Seven Generations CEO downplays recent outage
Executives at Seven Generations Energy Ltd. say they haven’t been wasting time in the wake of a major natural gas pipeline shut down, which has caused the company and some of its competitors to suspend production.
“We have not been sitting on our hands waiting on them,” Seven Generations CEO Pat Carlson said Monday, adding that the company has carried out some maintenance initially planned for later this summer after Alliance Pipeline LP announced its surprise shutdown.
Alliance, a natural gas pipeline system jointly owned by an Enbridge Inc. subsidiary and Veresen Inc., announced Friday it had shut in its line after discovering a third party delivered gas with hydrogen sulphide into the system.
Keyera Corp. later announced it was responsible for sending “gas which did not meet sales gas specifications in the system.”
Alliance began venting the line in Saskatchewan on Sunday to remove the hydrogen sulphide and a spokesperson could not confirm when it will resume operating, though the company is targeting the middle of the week.
The venting process is expected to take several days, which Alliance said was not dangerous, though locals of Alameda and Arcola, Saskatchewan are advised to stay clear of the area.
In the meantime, Seven Generations, Athabasca Oil Corp., Crew Energy Inc., RMP Energy Inc., NuVista Energy Ltd. and other producers announced they were temporarily suspending or reducing their natural gas production in northwestern Alberta as a result.
Carlson said Seven Generations can re- start its facility in only a few days, and noted during the company’s second quarter earnings call Monday that its production guidance remains unchanged.
“This ( guidance) is even despite the ongoing Alliance disruption, which is expected to shut in all of ( Seven Generations’) production for at least five days with a ramp up period thereafter,” RBC Capital Markets analyst Michael Harvey said in a research note.
Harvey noted that Seven Generations, which raised $ 931 million when it went public in Nov. 2014, beat analysts’ projections for cash flow and production in the second quarter.
The company posted a net loss of roughly $ 22 million for the second quarter, compared with net income of almost $ 44 million in the same period last year.
At the same time, Seven Generations announced it had signed an agreement with TransCanada Corp. to deliver natural gas on the pipeline company’s Nova project beginning in 2018, which would help reduce the company’s reliance solely on the Alliance system.
“That ( agreement) is not a response to the incident on Alliance,” Carlson said, noting the deal with TransCanada had been in the works for over a year.
Seven Generations is also actively seeking additional pipeline take- away capacity from its natural gas projects in northwestern Alberta, where multiple pipelines run through its acreage. “We would like to diversify our markets,” Carlson said.
Seven Generations grew its production to an average of 54,219 barrels of oil equivalent per day in the second quarter, up 11 per cent from the first quarter and 126 per cent from the same period last year. The company’s stock was trading 3.8 per cent higher to end the day at $ 14.45.