PSAC Petroleum Service News Summer 2013

Hyduke Energy and other services sector companies are finding a high demand for their innovative technology in markets around the world

MADEIN

CANADA

S U M M E R 2 0 1 3

Financial Planning FoR thE RESt oF 2013

FRacFocUS ExPandS into canada

WoRkER EngagEMEnt highlightS SPRing conFEREncE

PM#40020055

SERVICES

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© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2249

It’s a done dealMergers & AcquisitionsWinning the deal is easier when you hold all the cards.At KPMG, our network of mergers and acquisitions professionals possess the experience and forward thinking necessary to help you meet the time constraints of the deal.

kpmg.ca

Michael McKerracherNational Energy Leader(403) [email protected]

Rhys RenoufManaging Director, KPMG Corporate Finance(403) [email protected]

Alex HendersonPartner, Transaction Services(403) [email protected]

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Features

Departments47

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CONTENTSS U M M E R 2 0 1 3

GlObE TROTTERS Canada’s energy services sector

exports innovative technology

around the world

FUll DISClOSUREA website using transparency to dispel

myths about hydraulic fracturing

comes to Canada

EDUCaTE, EnGaGE anD ExCElHighlights from the annual PSAC

Spring Conference

10

14

MESSaGE FROM ThE ChaIR

In ThE FIElD News, notes and events from the industry

DRIllInG aCTIVITy FORECaST UpDaTE Increased activity is expected in the Western

Canadian Sedimentary Basin

pSaC In aCTIOn Advocacy initiatives from PSAC spread far

and wide

bUSInESS MaTTERSFinancial planning for both increased and

decreased activity in the field

MEMbER pROFIlEPentagon Optimization Services monitoring

new technology

a lOOk aT lEaDERShIpUp close and personal with PSAC board

members Quinn Holtby and Doug McNeill

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WWW.pSaC.Ca

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© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2249

It’s a done dealMergers & AcquisitionsWinning the deal is easier when you hold all the cards.At KPMG, our network of mergers and acquisitions professionals possess the experience and forward thinking necessary to help you meet the time constraints of the deal.

kpmg.ca

Michael McKerracherNational Energy Leader(403) [email protected]

Rhys RenoufManaging Director, KPMG Corporate Finance(403) [email protected]

Alex HendersonPartner, Transaction Services(403) [email protected]

2249 PSAC_8.25x10.75_Apr2013_FINAL.indd 1 4/19/2013 9:33:47 AM

000PSN-KPMG-FP.indd 1 4/19/13 9:46:01 AM PSAC_Summer_2013_p02-03.indd 3 2013-05-17 2:53 PM

4 Summer 2013 Petroleum services news

MESSAGE FrOm THe CHAIR

Lucas Mezzano, PSAC Board Chair

T HAS BeCOme CleAr THAT THe Canadian petroleum services,

supply and manufacturing sectors are global leaders through innovations

used at home and abroad. Technology advances are continuously

improving the operational, environmental and safety performance in

the field, along with increasing productivity. However, many Canadians are

unaware of how these technologies actually work and their far-reaching benefits.

To increase the understanding of the processes and regulations involved

across the upstream oil and gas value chain, PSAC hosted its inaugural

Canadian Energy Technology Blueprint Summit in March. Expert panelists

demystified technologies and innovations related to seismic, hydraulic

fracturing, water treatment and reclamation, and pipelines. This event was

well attended and well received by government representatives, students and

PSAC member company employees.

With hydraulic fracturing operations, commonly known as “fracking,” receiving increased attention this

was a timely opportunity to improve the general understanding of this technology. But this is just a first step.

PSAC recognizes that hydraulic fracturing is a critical part of our industry’s business and without it

accessing many proved reserves of oil and natural gas could quite literally grind to a near halt. The complexity

of today’s modern wells is undoubtedly hard to understand for people who don’t work closely with these

technologies every day. PSAC members are very confident about how well we operate, so we welcome the

opportunity to improve transparency in our performance as a way to build public trust.

That’s why PSAC has launched the Working Energy Commitment. Our members are the ones who perform

hydraulic fracturing and associated services, and that’s why our voice needs to be heard in the ongoing

discussions about how we operate. We also need to communicate more openly and regularly about service

sector innovations that are drivers of the continual improvement in our industry’s performance.

The Working Energy Commitment is our way of communicating the commitment of our members, who

carry out hydraulic fracturing operations, to listen and address public concerns. It began with a Statement

of Principles that are a set of values to guide us as we communicate and collaborate with our on-the-ground

stakeholders and industry peers. The Working Energy Commitment will be the framework within which we

can discuss with Canadians the petroleum services sector’s contribution to the industry, and map a set of

operating practices that reflect the innovation applied to a very old technology – hydraulic fracturing. Or, to

put it more simply, a hydraulic fracturing code of conduct.

To do this, PSAC will gather stakeholder input from residents, land owners and elected officials through

a series of conversations with Canadians over the coming months. This input will help us draft a code of

conduct based on four cornerstones: health, safety and environment; technology and innovation; stakeholder

communication; and community respect. This is a significant undertaking for PSAC and for the industry as a

whole, and supports our broader strategy of increased stakeholder engagement to increase the profile of PSAC

and its more than 250 members. This communication process will be done across Canada, with meetings

from British Columbia to New Brunswick.

Establishing meaningful dialogue with stakeholders is important, with our primary focus always on

enhancing our advocacy efforts to help us run successful businesses. In this regard, PSAC’s Board of

Directors and senior executive met recently for two days in Red Deer to update the association’s strategic

plan. This is an exercise that is done every three years. A member survey was recently conducted to help stir

PSAC’s strategic direction and guide efforts over the next cycle. Member engagement will be a priority and

I look forward to helping establish an ongoing conversation with members that will be critical to PSAC’s

ability to deliver on its members’ behalf. We always welcome your feedback on all of our activities and

initiatives, and encourage you to get more involved with your association.

Lucas Mezzano

PSAC Board Chair

Building Trust Through Transparency

I

PSAC_Summer_2013_p04-05.indd 4 2013-05-17 2:54 PM

WWW.PSAC.CA �

SUMMER 2013 VOL 13 • No.1

PETROLEUM SERVICES ASSOCIATION OF CANADA 11�0 800 6TH AVENUE SW

CALGARY, AB T2P 3G3TEL: 403.264.419�FAX: 403.263.7174

PRESIDENT AND CEO: MARK SALKELDVICE PRESIDENT, COMMUNICATIONS: KELLY MORRISON

COMMUNICATIONS COORDINATOR: LINDA ALDRIDGE

PETROLEUM SERVICES NEWS IS PUBLISHED FOR PSAC BY

VENTURE PUBLISHING INC. 102�9-10� STREET,

EDMONTON, AB T�J 1E3TEL: 780.990.0839FAX: 780.42�.4921

TOLL-FREE: [email protected]

PUBLISHER: RUTH KELLYASSOCIATE PUBLISHER: JOYCE BYRNEMANAGING EDITOR: STEVE MACLEOD

CONTRIBUTING WRITERS: ERIC ASTLEY, ALEXANDRIA ELDRIDGE, JORDAN WILKINS

ART DIRECTOR: CHARLES BURKEASSOCIATE ART DIRECTOR: ANDREA DEBOERASSISTANT ART DIRECTOR: COLIN SPENCEPRODUCTION MANAGER: BETTY-LOU SMITH

PRODUCTION TECHNICIANS: BRENT FELZIEN, BRANDON HOOVER DISTRIBUTION: KAREN CRANE

ACCOUNT EXECUTIVES: DAVID FRAZIER, DENNIS McCORMACK

PRINTED IN CANADA BY RHINO PRINT SOLUTIONS. RETURN UNDELIVERABLE MAIL TO 102�9 10� ST. EDMONTON AB T�J 1E3.

[email protected] • PUBLICATIONS AGREEMENT #400200�� CONTENTS © 2013 PSAC. NOT TO BE REPRINTED OR REPRODUCED WITHOUT PERMISSION.

The Petroleum Services Association of Canada is the national trade association representing the service, supply and manufacturing sectors within the upstream petroleum industry. PSAC represents a diverse range of nearly 260 member companies, employing more than 80,000 people and contracting almost exclusively to oil and gas exploration and production companies.

SERVICES

PSAC_Summer_2013_p04-05.indd 5 5/21/13 11:05:01 AM

© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

Audit Tax Advisory

Enterprise Group Inc. has an aggressive growthstrategy. We help make it a successful one.

After several consecutive quarters of profitability, it’s clear Enterprise Group Inc. is doing exceptionally well. And at Grant Thornton LLP, we’re very proud of our participation in their success. By helping develop superior financial processes, by providing assistance and insight to their newly acquired companies on financial reporting, and by offering advice on tax strategies to maximize profitability, we helped our dynamic client achieve robust growth.

We’re a leading national accounting firm, with a full range of audit, tax and business advisory services—and we know the challenges that companies in the oil and gas industry face. Give us a call. And let us help unlock your potential for growth.

Jeremy Fearnley, CA, CAFMNorthern AlbertaT +1 780 401 8234 E [email protected]

Devin Wagner, CA CBVSouthern Alberta T +1 403 260 2543E [email protected]

Calgary Edmonton Camrose Wetaskiwin

GrantThornton.ca

000PSN-GrantThorton-FP.indd 1 4/16/13 4:20:43 PMPSAC_Summer_2013_p06-07.indd 6 2013-05-17 2:55 PM

WWW.PSAC.CA 7© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

Audit Tax Advisory

Enterprise Group Inc. has an aggressive growthstrategy. We help make it a successful one.

After several consecutive quarters of profitability, it’s clear Enterprise Group Inc. is doing exceptionally well. And at Grant Thornton LLP, we’re very proud of our participation in their success. By helping develop superior financial processes, by providing assistance and insight to their newly acquired companies on financial reporting, and by offering advice on tax strategies to maximize profitability, we helped our dynamic client achieve robust growth.

We’re a leading national accounting firm, with a full range of audit, tax and business advisory services—and we know the challenges that companies in the oil and gas industry face. Give us a call. And let us help unlock your potential for growth.

Jeremy Fearnley, CA, CAFMNorthern AlbertaT +1 780 401 8234 E [email protected]

Devin Wagner, CA CBVSouthern Alberta T +1 403 260 2543E [email protected]

Calgary Edmonton Camrose Wetaskiwin

GrantThornton.ca

000PSN-GrantThorton-FP.indd 1 4/16/13 4:20:43 PM

in the field News, events and activities in the industry

the 2013 PSAC

Education Fund Golf

Classic online auction

is now open. Proceeds

from the auction go to

the PSAC Education

Fund, which supports

Canadian students

and helps to build the future labour force for the

oil and gas industry.

This year’s auction items include three terrific

packages including: Flames Fever, a package

to attend a Calgary Flames game in a luxury

suite; Kokanee Springs Resort Golf Getaway,

the ultimate getaway for a foursome; and the

Nokian tires package, a set of four Nokian

passenger or light truck tires.

The auction closes at 1:30 p.m. on July 18,

2013. The winning bids will be announced at the

PSAC Education Fund Golf Classic Tournament

and will be posted on PSAC’s website. For more

information and to place a bid, visit

www.psac.ca/onlineauction.

PSAC Opens Online Auction to Support educationCongratulations to the individuals who have received

their Petroleum Competency Program (PCP) certifications in the past

year. PSAC is proud to support this program, which is managed by

the Petroleum Human Resources Council of Canada – now a part of

Enform – and is designed to build a national, skilled workforce with

standardized, identifiable skills by using competency standards to assess

and certify workers. For more information, visit www.petrohrsc.ca.

Snubbing ServiCeSChad Barney

Chad Clarke

Nelson Cripps

William Dunford

Graham Fraser

Graham Gaudet

Todd Gripich

Martin Jean

Roy Muckler

Carl Nylen

Ryan Rechlo

Patrick Schlyter

TrAnSPOrTATiOnMelvin Budge

Colin Dineen

John Hoglund

Well TeSTingChris Berlinguette

Jason Brooks

Jamie Rempel

Petroleum Services Sector employees receive Certifications

COMing evenTS

PSAC eduCATiOn fund gOlf ClASSiCJuly 18, 2013

Calgary Elks Lodge and Golf Club

Calgary, Alberta

PSAC Pre-drilling SeASOn MeeTingSeptember 12, 2013

Fort St. John, British Columbia

PSAC AnnuAl generAl MeeTingOctober 30, 2013

TELUS Convention Centre

Calgary, Alberta

2014 CAnAdiAn drilling ACTiviTy fOreCASTOctober 30, 2013


Calgary, Alberta

PSAC induSTry inSighTS dinnerOctober 30, 2013


Calgary, Alberta

For more information about PSAC events,

visit www.psac.ca/events

neW MeMberSregulAr MeMberSAker Well Service, A Division of Aker Solutions

Oilfield Services Canada Inc.

Arctic Therm International, A Division of

Enterprise Group Inc.

Evolution Well Services

Fall Protech Consulting Ltd.

Forum Energy Technologies

Hi-Kalibre Equipment Ltd.

Mustang Well Services Ltd.

Jewel Energy Service Inc.

PTI Group Inc.

ASSOCiATe MeMberSAccretive Financial Corp.

Choice Office Furniture Ltd.

Cube Data Management System

Dynamic Filtration Ltd.

Jim Pattison Lease

Lloyd Sadd Insurance Brokers (Calgary) Ltd.

RPM Industries LLC


Servic-

000PSN-Abacus-FP.indd 1 5/17/13 3:33:34 PM

T

PSAC_Summer_2013_p08-09.indd 8 5/17/13 3:38:47 PM

WWW.PSAC.CA 9

Rising Rig Activity

DRILLING ACTIVITY FORECAST UPDATE

British Columbia: 457 Alberta: 7,563 Saskatchewan: 3,286 Manitoba: 670 Total in Canada: 12,000

13, 000

12, 000

11, 000

10, 000

9, 000

8, 000

7, 000

6, 000

5, 000

4, 000

3, 000

2, 000

1, 000

0

BRITISH COLUMBIA: 554

NUM

BER

OF O

IL W

ELLS

TOTAL IN CANADA: 12,950

2011 DRILLING ACTIVITY FORECAST(NUMBER OF WELLS)

ALBERTA: 8,732

SASKATCHEWAN: 3,043

MANITOBA: 587

GRAPHHed: 2011 Drilling Activity Forecast (number of wells)

British Columbia: 554Alberta: 8,732Saskatchewan: 3,043Manitoba: 587

Total in Canada: 12,950

BRITISH COLUMBIA: 457

ALBERTA: 7,563

SASKATCHEWAN: 3,268

MANITOBA: 670

TOTAL IN CANADA: 12,000

2013 CANADIAN DRILLING ACTIVITY FORECAST(NUMBER OF WELLS)

Note: Total includes activity in Northern and Eastern Canada.

PSAC’S DrIllINg forECAST CoNTINUES UPwArD TrEND

hE PETrolEUm SErVICES ASSoCIATIoN of

Canada (PSAC) has revised its 2013 Canadian Drilling

Activity Forecast with another slight increase in the

expected number of wells drilled during 2013.

PSAC has added 600 wells to its original forecast from November 2012

for an estimated 12,000 wells drilled (rig releases) across Canada for

2013. PSAC is basing its April 2013 update on average natural gas prices of

CDN$3.40/mcf (AECO) and crude oil prices of US$90 per barrel (WTI).

“Drilling activity is keeping on a steady pace this year, and we

T anticipate another pickup in activity in Q3 and Q4,” says Mark Salkeld,

president and CEO of PSAC. “Even with steady levels of activity this year,

continued low gas prices and the impact of infrastructure bottlenecks

that are squeezing access to new markets are certainly having an impact.”

PSAC’s mid-year update was released at a luncheon on April 25. The

Drilling Activity Forecast can be used with the PSAC Well Cost Study to

effectively determine potential drilling and completion market sizes, as

well as pricing and activity direction. For more information, contact PSAC

at [email protected] or 403-264-4195.




WWW.PSAC.CA 11

by Jordan Wilkins

InnovatIve technology developed by canada’s energy servIces sector Is beIng sought after from around the world

yduke energy servIces Inc. wandered a little further outside of its own backyard during 2012 and more than doubled its international business. The drilling rig and well servicing equipment manufacturer increased its international revenue from 22

per cent of its overall business in 2011 to 45 per cent of the company’s $108 million of revenue in 2012.

Hyduke’s president and CEO Gord McCormack learned pretty quickly during his company’s expansion to overseas markets that there is a huge demand for products that meet Canadian standards.

With temperatures ranging from 30°C to -30°C, an abundance

of heavy oil, and rock formations that can be difficult to drill into,

Western Canada is one of the most expensive basins in the world to

produce oil and natural gas. Since Alberta’s first natural gas well was

spudded in 1908 at Bow Island in the southeast corner of the province

near Medicine Hat, Canadian companies have been forced to develop

new technologies to combat the harsh environment and improve

industry processes. This has led to advances in the Canadian services

sector being the most reliable, and thus sought after, technology in

many of the major petroleum markets in the world.

“If it’s good enough for Canada, it’s good enough for the

rest of the world,” McCormack says. “We work in extremely

challenging conditions and we generally only do so a few

months out of every year.”

Hyduke is headquartered just south of Edmonton in Nisku’s

industrial hub, and has been providing Alberta’s oil and gas industry

with drilling rigs and other well servicing equipment for more than

35 years. The company now operates in more than 20 countries,

ranging from the frozen tundra of Siberian Russia to deserts in the

H

TroTTersGlobe

Middle East and Australia, and tropical jungles in

South America and Southeast Asia.

Hyduke’s increased work in international

markets earned the public company the

Exporter of the Year award at the Alberta Export

Awards, which are presented by the Canadian

Manufacturers & Exporters and the Alberta

Government.

The need to expand its work in foreign

countries was partly to combat what McCormack

calls an often misleading amount of local activity

in the Western Canadian Sedimentary Basin.

“The oil and gas sector is very cyclical,

especially when it comes to the new equipment

end of the business,” he says. “There are years

where there is very little capital spending (in

Alberta), despite the fact that there is a lot going

on. Our international customers help us maintain

sustainable revenue when this is happening.

When you want to grow as a company, the first

step is to diversify.”

Many Canadian petroleum services companies

looking to diversify and maintain a consistent

revenue stream have found mutually-beneficial

partnerships in foreign markets where companies

are looking for Canadian-made products and

technology.

McCormack attributes a combination of

meeting environmental challenges and a strong

focus on maintaining high industry standards

as the reason Canadian petroleum technology

is in high demand. “Our industry is very robust



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in regards to our safety standards,” he says.

“Self-regulation has led to some of the highest

worldwide standards and many international

organizations turn to Canada for leadership.”

Unscheduled downtime also negatively affects

Canadian petroleum companies more than in

other parts of the world because the window

for opportunity in Canada is relatively small in

comparison. “We’ve designed equipment that

compress downtime,” McCormack says. “This

obviously increases productivity and efficiency; if

I’m a multi-national oil company, those are two

things I’m looking for in the product I’m buying.”

As the industry continues to innovate, the pro-

cesses employed to extract oil and gas from difficult

to access rock formations has created an increas-

ingly complex suite of technologies. The industry’s

ability to further deploy these innovations, abroad

and domestically, partly hinges on the ability to

demystify technology for the general public to make

the industry more accessible and transparent.

Part of Hyduke’s export program also includes

its knowledge and expertise. The company

focuses on providing service and maintenance

to its extensive product line after they have been

deployed in other parts of the world. McCormack

says the growing international popularity of

horizontal wells and multi-stage hydraulic

fracturing has put many Canadian companies,

including his own, in advantageous positions.

Pipe handling and automation technology is

another area that McCormack has seen take off in

other regions of the world.

Hyduke was joined by Kudu Industries Inc. as

a major award winner at the most recent edition

of the Alberta Export Awards. Kudu, which was

named Exporter of the Year at the 2011, took top

spot in the Leadership category at the award’s

presentation back in March.

Kudu’s main line of business is manufactur-

ing progressing cavity pumps (PCPs) that extract

everything from heavy oil to light oil, dewatering

gas wells and coalbed methane out of the ground.

Several years ago, Kudu made it a company goal for

half of its revenue to come from exports by 2015.

Hans Gjerdrum, vice-president of international

business development with Kudu, joined the

company around the time that goal was made

and predicts that in 2013 about 60 per cent of the

company’s revenue will come from international

clients. He says that part of Kudu’s success comes

from the company’s willingness to adapt its

product line to meet the needs of its customers.

But, with customers in several oil and gas

producing regions around the world, the demands

from each area can vary greatly from one another.

Kudu’s company culture places a large emphasis

on research and development in order to keep in-

novation high for its foreign and domestic clients.

Kudu’s PCP solutions are supported and serviced

by industry specialists and incorporate designs

for a variety of well conditions. As well as being

designed to work with several different natural re-

sources, the pumps meet a wide-range of well types

including horizontal, slant and directional drilling.

Gjerdrum believes that it’s this innovation and

adaptability to the industry that has made many

petroleum services companies successful outside

of Canada’s borders, despite foreign competition

that is usually considerably larger with more

resources and lower manufacturing costs.

“In Canada, a lot of companies are small and

specialized but are competing against giants,” he

says. “This is a challenge but it can be done, you

just have to learn from other companies.”

Several other services sector companies are

already operating in various markets around the

world and a handful of them were also award

recipients at the 2013 Alberta Export Awards.

For other services sector companies looking to

take advantage of Canada’s reputation as a world

class provider of innovative oilfield processes and

technologies, proper market research and analysis

should be undertaken before stepping out onto

the world stage.

“People who want to grow exports need

to step outside of their own company and

product,” Gjerdrum says. “When looking at a

specific market, you should find out what other

companies are doing and analyze their successes

and their failures.”

Canadian companies looking for examples

of success don’t have to look very far. Hyduke

has partners in many aspects of the petroleum

industry, and in several different countries. But,

whenever it comes time for the company to search

for a product outside of its specialty, McCormack

says they rarely look outside of Canada.

“Canadian companies are no doubt leaders in this

industry,” he says. “There may be disadvantages

to working in Canada, but our reputation isn’t

one of them.”

The Petroleum Services Association of Canada (PSAC) is increasing its communica-

tion with communities in an effort to provide

a clearer picture on how the relationship

between regulations and technology mitigates

the risk of completing wells. The association

hosted its inaugural Canada’s Energy Technol-

ogy Blueprint Summit in March as part of its

public engagement strategy.

The full-day session featured experts to

discuss several technologies used in the field,

such as seismic, hydraulic fracturing, water

treatment and reclamation, and pipelines; as

well as the innovations that help make these

operations more efficient, safer and more

environmentally friendly. It’s these advances

that appeal to foreign operators around the

world.

“I do think we are a leading player and the

response is overwhelming in the industry that

people seek out our knowledge,” said Greg

Boone, Calgary market leader for business and

tax incentives with Ernst & Young LLP, during

the event.

TEACHING TECHNOLOGY


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WWW.PSAC.CA 15

by AlexAndriA eldridgeA website thAt helps educAte And inform the public About hydrAulic frActuring comes to cAnAdA

n AmericAn website is moving into Canada and using transparency as a way to help dispel myths about hydraulic fracturing.

While hydraulic fracturing technology has unlocked enormous potential for growth in unconventional oil and gas plays, misinfor-

mation about the practice is widespread, which leaves the public with questions about health and environmental safety.

A

disclosureFull

“we were trying to provide something thAt wAs much eAsier for the public to Access And much more

trAnspArent for them.”

– mike nickolAus, speciAl projects director for gpc

FracFocus.org was started in the United States and is an initiative of

the Groundwater Protection Council (GPC) and the Interstate Oil and

Gas Compact Commission. The site was created as a way to create public

awareness about the practice

of hydraulic fracturing.

“We knew there was a great

deal of interest by the public

with respect to finding out

what chemicals were being

used in hydraulic fracturing,”

says Mike Nickolaus, special

projects director with the GPC.

Part of the website is dedicated to education and explains in

layman’s terms the process of hydraulic fracturing and chemicals used

in the process. The site also serves as a registry of completed wells and

their hydraulic fracturing ingredients, searchable by fields such as

region and operator.

Launched in April 2011, FracFocus.org has attracted more than

500,000 visitors, has more than 41,000 disclosures and 11 states are

using it as their mandatory reporting mechanism. Shortly after the site

launched, the B.C. Oil and Gas Commission entered an agreement to

use the FracFocus system in Canada and FracFocus.ca was created. All

well operators in the west coast province were required to start using

the site for reporting new wells beginning on January 1, 2012.

On the first day of 2013, Alberta operators were also required to

use FracFocus.ca for reporting new wells, after the Energy Resources

Conservation Board enhanced the reporting requirements for fracture

fluids. The other western provinces require companies to submit

ingredients to their respective provincial regulator, but haven’t adopted

the FracFocus.ca site as a reporting tool.

There’s certainly a possibility of that happening, as Nickolaus

believes FracFocus provides a benefit to the industry in its efforts

to improve its relationship with the public. Rather than forcing

interested people to dig up information through provincial or state

regulators, FracFocus makes it easy to find and access the information,

creating more transparency and

increasing public awareness.

“We were trying to provide

something that was much easier

for the public to access and much

more transparent for them,” says

Nickolaus, adding that in the

U.S. more than 500 companies

use FracFocus voluntarily, for those very reasons. “[Industry]

recognizes that there’s a public relations issue. People think that

the industry is very secretive and they don’t want to tell anybody

anything.”

In most cases, companies aren’t sharing information on FracFocus

that the public wouldn’t already be able to access through provincial

regulators. In Canada, operators and suppliers can apply for

exemptions for disclosing confidential business information to protect

trade secrets.

FracFocus.ca will continue to have more information on operations

in Alberta and B.C. in the summer months as operators report their

newly drilled and completed wells.


SERVICES

“Where Cu

stomers

Come

First !!

”

PSAC_Summer_2013_p10-16.indd 16 5/21/13 10:29:10 AM

WWW.PSAC.CA 17

he PSAC 2013 SPring Conference held in Red Deer,

Alberta, on April 16 and 17 offered

delegates a wide array of timely

topics related to transportation, human capital

management and leadership development.

The opening plenary session provided an

overview of drug and alcohol testing in the

workplace. Wayne St. John of CannAmm

Occupational Testing Services characterized

drug and alcohol policies as an important

element that needs to be part of a company’s

larger safety program, akin to policies regarding

required safety gear for workers. “It’s simply no

different,” he said, “because it’s really all about

safety and reducing accidents.”

St. John emphasized that a well-written drug

and alcohol policy does not need to be written

from scratch, but it must be legally defensible,

comply with human rights and be applied

consistently to be effective. He also noted that a

well-designed program balances the rights and

protection of the employee with the rights of

the company, including providing a safe work

environment for all employees.

The importance of consistency was also

heard in Martin Kratz’s presentation, The

Boundaries of Social Media. Kratz, a lawyer

with Bennett Jones LLP, advised delegates to

engage internal stakeholders including human

resources, marketing, management and IT when

developing a policy. Kratz also recommended

the policy should not be a “motherhood

statement,” but that it should be a detailed

statement of expectations, applied consistently

and have consequences when it is breached.

“Quite simply,” he said, “it must be important

to the company.”

Kratz said that although consistency is

T

critical to the success of a social media policy, it should be flexible so it

can adapt to changing uses of social media platforms. He also highlighted

the importance of planning for a crisis stemming from social media and

gave many examples of the sudden and dramatic impact an incident can

have on a company’s reputation.

Daryl Johnson’s presentation, Pay It Forward: Fostering Culture and

Total Rewards, also touched upon the consistency theme but in an entirely

different context. He addressed the issue of consistent labour shortages

now and into the future in Canada, due to reduced birth rates and the

growing number of retiring Canadians.

To retain workers, Johnson said, they must be engaged. He pointed out

that increased financial compensation is not necessarily the best means

of engaging employees. Offering benefits like more flexible schedules

and recognizing contributions consistently can have a much greater and

positive impact on engagement, and thereby employee retention. Johnson

said engaging employees is not merely a feel-good thing, but that it drives

bottom line results. For example, studies have shown that companies

with an engaged workforce can have up to 19.2 per cent higher operating

income than companies with a disengaged one.

Educate, Engage and Excel PSAC SPring ConferenCe ProvideS

SeverAl oPPortunitieS to emPower ServiCeS SeCtor workerS

Jim tittemore of Bottom line impact delivered an enlightening and entertaining final session to a full house entitled, “Coach or mentor: what’s the difference?”



Other highlights from the conference

included the session, Strategies for Managing

a Safer More Effective Fleet. Mike Koebel of

AssetWorks Inc. outlined a variety of options

where technology, such as electronic logs,

combined with behaviour-based safety is the

most effective strategy for reducing workplace

incidents. Douglas Smith of Baker Hughes

stressed the importance of conducting a risk

assessment and developing a journey plan to

prevent injuries.

Jim Tittemore of Bottom Line Impact

delivered an insightful and entertaining final

plenary session, which focused on the value of

mentoring and coaching programs. Through

examples and through an exercise akin to CBC’s

Dragons’ Den television show, Tittemore was

able to communicate the difference between

mentoring (passing on knowledge) and

coaching (helping someone achieve goals). At

the end of the day, he noted that both programs

are about creating good feelings, and that

benefits both the company and employees.

The spring conference dinner also brought

a message of consistency – the importance

of always wearing personal protective

equipment (PPE). Guest speakers, Jamie and

David Dyck recounted their powerful story

of David’s miraculous survival following a

violent explosion while performing a routine

maintenance procedure.

PSAC’s Spring Conference will be held again

next April in Red Deer, Alberta.

Thank you To The 2013 Spring ConferenCe SponSorS Major SponSorSBaker HughesCapilano Truck Driver Training InstituteCenovus energyenterprise Commercial TrucksGeOTrac SystemsJuneWarren-Nickles energy GroupKal Tire

ConferenCe SponSorSAbaDataArresting You Ltd.AssetWorksCANNAmm Occupational Testing ServicesDitch HitchDriving ForceeHS PartnershipsenformJ.J. Keller & Associates Inc.Nexus exhibits Ltd.Northbridge InsuranceOBP Promotions & Awards Ltd.Partners in ComplianceProductivity Albertaroadatarogers InsuranceSAIT PolytechnicSterling Western Star Trucks Alberta Ltd.

ConferenCe SupporTerSAlberta GovernmentWCB – AlbertaWillson Audio VisualWorkSafe BC

PSAC president and CeO mark Salkeld presents Ted Graul of Strad energy with the $250 prize for winning the 2013 Spring Conference evaluation form draw.

Delegates were armed with conversation ice breakers at the 2013 Spring Conference with a PSAC trivia game designed to encourage delegates to visit exhibitors. The game also provided participants with a few facts outside of the education sessions.


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WWW.PSAC.CA 21

PSAC in action

the Petroleum ServiceS aSSociation of canada (PSac) continueS to keeP the ServiceS Sector front and centre through advocacy and outreach

PSAC ContinueS to AddreSS LAbour iSSueSPrior to the release of the 2013 federal budget, PSAC participated in

a pre-budget roundtable discussion hosted by Rona Ambrose, federal

Minister of Public Works and Government Services and vice-chair of

the Treasury Board, and recommended a review of taxable benefits

related to transportation and accommodation for out of province/town

workers, the reinstatement of the Overseas Employment Tax Credit

(OETC), training credits and infrastructure to aid competitiveness.

PSAC also met with representatives from Human Resources and

Skills Development Canada (HRSDC), and Alberta Enterprise and

Advanced Education to continue discussions on addressing eligibility

issues through foreign worker programs for skilled workers without

post-secondary or trade credentials.

PSAC PArtiCiPAteS in ALbertA’S reguLAtory enhAnCement ProjeCtPSAC attended an Alberta Regulatory Enhancement Project (REP)

roundtable discussion this spring regarding notification processes for

licensing and land use notification. The discussion centred around

approval timing, notice to landowners, and reciprocal timing for

responses from all parties when issues arise.

PSAC PromoteS the CAnAdiAn PetroLeum ServiCeS SeCtor in CoLombiA

PSAC LAunCheS the Working energy Commitment

PSAC, together with 11 of Canada’s leading pumping services

companies and PSAC members, recently launched the Working Energy

Commitment. This initiative is aimed at increasing public confidence

in hydraulic fracturing operations and outlines principles under

which its members conduct themselves, now and into the future.

By supporting this initiative, these member companies signify their

pledge to communicate with communities and continuously improve

how they deliver services that support the responsible development of

Canada’s vast oil and gas resources.

Over the coming months, PSAC will be holding meetings with

community members and stakeholders in key operating areas to

discuss a Code of Conduct that will define mutual expectations of

how services companies and communities can work together, and

to set out service sector operating practices to respond to issues and

concerns related to hydraulic fracturing. More information on the

Working Energy Commitment can be found at www.oilandgasinfo.ca.

PubLiC diSCLoSure of ChemiCALS uSed in hydrAuLiC frACturing oPerAtionSIn March, PSAC hosted an information session with representatives from

Health Canada and Environment Canada, as well as provincial regulators

from across Canada to discuss the public disclosure of chemicals used in

hydraulic fracturing operations. This event featured a presentation from

the developers of FracFocus, an online registry used for these operations,

and a panel discussion with subject matter experts.

Awareness of public disclosure requirements is important to

companies operating in Alberta and British Columbia, as the Energy

Resources Conservation Board and the B.C. Oil and Gas Commission

have mandated the use of FracFocus for this purpose.

PSAC was invited by the 2013 Colombia Generates conference

organizers to deliver a presentation to delegates in Cartagena,

Colombia in February. The presentation highlighted the advances

and successes of the Canadian petroleum services sector with the

purpose of developing relationships and networks for Canadian

companies who currently operate and those with intentions to operate in

the area.

mark Salkeld, president and Ceo of PSAC, presents to delegates attending the Colombia generates conference in Cartagena, Colombia in february 2013.



3. Think sTraTegic growThExpanding operations into new geographic regions or taking on new

clients could be good moves to grow a company, but growing just for the

sake of growing is not always beneficial to the overall business. “The busi-

ness buzz might be that everyone is opening shops in the U.S., or wher-

ever, but that doesn’t necessarily mean it’s right for you,” says Edgelow.

Is the new market potential enough to justify new costs for additional

infrastructure and staff? Be absolutely certain before committing; now

is not the time for unproven risks. Although it’s tempting to grab every

opportunity, assess what new clients bring to a company to determine

whether the time and resource investment are feasible. Avoid random

growth which could fragment a company’s focus beyond its capabilities

and jeopardize the ability to serve key existing clients.

4. never underesTimaTe The power of relaTionships“In this business, it’s all about relationships,” says Edgelow. “Build them,

preserve them and know when they’re at risk.” For example, never as-

sume that expansion into a new line, say adding drilling to pumping

services, means clients will automatically start using those new services.

They might have an existing relationship with another supplier that they

might not want to walk away from. It’s rarely a case of build it and they

will come.

ruce edgelow doesn’t have

a crystal ball, but he does have a

talent for long-range forecasts.

Edgelow, vice-president of energy

with ATB Financial, watches industry trends

and its players closely, and right now Edgelow

doesn’t see easy victories ahead.

“The market isn’t as robust as a year

ago,” he says. “It’s a cautious, rather skittish

environment; activity is muted. At best, the

challenge for the energy services sector is to

maintain the same results as last year.”

Still, the market could change rapidly to

either brighter or gloomier times, so Edgelow

suggests a savvy plan for both contingencies.

1. don’T sTay The course, make The courseWithout robust growth, most companies

expect to work a little harder, but that means

doing more, not just more of the same. Before

developing a strategy, companies should start

with some self-reflection. “To determine what

‘doing more’ means for you, start by revisit-

ing the touchstone questions of your business:

Who are we? Who are we serving? Who gener-

ates the most revenue for us? Who takes a lot of

time for small returns?” Edgelow asks.

2. grow wiTh good businesses An examination of a company’s client base

will usually prove the 80/20 rule, where the

majority of income is coming from a short list

of names. Businesses should focus on the most

profitable of their customers and identify a key

company that’s in a growth cycle. How can you

grow with them? Is there a new service you

could add that this company needs? Initiate

discussions by making your willingness to

“grow with them” known.

Financial Game Plan

B

with two quarterS down and two to go, here are Six ideaS for completing 2013 on a winning note

by lisa riccioTTi

business matterS


23WWW.PSAC.CA

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Also, listen to the grapevine to know when business relationships

could be at risk. Rumours that a company may be bought or

change hands often means new owners will have different supplier

relationships. Suddenly it becomes about their relationships, not

yours. Have a back-up plan on standby.

5. Keeping finances flexibleThe ability to grow a company and grab opportunities is inevitably

constrained by access to capital—from either the company or from

shareholders. Always keep some working capital available and don’t

max out lines of credit or overburden the balance sheet.

The foundation should be laid now for future capital to support

a growth spurt. Communicate frequently with shareholders (or

management) about the goal and give progress updates. Last-

minute surprises rarely end well.

6. plan for changes to variable expensesWhen times are tight, a sudden change in one item on a balance

sheet can be dramatic. Be aware of all variables, such as electricity

rates, the cost of diesel, the price of crude and interest rates. “It’s

been a long time since we had double-digit interest rates so many

people have stopped paying attention. But it could happen again,”

Edgelow says. “Protect yourself with locked-in rates and negotiate

forward contracts wherever possible.”


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WWW.PSAC.CA 25

hen five services sector veterans

decided to start a company that would help

producers get the most out of their wells, they

decided on a fairly straightforward name – Pentagon

Optimization Services.

Although only four of them ended up partnering to open the doors

of the Red Deer-based company, Square Optimization Services didn’t

quite have the same ring to it. Besides, the optimization part of the

company’s approach still applied as the company planned to put the

interests of the customer first, employ quality personnel and pay them

well, and wouldn’t be afraid to charge for quality work.

“We weren’t always the cheapest, there’s no doubt about that,” says

Rob Jackson, Pentagon’s head of business development. “We didn’t

bottom-feed. We had a good product, and we sold it for a fair price.”

One of the services that Pentagon developed was offset hydraulic

fracture monitoring. With a series of solar-powered monitors and

some elegant data engineering, Pentagon could provide real-time data

to a hydraulic fracturing crew about how the fluid in the formation

was interacting with adjacent wells.

The downhole monitoring allowed crews to make sure the

tremendous pressure involved in hydraulic fracturing didn’t cause

fractures where they weren’t needed, as well as provide greater

accountability and safety in the atmosphere of increased scrutiny that

now surrounds hydraulic fracturing.

Pentagon was one of the first companies to provide the service, but

Jackson admits the rest of the industry has since caught up. Pentagon’s

next move will be to roll out more downhole monitoring technology,

using acoustics to measure fluid behaviour at the bottom of a well and

combining data with the pressure at surface provided by the offset

monitoring.

It will be an engineering challenge, Jackson says, but he’s confident

his company and its new owners will be up for it.

Pentagon grew from a small company with no revenue to a 30-

employee shop with millions in annual revenue from its operations

stretching from northeast British Columbia to the deepest depths of

Saskatchewan. The company grew in what Jackson calls “the old-

fashioned way” – purely through cash flow. There were no private

placements and no acquisitions. “We could have raised the money if

we wanted to,” says Jackson, “but to do an acquisition just to do an

acquisition wasn’t in our cards.”

The company spurned a few acquisitions of its own before getting

purchased by Texas-based Lufkin Industries Inc. in 2011. Lufkin was

New Start for New Technology

W

MEMBER ProfiLe

subsequently picked up by GE in April for $3.3 billion.

Jackson doesn’t think the acquisition will hinder Pentagon’s ability to

develop new technology. “GE is not some old, stuffy company that’s done

the same thing for 50 years,” he says. “They want to be innovative.”

The international conglomerate purchased Lufkin to expand

its growth in the oil and gas industry, specifically in artificial lift

applications. Pentagon plans to continue operating as a distinct company

within the myriad of businesses under the General Electric umbrella,

just like it had with Lufkin.

“It’s like they [GE] build the car and sell the car, but they don’t service

the car,” says Kori Muir, sales manager with Pentagon. “Pentagon does a

lot of things that will let us service and maintain their equipment long-

term.”

Pentagon oPtimization services Looks to continue deveLoPing new technoLogy under new corPorate ownershiP

by ERic AstlEy



Is your oilfield services operation ready for serious competition?Focus on finance fundamentals to grow profits in tough markets.

When you’re wrapped up in managing day-to-day business operations, it can be hard to step back and see the big picture. Over the last fifteen years, the Canadian oil and gas industry has enjoyed enormous growth. In 1998 the value of all the oil and gas produced was $27 billion. By 2008 it had risen to $145 billion. Last year it was $110 billion. From 1998 to 2012, annual capital spending on oilsands development alone increased fifteen fold – from $1.5 billion to $23 billion. This spending has helped the Oilfield Services (OFS) sector expand significantly. But can these companies remain competitive when the growth stops?

The end of overall growth is complicated by ever-changing customer requirements. The collapse of gas prices has shifted drilling and development dramatically, leaving equipment and services that were profitable for years sidelined. The switch to oil and horizontal drilling has created demand for other products and services and solutions to new technical challenges. Market dynamics have caused demand for some equipment and services to explode while others have collapsed.

As a result, OFS companies have had to constantly adjust their products, equipment and services just to stay in the game.

“When the industry was in a period of steady expansion, it was easy for OFS companies to grow profits,” says David Yager, National Leader of MNP’s Oilfield Services practice. “High demand drove growth, but now, with capacity up and demand flat or falling, securing a profitable piece of a shrinking and ever-changing pie has become more challenging.”

These volatile market conditions require OFS companies to explore internal efficiencies in order to remain competitive, or in some cases, afloat.

“Going forward, profit growth will come more from internal operations, not the overall marketplace,” explains Yager. “When the industry landscape has changed this dramatically, companies must course correct or risk financial challenges.”

MNP’s Oilfield Services team has the financial management tools to help make the most on whatever business comes in the door.

“Finding cost efficiencies in your own operations is essential,” says Yager. “MNP’s Oilfield Services specialists know where to find opportunities to improve financial performance, through key activities like job costing and margins, field ticket flow, collections, cash management, and inventory control. Good financial management is always a sound investment. In this market it is imperative”.

To find out more about how MNP’s Oilfield Services team can benefit you, contact David Yager, Oilfield Services National Leader, at 403.648.4188 or [email protected]. David Yager,

Oilfield Services National Leader

000PSN-MNP-FP.indd 1 4/24/13 2:59:54 PM

A LOOK AT LeADerSHIP

Quinn HOLTbyPresident & CEO

Katch Kan Ltd.

Years in Services Sector: 19

DOug McneiLLExecutive Vice President, Business Development

Stream-Flo Industries Ltd.

Years in Services Sector: 30

PetroLeum ServIceS NewS tALkS wItH PSAc’S BoArD of DIrectorS AND tAkeS A PerSoNAL Look At LeADerS IN tHe ServIceS Sector

Quinn HOLTby DOug McneiLL

if yOu cOuLD DO Any OTHer jOb/OccupATiOn, wHAT wOuLD THAT be?QH: Just be a visionary for my organization.

DM: I have always wanted to be in the agriculture business, farming

or ranching. I like large machinery, I like the outdoors, I like

rural/small community life. My first assignment out of engineering

school was a year in Vegreville – a town of 5,000 – with all my mail

coming to “General Delivery Vegreville.” Second choice would be a

commercial pilot.

wHAT is yOur fAvOuriTe bOOK Of ALL TiMe?QH: Think & Grow Rich by Napoleon Hill (riches are not all monetary).

DM: The Day of the Jackal. Favourite Series: Wilbur Smith collection.

wHAT AbOuT MOvie?QH: Slumdog Millionaire. My definition of luck: “opportunity meeting

preparation and preparation meeting opportunity!”

DM: Gone in 60 Seconds, for an action movie, for the cars and the cast of

[Nicolas] Cage, [Angelina] Jolie and [Robert] Duvall. Reaching back for a

comedy would be Blazing Saddles.

if yOu cOuLD inviTe THree fAMOus peOpLe (DeAD Or ALive) TO Dinner, wHO wOuLD THey be AnD wHAT wOuLD yOu serve?QH: Abraham Lincoln, Winston Churchill and Peter Lougheed. I would serve

Oban scotch, 2006 Quails’ Gate merlot, surf and turf of AAA Alberta beef

and halibut with light roasted asparagus.

DM: A young Howard Hughes, Sir John A. Macdonald, and Orville and

Wilbur Wright, as they all pursued their passion. My wife will tell me what

she would be serving, as cooking is her passion, but it would be flavourful,

interesting, comfort food, paired thoughtfully with some wine.

wHAT DO yOu THinK is THe biggesT cHALLenge fAcing cAnADA’s energy inDusTry AT THis TiMe?QH: Having one customer and not refining all of our own oil.

DM: Communication of what we are doing well, what advances we have

made in our efforts to be more protective of our resources and our

environment, and what we are doing to give back to the communities that

we are working in.

wHAT wOuLD yOu sAy is yOur biggesT AccOMpLisHMenT TO DATe?QH: Helping protect lives and the environment.

DM: Family, close and extended, that like each other’s company and

friendship.

wHAT MOTTO Or pHrAse DO yOu Live by?QH: When you can conceive it and believe it, you will achieve it (perseverance).

DM: Don’t tell me all the reasons it cannot be done, tell me how we are going

to do it.

wHAT TALenT wOuLD yOu MOsT LiKe TO HAve?QH: Inspire people so they can move to the next level in their lives.

DM: I would like to have an aptitude for learning languages.

if yOu cOuLD cHAnge One THing AbOuT yOurseLf, wHAT wOuLD iT be?QH: More patience with people.

DM: I would like to be as fit and active as I was in my mid-twenties.

wHAT is yOur MOsT TreAsureD pOssessiOn?QH: My family.

DM: Family time at the lake where we are off grid and have no cell coverage.

if yOu cOuLD TrAveL TO AnywHere in THe wOrLD, wHere wOuLD yOu gO?QH: Famous museums around the world.

DM: Antarctica or Turtle Island in Fiji.

wHO Are yOur HerOes in reAL Life?QH: Teams that work on a drilling rig, my wife Debra, my uncle Stan who

volunteered in World War II, my grandfather who volunteered in World

War I, and my stepfather who volunteered in World War II.

DM: Those who have overcome challenges in their lives to then contribute and

achieve so much.

in 10 wOrDs Or Less, wHAT wOuLD yOu sAy AbOuT HOw 2013 is gOing TO Turn OuT?QH: A lot better than the predictions of the end of the world in

December 2012.

DM: Politically turbulent, oil and gas industry steady, Indian summer.


Is your oilfield services operation ready for serious competition?Focus on finance fundamentals to grow profits in tough markets.

When you’re wrapped up in managing day-to-day business operations, it can be hard to step back and see the big picture. Over the last fifteen years, the Canadian oil and gas industry has enjoyed enormous growth. In 1998 the value of all the oil and gas produced was $27 billion. By 2008 it had risen to $145 billion. Last year it was $110 billion. From 1998 to 2012, annual capital spending on oilsands development alone increased fifteen fold – from $1.5 billion to $23 billion. This spending has helped the Oilfield Services (OFS) sector expand significantly. But can these companies remain competitive when the growth stops?

The end of overall growth is complicated by ever-changing customer requirements. The collapse of gas prices has shifted drilling and development dramatically, leaving equipment and services that were profitable for years sidelined. The switch to oil and horizontal drilling has created demand for other products and services and solutions to new technical challenges. Market dynamics have caused demand for some equipment and services to explode while others have collapsed.

As a result, OFS companies have had to constantly adjust their products, equipment and services just to stay in the game.

“When the industry was in a period of steady expansion, it was easy for OFS companies to grow profits,” says David Yager, National Leader of MNP’s Oilfield Services practice. “High demand drove growth, but now, with capacity up and demand flat or falling, securing a profitable piece of a shrinking and ever-changing pie has become more challenging.”

These volatile market conditions require OFS companies to explore internal efficiencies in order to remain competitive, or in some cases, afloat.

“Going forward, profit growth will come more from internal operations, not the overall marketplace,” explains Yager. “When the industry landscape has changed this dramatically, companies must course correct or risk financial challenges.”

MNP’s Oilfield Services team has the financial management tools to help make the most on whatever business comes in the door.

“Finding cost efficiencies in your own operations is essential,” says Yager. “MNP’s Oilfield Services specialists know where to find opportunities to improve financial performance, through key activities like job costing and margins, field ticket flow, collections, cash management, and inventory control. Good financial management is always a sound investment. In this market it is imperative”.

To find out more about how MNP’s Oilfield Services team can benefit you, contact David Yager, Oilfield Services National Leader, at 403.648.4188 or [email protected]. David Yager,

Oilfield Services National Leader

000PSN-MNP-FP.indd 1 4/24/13 2:59:54 PMPSAC_Summer_2013_p22-28.indd 27 2013-05-17 3:01 PM

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Documents

PSAC Petroleum Service News Summer 2013