Hat still committed to Sask. gas, oil, city says

The divestiture of one quarter of its natural gas wells doesn’t mean a total retreat from southwest Saskatchewan for the City of Medicine Hat, energy division officials said this week.

Nor will it lead to further jobs cuts at the corporation that spent last year trimming its budget while developing a new oil drilling program.

Petroleum division general manager Brad Maynes told the News that the city’s production company, known as Prodco, is still active in Richmound, Free fight and Fox Valley areas.

“We expect to keep our offices in Saskatchewan and there are quite a few wells in relation to the properties,” he said.

“We expect to be operating in Saskatchewan for sometime.”

This week the News reported that the sale of 1,500 wells and major holdings in Hatton, Bigstick, the Sandhills, in Saskatchewan, as well as smaller acreage near Cessford, Alta., will remove more than $50 million worth of long-term abandonment liabilities from the city’s book.

“Very little cash” is involved, said Maynes, who described the wells as bringing in revenue, but not much

Sources outside city hall tell the News that Canadian Natural Resources is the other principal in the transaction.

The senior producer has major holdings in southwest, and its possible could find efficiencies and effectively manage the declining properties at a profit.

Maynes said it was an important consideration for the city to sell to a reputable company that would not leave landowners in the lurch with wells became unprofitable.

Council members reacted to the sale this week saying that the city needs to concentrate on growth opportunities outside of shallow gas.

“Nothing lasts forever,” said Coun. Jim Turner, who didn’t specifically name CNRL — council members were not given any particulars of the deal when they approved it in December.

“I don’t think it’s a bad deal for either side. They might have a direction they want to go and we do too. Time will tell.”

The city’s direction is clearly towards oil.

The city’s new oil development is centred at a property near the Alberta boundary in eastern Saskatchewan, though much further north.

As such Medicine Hat will continue to operate in the province and continue to hold abandonment certification with the Saskatchewan regulator.

Job losses should be minimal from the city’s standpoint.

“Many of the wells (sold) were nonoperated so we didn’t have a lot of operators or contractors in the field,” said Maynes.

Two of the three contractors were employed in the fields have secured new work, and discussions are ongoing with the third.

“We were very cognizant going into this year that we might be looking at dispositions of size. We’ve kept our office and operations staff quite lean... so we don’t expect a reduction.”

A mid-year 2016 report on Prodco stated that 20 positions had been cut over two years and there was a major pullback on capital spending.

The 2016 year-end report on the “gas unit”, which comprises both explorations and utility distribution, states that operational spending in was down steeply to counter falling revenue.

Total wage reductions of $1 million, a $10 million cut in contract services and materials, plus $6 million in general cuts reduced an expected $20 million shortfall to about $11 million.

The city also absorbed its privatesector subsidiary Allied Oil, which has led to some savings as accounting and reporting is streamlined.