Driller that bet on Venezuela closes shop
PURCELL — An Oklahoma oil and gas drilling contractor that aimed to produce oil from the Orinoco Belt in Venezuela for that nation's governmentowned oil company closed this month, state employment officials have said.
News outlets previously had reported that Horizontal Well Drillers, which operated out of a yard and office here, defaulted on a significant loan it had acquired from a Canadian financial firm that had specialized in making loans to companies that couldn't obtain financing from traditional sources.
That Canadian firm, Callidus Capital, was taken private by one of its largest investors in November after financial problems and leadership changes.
In September 2016, Horizontal Well Drillers announced it had been awarded a bid by Venezuela's national oil company, PDVSA, to drill up to 191 horizontal wells there.
It was reported then that PDVSA had awarded $3.2 billion in contracts to drill wells in the Orinoco Belt region of the country, and that Horizontal Well Drillers' share of that work was $1.29 billion.
Other award winners in that auction included Schlumberger Ltd. and Y&V
Group, which won bid awards to drill 80 and 100 wells respectively, Horizontal Well Drillers officials said in 2016.
Those reports stated PDVSA, through the contract awards, aimed to boost its daily production by 250,000 barrels over a 30-month time frame.
However, the International Energy Agency reports the country's production instead declined dramatically, by 29 million tons of energy equivalent in the 2017-2018 time frame.
Meanwhile, the country has continued to struggle under sanctions imposed against it and some of its key officials by the United States and other entities as its residents have protested because of declining economic conditions.
Deal went south
Callidus Capital stated in its 2017 full year and fourth quarter results it had written off loan losses of $217.4 million, of which $131.9 million (with an additional pending loss of $64 million) involved one specific loan concentrated in the energy sector.
While it didn't name the borrower, it reported that sanctions imposed by the U.S. and Canadian governments prohibiting certain types of business activity in a South American country where the borrower had significant commercial interests had influenced that loss.
It added that the unnamed country' s default on sovereign bonds, a subsequent sovereign rating downgrade and the fact that the nation's military appeared to have assumed management control of the borrower's main customer (a state-owned oil and gas company), also played roles.
Callidus held out hope then that it could be repaid what it was owed by the borrower, if conditions improved.
Later, when Callidus issued its annual report for 2017, it disclosed it was battling a lawsuit in the Ontario Superior Court of Justice brought against it by its former chief underwriter.
Craig Boyer filed the case to seek back pay, vacation time and other compensation from Callidus after being separated from the company. But Callidus filed a counterclaim that argued Boyer had breached his fiduciary duty to his employer with respect to three companies it had extended financial assistance to, including Horizontal Well Drillers.
Changing fortune
In 2016, officials with Horizontal Well Drillers were up beat about the contract received from PDVSA, noting i ts bid had been successful because the country's shallow formations were well suited for the company's rigs.
“We have widespread experience drilling in similar geological formations and a strong international record with Pemex, Mexico's national oil and gas enterprise,” Brent L. Mills, a member of the company's board, said at the time.
“HWD went through an extensive bidding and qualifications process before receiving the contract,” Mills also said.
In 2016, Horizontal Well Drillers officials said the company had employees in the U.S. and Mexico with field offices in Luthersburg, Pennsylvania, and Villahermosa, Mexico. The contractor had drilled 760 wells for more than 25 companies during the past 10 years, they had said.
An initial report that the company had closed its doors was circulated in early January by Bill Hancock, the business services and rapid response coordinator for the Oklahoma Office of Workforce Development.
On Jan .8, Hancock circu lated a follow-up email, stating, “They have officially closed.
“The only people in the building ( are from) an auction house setting up for an auction on Jan. 14 and 15. All employees are already gone,” he wrote.