B. C. SEEN AS BRIGHT LIGHT
Energy firms look west
Companies that service Alberta’s energy industry, battered by the oil market crash, are feeling the love in British Columbia.
Utility and logistics company Atco Ltd. and drilling- services provider Petrowest Corp. are among Alberta bidders on at least $ 45 billion of hydroelectric and liquefied natural gas projects in British Columbia set to start or be decided this year. Growth has slowed in Alberta, where some expansions in the oilsands are on hold because of depressed crude prices.
Atco, based in Calgary, is developing a 1,600- person housing facility for workers at the $ 8.8- billion Site C hydroelectric dam on the Peace River in northeast British Columbia. Grand Prairie- based Petrowest is among pre- qualified bidders for contracts related to moving earth and building water- diversion tunnels for the dam, which is slated to begin construction by the end of this year.
“British Columbia has the potential to be the bright light within the energy patch and even within western Canadian economic development,” said Andrew Bradford, an analyst at Raymond James Ltd. in Calgary.
The Conference Board of Canada forecasts the economy in British Columbia will grow 3.1 per cent this year, the fastest among the provinces, according to a May 28 report. It expects Alberta to contract by 0.7 per cent.
Work in British Columbia is already helping Alberta drillers such as Western Energy Services Corp. and frackers including Calfrac Well Services Ltd. partially offset a slowdown across the region after oil prices collapsed by half last year, according to Bradford.
The Canadian unit of Petroliam Nasional Bhd., which is proposing a $ 36- billion LNG project in British Columbia, is one of the most active producers, with 20 rigs working at one time in recent months to drill for gas and at least two fracturing crews.
While drilling in British Columbia is forecast to fall 20 per cent in 2015, that’s less than the 54 per cent plunge expected in Alberta as LNG activity takes up some of the slack, according to the Petroleum Services Association of Canada.
Some are skeptical that the crude price downturn will continue to ripple through Alberta’s energy economy. The industry has some “resiliency” after a difficult second quarter, Calgary Mayor Naheed Nenshi said Monday in an interview at Bloomberg’s head office in New York.
“People smarter than I are making counter- cyclical bets at the moment,” Nenshi said. “Their longterm bet is that the cost per barrel is going to come down.”
Western Energy’s chief executive officer, Alex MacAusland, declined by phone to comment on the outlook for services work. Calfrac chief financial officer Mick McNulty didn’t respond to a request for comment.
Work- camp providers such as Horizon North Logistics Inc. and Black Diamond Group Ltd. are best exposed to see share price gains if LNG projects move ahead, according to Raymond James.
“The number of beds that could be required by a single project is about 10,000,” Bradford said. “It’s a fair bit of business and it could more than offset the decline in the oilsands over the next year.”
The work created by Petroliam Nasional if it advances its project would be similar in size to Black Diamond’s entire business, said CEO Trevor Haynes.
“LNG will be a huge catalyst for the camp business in general,” Haynes said.
Atco, which gets about one- fifth of its sales from the structures and logistics unit that builds work camps, is well positioned to supply a range of energy developments in British Columbia, Jason Kielau, an Atco vice- president in the division, said in an email response to questions.
Petronas, as the Malaysian stateowned company is known, plans to make a conditional decision in the coming weeks on whether to proceed, its CEO said May 22. The LNG project is among 19 proposed to deliver billions of cubic feet of gas per day to Asia.
“If LNG happens, there’s going to be a lot of opportunity for everybody,” Petrowest CEO Richard Quigley said by phone.
British Columbia has the potential to be the bright light within the energy patch and even within western Canadian economic development.