more bar­rels out of them. This puts rev­enue into gov­ern­ment cof­fers, and into the ser­vice in­dus­try through hir­ing lawyers, ac­coun­tants, drillers and the like. But, the ju­nior’s value doesn’t end there. Ma­jors are of­ten cau­tious about risk­ing new tech­nol­ogy, whereas ju­niors will take the plunge, spear­head­ing de­ploy­ment of new tech­nol­ogy and speed­ing up its spread and ac­cep­tance across the patch. They played a key role in crack­ing the shale code to launch North Amer­ica’s oil and gas revo­lu­tion over the past 15 years, and they are driv­ing the Mont­ney and Duver­nay field de­vel­op­ment in Western Canada.

CNRL and Cres­cent Point En­ergy had to learn to walk be­fore they could stride across Canada’s re­source-rich ter­rain. They did so as ju­niors.

It’s the can-do at­ti­tude of the ju­niors that makes them spe­cial. And it started gen­er­a­tions ago in Western Canada as young work-hun­gry farm­ers raced to oil strikes in Alberta’s Turner Val­ley and on to Le­duc. One such farm boy who shoul­dered hard work in harsh cli­mates to en­ter the Cana­dian Pe­tro­leum Hall of Fame was Dan Clay­pool from Saskatchewan. He took this just-do-it think­ing with him, cross­ing North Amer­ica and the North Sea dur­ing half a cen­tury of oil hunt­ing. “The whole in­dus­try had a phi­los­o­phy and it came from Turner Val­ley: The tough jobs we’ll do right now; the im­pos­si­ble takes 10 min­utes,” he says.

Out of this at­ti­tude flow the bar­rels, rev­enues and in­no­va­tions. Yet, as far too many of them shut­ter their shops in the slump, we are un­able to record the slow­ing data streams from these un­sung he­roes.

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