SPRI NG 201 5

2015 Drilling Activity

Forecast Update
When to Permit,
When to Prorate
T H E O F F I C I A L V O I C E O F T H E P E T R O L E U M S E R V I C E S A S S O C I AT I O N O F C A N A D A

Experts weigh in on the gloomy

forecast for low oil prices

PM#40020055

Success at
STARS & Spurs 2015

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CONTENTS
SPRING 2015

Departments
MESSAGE FROM THE PRESIDENT
IN THE FIELD

5
9

News, notes and events from the industry

BUSINESS MATTERS

19

Should you consider registering a vehicle

under the International Registration Plan?

10

Features
TAKING A BALANCED
APPROACH
Experts take on the doom and gloom
surrounding low oil prices

26

22

PSAC IN ACTION

25
28
30

MEMBER PROFILE
A LOOK AT LEADERSHIP
Getting to know PSAC board members
Ian McConnell and Dave McHattie

COVER

10

28

2015 DRILLING ACTIVITY

FORECAST

PITCHING IN
The 21st annual STARS and Spurs Gala
rings in another year of big success

19

9
23

26
WWW.PSAC.CA

Leaders never rest.

No matter what the hour, or how many hours they have in front of them,
leaders stay the course. Through good times and bad, weve done just that,
custom building solutions to help our clients do what they do bestlead.
Because Alberta means the world to us.
atb.com/Leaders

TM

Trademarks of Alberta Treasury Branches.

MESSAGE FROM THE PRESIDENT

Embarking on a
Challenging Year Ahead

ELL, HOW TIMES CHANGE!

In the blink of an eye

our industry has been hit by spiralling commodity prices and
headlines are screaming of mass layoffs.
We were quite optimistic about the year ahead when we
released our 2015 Canadian Drilling Activity Forecast back in late October amidst
uncertainty that was already starting to brew in response to declining prices. As
of the end of January, we have revised our forecast pricing assumptions and have
adjusted our drilling activity forecast from 10,100 wells (rig releases) to 7,650. See
page 22 for the detailed breakdown of PSACs revised forecast.
The year ahead promises to have some challenges as industry continues to
respond to the changing economic landscape we now face. But there is still
Mark Salkeld, President & CEO
optimism to be had. With the strength of our collective membership, PSAC will
continue to forge ahead to make inroads on the issues that matter most. Despite
what may be some turbulent times ahead, the work to champion the interests of our members,
including removing unnecessary obstacles to their future business success, is as important as ever.
We will continue to focus on four key strategic areas: health and safety, knowledge leadership,
human capital and technology, and competitiveness and innovation. When prices rebound,
we want to make sure our efforts help our members to be resilient and drive towards long-term
business success.
Even in these times which we have faced before and survived, our industry remains generous
and committed to supporting safe and vibrant communities. The PSAC-hosted 21st Annual
STARS and Spurs Gala once again showcased that generosity, raising nearly $1.1 million
supporting STARS life-saving emergency medical services. Thank you to this years guests,
volunteers and donors, whose unparalleled generosity shows that when the going gets tough, well,
the tough keep doing the right thing. See the re-cap of the event on page 24.
While there will be some uncertainty and pain points for our industry as we continue to ride
the waves of pricing, the year ahead will be a time for us to demonstrate our commitment to
innovation, operational excellence and the entrepreneurial spirit that transcends our membership
and industry, putting Canadas oil patch back in a leading position sooner than later. We have been
through this before and came out better. This time will be no different.
Best Regards,

Mark Salkeld
PSAC President & CEO

WWW.PSAC.CA

013

h)

You Gotta
See thiS
FrackinG
thinG!

SPRING 2015 VOL 14 No.4

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 250 member companies, employing close to
75,000 people and contracting almost exclusively to oil
and gas exploration and production companies.
PETROLEUM SERVICES ASSOCIATION OF CANADA
1150 800 6TH AVENUE SW
CALGARY, AB T2P 3G3
TEL: 403.264.4195
FAX: 403.263.7174
EMAIL: info@psac.ca
PRESIDENT AND CEO: MARK SALKELD
VICE PRESIDENT, COMMUNICATIONS: KELLY MORRISON

PETROLEUM SERVICES NEWS IS PUBLISHED FOR PSAC BY

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TEL: 780.990.0839
FAX: 780.425.4921
TOLL-FREE: 1.866.227.4276
CIRCULATION@VENTUREPUBLISHING.CA
PUBLISHER: RUTH KELLY
DIRECTOR OF CUSTOM CONTENT: MIFI PURVIS
MANAGING EDITOR: LYNDSIE BOURGON
CONTRIBUTING WRITERS: ROBIN BRUNET, ROBBIE JEFFREY,
SAMUS SMYTH, RYAN VAN HORNE
ART DIRECTOR: CHARLES BURKE
ASSOCIATE ART DIRECTOR: ANDREA DEBOER
PRODUCTION MANAGER: BETTY FENIAK SMITH
PRODUCTION TECHNICIANS: BRENT FELZIEN, BRANDON HOOVER
DISTRIBUTION: KAREN REILLY
ACCOUNT EXECUTIVES: PEGGY BOGDAN, KATHY KELLEY,
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RETURN UNDELIVERABLE MAIL TO 10259 105 ST.
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CIRCULATION@VENTUREPUBLISHING.CA
PUBLICATIONS AGREEMENT #40020055
CONTENTS 2015 PSAC. NOT TO BE REPRINTED OR
REPRODUCED WITHOUT PERMISSION.

PETROLEUM SERVICES NEWS

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IN THE FIELD

News, events and activities in the industry

COMING EVENTS
PSACS DRILLING ACTIVITY FORECAST
MID-YEAR UPDATE
April 30, 2015
Westin
Calgary, Alberta
PSAC EDUCATION FUND GOLF CLASSIC
July 16, 2015
Carnmoney Golf Club
DeWinton, Alberta
For more information and to register for an
event, visit www.psac.ca/event

Canadas Energy Blueprint,

brought to you by ATB Financial
LOOKING AT THE FUTURE STATE OF INDUSTRY
April 22, 2015
Calgary, Alberta
PSAC is pleased to present the first event in its 2015 Canadas Energy Blueprint series, featuring Peter
Tertzakian of ARC Financial, who will be presenting a comprehensive outlook on Canadas oil and
gas industry. Tertzakian will highlight some of the key outcomes to expect three, five and 10 years
from now based on technology development, cost containment and efficiency, social acceptance and
regulatory development.
Find out more at www.psac.ca/event.

PSAC 2015 Scholarship

Competition Now Open
PSAC IS NOW ACCEPTING online applications for
its 2015 Education Fund scholarships. The awards include
five $1,000 PSAC Regular Member scholarships and one
PSAC Roger Soucy Legacy Scholarship, funded by KPMG
in the amount of $2,500. The scholarships are open to
PSAC Regular Member employees and their children.
The application deadline is April 24, 2015. To apply, visit
www.psac.ca/education

WWW.PSAC.CA

NEW MEMBERS
REGULAR MEMBERS
Big Guns Wireline Services
Blue Spark Energy
Expro
Horizon Oilfield Solutions Inc.
ASSOCIATE MEMBERS
DivestLINK Advisory Partners LP
ESI International
Finning (Canada)
LeaderSharp Group
PFM Capital Inc.
SunCity Chem & Polymers Canada Inc.
Volvo Trucks Canada

10 SPRING 2015

PETROLEUM SERVICES NEWS

Taking a Balanced

APPROACH
Experts take on the doom and gloom
surrounding low oil prices
BY ROBIN BRUNET

HE HEIGHT OF THE MEDIAS

from the collapse of oil sands production to the bottom dropping out
of B.C.s liquefied natural gas projects.
But the reality and the news are two different things, and Todd
Hirsch, chief economist at Calgary-based ATB Financial, is bewildered
by the panic. I just heard [Albertas] premier calling the price plummet the worst downturn in generations, he says. That could only be
true if you have the lifespan of a golden retriever. About the only reason
I can come up with for him making such an outrageous statement is
that hes trying to prepare Albertans for a tough budget.
Hirsch says that even the experts cant always be relied on to accurately predict the ebb and flow of prices. As recently as five years ago,
I inadvertently stuck my foot in my mouth by
declaring that oil couldnt go below $80 per barrel, and it promptly dropped to $30 which is
$17 less than it is today. I guess what Im trying to
say is that oil prices have always been like playing
a game of snakes and ladders. Unexpected dramatic drops are, in a way, entirely expected.
Mark Salkeld, president and CEO of the Petroleum Services Association of Canada, goes one
better: In my time Ive seen oil plummet to $18
will still be down: Its going to be very hard per barrel, and yet were all still here, he says.
Salkeld and his colleagues fully appreciate the challenges facing
for Alberta to avoid a recession this year,
them. Theres a lot of hype and talk going on, and rightly so, and
he added.
It was just the latest in a daily spectacle of theres no denying that the drop will break the backs of some playworried reporters citing $47-per-barrel oil ers, primarily newcomers, he says. But a few facts must be kept in
prices as a potential trigger for everything mind. First, I dont know of any significant producer that doesnt have

obsession over the drop in

oil prices came on January 13, when news outlets
reported the Conference
Board of Canadas prediction that the drop will precipitate a recession
in Alberta. Glen Hodgson, the Conference
Boards chief economist, was widely quoted as
saying that even if oil rebounds to $65 per barrel, investment, profits and consumer spending

WE WILL SURVIVE AND BOUNCE BACK, AND JUST

AS HAS BEEN THE CASE IN PRIOR DOWNTURNS
WE WILL BE LEANER AND STRONGER FOR IT, PLUS
WELL HAVE FURTHER DEVELOPED TECHNOLOGY
THAT PROVIDES EVEN GREATER PRODUCTION
EFFICIENCIES. MARK SALKELD

WWW.PSAC.CA

11

a 20-year plan in place, with everything calculated to accommodate a wide range of price
downturn scenarios.
Salkeld cites Crescent Point Energy Corp. as
a perfect example of how seasoned producers
weather price drops. That companys policy-makers have vowed to keep drilling all the
way down to $20 WTI, plus its maintaining
the $2.76 per share dividend this year partly
because it hedged 50 per cent of its production
next year at US$90 per barrel.
Indeed, companies that hedged production in
2014 are significantly insulated from the price
plummet. Calgary-based Encana Corp. hedged
about 30,400 barrels a day of expected oil production between July and December of 2014 at
an average WTI price of US$97.34 per barrel.
Cenovus Energy Inc. added financial hedges
on 14,500 barrels a day of expected 2015 production, at an average Brent price of C$113.64.
Other Canadian energy producers benefiting
from hedges include NuVista Energy, Whitecap
Resources Inc. and Bonavista Energy Corp.
Salkelds second point is that business
opportunities abound during any downturn.
Case in point: in December 2014, Tundra Oil
& Gas Limited announced the purchase of 550
oil wells in southwestern Manitoba from a subsidiary of EOG Resources Inc. The wells produce approximately 7,000 barrels of light oil
per day in the Waskada and Pierson areas. Tundras total production will now exceed 30,000
barrels of oil daily.
In December 2014, Tundra president
Ken Neufeld told reporters, Despite the recent
volatility in the world oil markets, we take a
long-term approach to our business and we
believe that the addition of these assets will provide us not only with additional oil production
in the short term, but with further development
and enhanced recovery opportunities over
the longer term. Tundra will spend $70
million this year to drill and expand the newly
acquired assets.
Much has been said about OPECs manoeuvring in response to the overwhelming success of hydraulic fracturing in the U.S. Its no
secret that OPEC, led by Saudi Arabia, is trying to drive out the high-cost producers, says
Hirsch. But I question the long-term sustainability of this strategy. While Saudi Arabia is a

12 SPRING 2015

low-cost producer, other OPEC members such as Venezuela are not, and its doubtful that ramped
up production will be able to continue indefinitely.
So, what form would the experts like a price recovery to take? For the sake of industry overall I
would prefer a gradual increase in prices; otherwise we will lose out on all the benefits associated
with the ratcheting down of costs, says Hirsch. In its first quarter 2015 Economic Outlook, ATB
has outlined three risk scenarios for global energy prices and their implications for Alberta. In
the first scenario, OPEC
refuses to cut production this would result
in an oil price floor
of US$40 WTI, more
layoffs and provincial
real GDP growth slowing to between 0.5 and
1.5 per cent.
In the second scenario (which ATB believes is most likely), OPEC members are not able
to maintain production levels. This will mean a price rebound of above $60 per barrel starting in the summer. Oil sands production would be cut back, and GDP growth would hover at
two per cent.
In the third (and least likely) scenario, global growth accelerates, OPEC dramatically reduces
production and prices climb to US$70-90 per barrel. This would result in only modest curtailment in the oil sands, and GDP growth would remain above 2.5 per cent.
Although in all three scenarios Alberta experiences the slowest rate of GDP growth since the
2009 recession, the provincial unemployment rate remains at or below the national average, and
in no scenario does Alberta experience a recession, says Hirsch.
The ATB Economic Outlook does, however, discuss other concerns about the oil and gas sector. Energy transportation and access to markets will remain a key concern for producers in
2015, it states in its overview. As of the beginning of the year, there is still no resolution on
any of the major pipeline projects (i.e., Northern Gateway, Keystone XL, Energy East or TransMountain). There is some optimism that the Republican-controlled Congress in the U.S. will
approve the Keystone XL project, but a presidential veto is still possible, meaning the pipeline
remains uncertain.
For his part, Salkeld remains bullish about the long-term prospects of Western Canada oil
producers. We will survive and bounce back, and just as has been the case in prior downturns
we will be leaner and stronger for it, plus well have further developed technology that provides
even greater production efficiencies.
Hirsch sums up the sentiments of his colleagues when he concludes, Nobody is denying
the hurt that plummeting oil prices are causing. The only thing I dont understand is how people
who should know better think this is anything new, or out of the ordinary, or something that
wont be soon corrected. Anyone with a passing acquaintance of past trends knows that prices
will climb in the spring and summer. Yes, job losses are occurring, but 2015 will essentially be
a rebound year.

FOR THE SAKE OF INDUSTRY OVERALL I WOULD

PREFER A GRADUAL INCREASE IN PRICES;
OTHERWISE WE WILL LOSE OUT ON ALL THE
BENEFITS ASSOCIATED WITH THE RATCHETING
DOWN OF COSTS. TODD HIRSCH

PETROLEUM SERVICES NEWS

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YOU MAY HAVE TO

EXPLAIN WHAT YOU DO.
BUT NOT WHAT
YOUVE ACHIEVED.
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Supply chain professionals manage the flow of goods, services,

finance and informationas well as relationships with suppliers
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PETROLEUM SERVICES NEWS

SPECIAL SPONSORED SUPPLEMENT FROM MNP

SURVIVING

THE DOWNTURN
What oilfield services managers should consider in 2015
BY DAVID YAGER, NATIONAL LEADER, OILFIELD SERVICES, MNP

Y NOW, THOUSANDS OF oilfield

services owners and managers

across the WCSB have realized that 2015 is going to be a long and
difficult year. As upstream cash flow available to oil company
clients for reinvestment declines because of lower commodity
prices, capital budgets are being slashed. Customers are also
asking their suppliers to share in the correction by seeking reduced pricing for
goods and services. Services companies dont have much choice in this market.

WWW.PSAC.CA

15

THE OBJECTIVE IS TO GET THROUGH

THE DOWNTURN WITH THE COMPANY
INTACT WHILE PRESERVING THE
GREATEST NUMBER OF JOBS.

STRIVE FOR PROFITS, NOT PRACTICE,

AND YOULL BE AMAZED AT WHAT YOU
CAN LIVE WITHOUT WHEN YOU HAVE TO.

Weve been here before. While oil prices are well below replacement cost
and are ultimately unsustainable, a fundamental change in world oil
markets has taken place. Low-cost producers in the Persian Gulf have
abandoned their traditional role of swing producers to support prices.
Its now up to other producing regions to reduce supply (or increase
demand) to raise prices. This will take time. Meanwhile, doing nothing
and waiting for a recovery simply isnt an option for the service and supply
sector, which must deal with the market as it exists today. Here are some
ways to help your company manage these tough times and emerge with a
leaner, more efficient organization:

COMMUNICATE HONESTLY WITH LENDERS

Lenders hate surprises. They dont want your assets or your company; they
want their money back and theyll work with you if you show them you have
a strategy to survive the downturn, position yourself for the recovery, and
ultimately pay them back. Every oilfield services company with debt is facing
the same challenges, so your lender wont be surprised if you are delivering bad
news. Be honest and dont wait too long. If you dont have a plan, make one fast.

HAVE QUALITY FINANCIAL STATEMENTS AND FORECASTS

Should you want or need to refinance or restructure your debt, raise equity,
merge with a competitor or otherwise change your financial structure,
quality and timely financial statements are essential. This includes monthly
TELL YOUR STAFF WHATS GOING ON
Getting through this slump will be a team effort, so youll need your team P&L reports plus Review Engagement annual statements. Many financial
on your side. The job market is shrinking fast, so your staff will be ready institutions wont lend to or invest in companies without comprehensive
(maybe) for some tough love. Dont be alarmist, but be honest: this is and independently prepared annual financials. While forecasting is
certainly not the time to ask for a raise. The objective is to get through the difficult in todays dynamic market, being able to demonstrate you can
downturn with the company intact while preserving the greatest number model your future revenue and expenses is critical.
of jobs. Elicit everyones help to cut costs wherever possible. Align their
RETOOL FOR PRICE CUTS
success with the companys success.
With oil and gas prices down, clients will be looking for their suppliers
to share the pain by working for less. No is the wrong answer; instead
SLASH DISCRETIONARY SPENDING
Be merciless in determining what you can live without. Review all non- how has become the challenge. Oilfield services companies cannot
essential expense accounts, unassigned employee use of company vehicles, succeed unless their customers succeed. The primary way E&P companies
travel and club memberships, and determine which capital expenditures compensate for lower commodity prices is by spending less and the oilfield
and repairs can be deferred. Close unprofitable locations and dump services must participate. But oil companies know they cannot succeed
marginal service and product lines. Strive for profits, not practice, and by bankrupting their vendors, so as you negotiate, ask if your clients are
making the same cuts theyre asking you to take.
youll be amazed at what you can live without when you have to.

16 SPRING 2015

PETROLEUM SERVICES NEWS

SPECIAL SPONSORED SUPPLEMENT FROM MNP

CONSIDER PAY CUTS AND JOB SHARING

In the 2009 slump, many services companies cut wages for managers and
staff. This works in a downturn because all your competitors are in the same
boat and your employees have nowhere to go. Management must lead by
example if the top dogs make proportionately bigger sacrifices, everyone
will fall into line. Retool your companys base and bonus compensation to
reward success, not activity. Promise to return everyone to higher income
levels as soon as possible and follow through.

RUN CREDIT CHECKS

Available cash for oil companies will be reduced in three ways: lower
production revenue, reduced credit facilities and much higher costs for
equity. If your clients cant pay their lenders, they certainly cant pay you.
When the order comes in, dont move until youre sure youll be paid.
Doing the work then not collecting will exacerbate an already challenging
financial situation.

STRESS-TEST YOUR STATEMENTS AND BALANCE SHEET

Will your company make it through a prolonged downturn? Will you have
the money and flexibility to continue to operate the business in the most
normal fashion possible, ensuring your assets, shareholders equity and your
sweat equity are preserved so that when the recovery comes (and it will
come) youll be able to exploit it and preserve your work and investment?
MNPs Corporate Recovery group is staffed by financial advisory
specialists who can help managers and owners determine financial
risks, analyze cash flows, optimize cash management and review lender
KNOW YOUR JOB DELIVERY COSTS
As you reduce prices, extracting the maximum possible gross margin from obligations to minimize the chances of a default and avoid the worst
each transaction becomes essential. Its important to know and control possible outcomes. This includes reviews of accounts receivables, payables,
direct costs. If your staff is efficient and does every job right the first time, inventory and underutilized capital assets with an objective of maximizing
in some cases you can make the same margin at lower prices. With fuel cash flow.
prices down and labor under control (see above), pleasant surprises can
emerge from doing less work better.
FULL DISCLOSURE
In 2009, the writer was CEO of a medium-sized, TSX-listed services
company. Between 2008 and 2009, revenue slumped from $114 million
MERGERS WORK
One proven way to preserve shareholders equity is consolidation with to $82 million and EBITDA plunged from $10.4 million in 2008 to $0.8
competitors. The objective is to spread management costs across a larger million in 2009. The company shrank from 900 employees to 625. We
revenue base. Clients want to do more work with fewer and larger vendors, defaulted on our senior debt covenants, but our banker stayed with us.
so put your ego on the shelf and find a way to preserve your investment, Every strategy above, except the merger, was employed and we lived to fight
perhaps by owning less of a larger organization that has a fighting chance another day. It was sold in 2012 for more than six times what it traded at
during the bottom of the 2009 slump.
of being positioned to exploit the recovery when it comes.
STREAMLINE MANAGEMENT
In good times, organizations often become top heavy. The objective should
be to keep the greatest percentage of your skilled and trained revenuegenerating personnel while examining all levels of non-revenue generating
management to maximize efficiency. The primary criterion for who stays
and who goes should be performance, not seniority.

QUALITY AND TIMELY

FINANCIAL STATEMENTS
ARE ESSENTIAL.

MANAGEMENT MUST LEAD BY

EXAMPLE IF THE TOP DOGS MAKE
PROPORTIONATELY BIGGER SACRIFICES,
EVERYONE WILL FALL INTO LINE.

WWW.PSAC.CA

17

Times are tough.

And so are you.
Successful oilfield services companies know the importance of
adapting quickly to volatile markets. MNPs Oilfield Services
team delivers the financial management and business advisory
tools you need to become more cost efficient, effective and
competitive. By optimizing business fundamentals, we help
your operation become more resilientand better equipped
to overcome the toughest times.
Contact David Yager, MNPs National Oilfield Services
Leader at 403.461.8566 or david.yager@mnp.ca

Photo courtesy of Beaver Drilling Ltd

BUSINESS MATTERS

When to Permit, When to Prorate

SHOULD YOU CONSIDER REGISTERING A VEHICLE UNDER THE INTERNATIONAL REGISTRATION PLAN?
BY SANDY JOHNSON

RECENTLY MET WITH an Alberta company that won

WHAT TO KNOW
If your company is based outside of the province youre working in.,
there could be a provincial sales tax on vehicles (goods) that come
into the province for temporary use. This takes into consideration
how many days the vehicle is used in the province over a 12-month
period. In general, a vehicle is exempt from PST if the number of
days is five or less.
For instance, in British Columbia under the temporary use
formula, you pay seven per cent PST on the depreciated value of
the vehicle in instalments over a three-year period. In this case, the
company owed roughly $23,000 PST in 2014, 2015 and 2016.
The fleet manager didnt know about the PST issue until an
accountant at the companys head office asked why they had
recovered $312 from the customer for the trip permit but not any of
the $23,000 in PST.
But heres the kicker: the customer had called about doing more
jobs in B.C. and also Saskatchewan, which has a five per cent PST on
any commercial equipment, vehicle or tools used in the province for
one or more days in any 12-month period.
Now what?
A DECISION TO MAKE
Instead of paying for single trip permits and PST, the company could
license vehicles under the International Registration Plan. With IRP,
you pay licensing fees and prorated sales tax to your base jurisdiction
at the time of registration. The jurisdiction will calculate and
forward the proper amounts to other IRP jurisdictions according to
the proportion of distance you travel there.
Licensing a million-dollar rig that spends 80 per cent of its time
in Alberta and the other 20 per cent divided between B.C. and
Saskatchewan would cost a total of $2,396 per year under IRP. It
would be exempt from PST and instead the owner would pay a

WWW.PSAC.CA

PHOTO COURTESY BELCO DRILLING EQUIPMENT

a contract moving equipment from Slave Lake to Prince

Rupert, B.C. They had factored a 30-day trip permit ($312)
and Alberta base plate ($2,400) into their bid, but failed to
account for having to pay roughly $70,000 in B.C. provincial sales
tax on the million-dollar piece of trailing equipment used during the
move.
When your business crosses provincial borders, considerations
like this can cause mass confusion about what is and isnt taxable.
Unfortunately, confusion isnt a valid excuse during an audit. Heres
what you need to know about operating vehicles across the border:

LICENSING A MILLION-DOLLAR RIG THAT

SPENDS 80 PER CENT OF ITS TIME IN ALBERTA
AND THE OTHER 20 PER CENT DIVIDED BETWEEN
B.C. AND SASKATCHEWAN WOULD COST A TOTAL
OF $2,396 PER YEAR UNDER IRP.
prorated sales tax of $3,294 to B.C. and $2,353 to Saskatchewan.
The company could operate in all three provinces for three years for
roughly what it would cost for one year of trip permits and PST paid
to British Columbia alone.
WHEN TO PERMIT
Whether to use trip permits or register vehicles under IRP depends on
how many days you plan to operate outside your home province and
whether the company has already paid sales tax on that equipment.
Registering a vehicle under IRP doesnt represent a cost savings in
every case. But its worth calculating the real cost of using single trip
permits.
Sandy Johnson is the founder of North Star Fleet Solutions, a Calgarybased provider of vehicle tax and licence compliance services. She can be
reached at 1-877-860-8025 or northstarfleet.com.

19

Emergency Response Assistance Canada

Assistance dIntervention dUgence du Canada
Suite #1100, 744 4th Ave S.W. Calgary, Alberta T2P 3T4
Telephone: (587) 349-5880 Fax: (403) 543-6099 Website: www.erac.org

ADVERTORIAL

mergency Response Assistance Canada

(ERAC) formerly LPG Emergency Response
Corp. (LPGERC) began operating in 1997
with a mission to provide 24/7/365 emergency preparedness and response services to shippers and carriers of LPG gas covered under the TDG Emergency
Response Assistance Plan (ERAP) Act and Regulations. ERAC provides the ERAP development and
a national preparedness and response capability to
more than 300 organizations across Canada. When
activated, our Response Teams (RTs), Remedial
Measure Advisors (RMAs) and Flammable Liquids
Technical Specialists (FLTSs) will report to Incident
Command, who is often the local Fire Department
Chief or designate. Operating under Incident Command System, the ERAC Response Team reports to
Operations as a strike team.
ERAC has developed preparedness and response
plans that cover the entire country in support of
oil and gas producers, carriers and first responders.
ERAC ensures well-trained and qualified people,
quality equipment, knowledgeable advice and timely assistance to allow responders to deal effectively
with LPG incidents by road, rail and stationary tanks
greater than 450 L. LPG Products included are:
Propane (UN1978)
Butane (UN1011)
Propylene (UN1077)
Butylene (UN1012)
Isobutene (UN1969)
Isobutylene (UN1055)
LPG (1075)
Recently, after the tragic events of Lac-Mgantic,
Quebec where a train carrying crude oil derailed and
exploded killing 47 people, Transport Canada issued
a Protective Direction 33 which requires shippers to
have an ERAP for the following:
Flammable Liquids, N.O.S. (UN1993)
Alcohols, N.O.S. (UN1987)
Gasoline (UN1203)
Hydrocarbons, Liquid, N.O.S. (UN3295)
Ethanol (UN1170)
Petroleum Distillates, N.O.S. (UN1268)
Fuel, Aviation, Turbine Engine (UN1863)
Diesel Fuel (UN1202)
Petroleum Crude Oil (UN1267)
Ethanol and Gasoline Mixture (UN3475
ERAC, with support from the Canadian Propane
Association, Canadian Association of Petroleum
Producers and the Rail Association of Canada, created a new ERAC Flammable Liquids (FL) Division to
support the requirements of Protective Direction 33.

One significant difference, in the new Protective

Direction 33 ERAP requirement for the Flammable
Liquids, is Transport Canada requires all ERAP holders to provide firefighting technical advice and firefighting foam and equipment to the first responders
on scene as needed. ERAC is committed to providing this support on behalf of our Plan Participants
(those we serve as shippers and carriers of dangerous goods). ERAC has developed detailed activation and response plans which identifies significant
foam and equipment caches strategically located
coast to coast. In addition, we have recruited Flammable Liquids Technical Advisors (FLTAs) available
24/7 to provide firefighting advice by phone and
Flammable Liquids Technical Specialists (FLTSs) to
provide firefighting advice at the scene alongside
the rail technical specialists identified in our Plans.
ERAC operates across Canada with 10 LPG Response
Teams, 34 LPG RMAs, 4 Home Base Coordinators
(HBCs), 11 FL Response Teams, 14 FLTSs, 6 FLTAs
and 1 Emergency Call Centre operated under a division of STARS.
ERAC takes great pride in providing the training
and assessment of all of our responders and being
Canadas only national emergency preparedness
and response organization with a Transport Canada
approved ERAP. Our priority is to ensure we have
competently trained individuals ready and able
to support flammable gas and liquids incidents to
ensure public and first responder safety.
ERAC response personnel are extensively trained in
the handling, storage and/or transportation of LPG
and Flammable Liquids products and containers.
ERAC provides Plan Participants with responders
trained using National Fire Protection Association
standards as guidelines. Once a year, Regional Training and Assessment is held in each region across Canada for the RMAs, Response Team Leaders (RTLs),
Alternate Team Leaders (ATLs), FLTSs, FLTAs and
the Response Team Members to test their skills and
update them on any new developments. Once every
two years, a National Training session is held for
all the RMAs, HBCs, FLTSs, FLTAs, RTLs and ATLs
across Canada to share their experiences, learn new
skills and refresh their knowledge. In addition to the
above training, all FLTAs and FLTSs will receive Fire
Specialists training for crude and flammable liquids.
More information on ERAC and our services is
available at www.erac.org.

DRILLING ACTIVITY FORECAST UPDATE

Drilling Forecast Revised

PSACS 2015 DRILLING FORECAST DECLINES 24 PER CENT AMID SLUMPING OIL PRICES
2015 CANADIAN DRILLING ACTIVITY FORECAST
(NUMBER OF WELLS)

ALBERTA: 4,187
SASKATCHEWAN: 2,679
BRITISH COLUMBIA: 415

MANITOBA: 364

TOTAL IN CANADA: 7,650

Note: Total includes activity in Northern and Eastern Canada.

N ITS FIRST UPDATE to the 2015 Canadian Drilling

Activity Forecast, the Petroleum Services Association of Canada

(PSAC) has revised its forecasted number of wells drilled (rig
releases) across Canada for 2015 to 7,650 wells. This is a decrease
of 2,450 wells from PSACs original 2015 drilling forecast released in late
October 2014, representing a 24 per cent decline.
PSAC is basing its updated 2015 forecast on average natural gas prices
of C$2.50 /mcf (AECO), crude oil prices of US$57bbl (WTI) and the
Canada-U.S. exchange rate averaging $0.84.
The rapid decline of oil prices over recent weeks is taking hold, says
Mark Salkeld, president and CEO of PSAC. There is enormous pressure
on services companies to cut costs even in the face of slim margins.
They are responding and some difficult times may lie ahead in the
immediate term, but companies are focusing on what can be done now
to keep key personnel, enhance efficiencies and optimize operations.
On a provincial basis for 2015, PSAC now estimates 4,187 wells to
be drilled in Alberta, down from 5,740 wells in the original forecast.
Approximately 25 per cent fewer wells are also expected to be drilled in
British Columbia, with PSACs revised forecast now at 415 wells for the
province, down from 555 in the original forecast. The revised forecast

22 SPRING 2015

for Saskatchewan now sits at 2,679 wells, compared to 3,365 wells in the
original forecast, and Manitoba is forecasted to see 364 wells, or a decline
of 66, in well count for 2015.
The impacts of the current downturn have sent ripple effects
throughout Canada. This is not just affecting our industry negatively,
continues Salkeld. We have been through this before and will get
through it, but how long the pricing environment persists is a real
unknown. Although people may appreciate the dollars they save at the
pump, the negative impact to investment portfolios, other industries and
government coffers is serious.
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 230 member companies, employing approximately
70,000 people and contracting almost exclusively to oil and gas
exploration and production companies. The Canadian 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
info@psac.ca or 403-264-4195.

PETROLEUM SERVICES NEWS

PRICES WILL
REBOUND,

WILL YOU?
Get the business intelligence you need to
help you plan through the downturn and beyond.

2015 Mid-Year
Drilling Activity Forecast
Thursday, April 30, 2015
11:30 am 2:00 pm
Westin, Calgary

Register today at
www.psac.ca.

Join the Petroleum Services Association of Canada as we present

its 2015 Mid-Year Drilling Activity Forecast on April 30, 2015 to get
important business intelligence to help fuel your ongoing planning
to deal with the current downturn.
Cant Join Us?
You can get forecast numbers and other key information on
top operators, meterage, and well type breakdown in regions
across Canada in PSACs Canadian Drilling Activity Forecast publication.
When used in conjunction with the PSAC Well Cost Study, the
Canadian Drilling Activity Forecast can be used to determine
potential market sizes for drilling and completion products and
services, as well as pricing and activity direction.
Subscribe to both and save $200!
New subscribers save an additional 10%!

Leading Energy Services,

Supply, Manufacturing
and Innovation

WWW.PSAC.CA

23

24 SPRING 2015

PETROLEUM SERVICES NEWS

PSAC IN ACTION
THE PETROLEUM SERVICES ASSOCIATION OF CANADA (PSAC) CONTINUES TO KEEP THE SERVICE,
SUPPLY AND MANUFACTURING SECTORS FRONT AND CENTRE THROUGH ADVOCACY AND OUTREACH.
LABOUR AND WORKFORCE MANAGEMENT

PSAC met with Albertas new Jobs, Skills, Training & Labour
Minister Ric McIver to introduce him to PSACs membership
and PSACs various labour initiatives underway. Also attending
by conference call were the ministers chief of staff and assistant
deputy minister (workforce strategies division).
While in Ottawa, PSAC met with Eric Johnson, director of
Alberta-Federal Relations for the Government of Alberta, to
introduce PSACs membership and key facts, issues and initiatives.
Premier Prentice has announced that, notwithstanding changes to
key positions for that office, Eric Johnson will remain in Ottawa.
PSAC participated in an employer forum hosted by the Canada
Employment Insurance Commission, which included presentations
and discussions with deputy ministers and senior government staff
from Employment & Social Development (ESD) Canada as well as
a roundtable discussion with ESD Minister Jason Kenney. PSAC
also participated in a roundtable event hosted by Citizenship and
Immigration Canada Minister Chris Alexander on the new Express
Entry program due to launch on January 1, 2015.

HEALTH AND SAFETY

PROPOSED CHANGES TO THE ALBERTA OCCUPATIONAL HEALTH & SAFETY
(OH&S) CODE
PSAC participated in a joint project with the other upstream
petroleum industry trade associations to propose changes
to Part 37 Oil and Gas Operations of the Alberta OH&S
Code. The project was undertaken in response to the Alberta
governments scheduled review of parts of the OH&S Code.
The associations are also working on a proposal to harmonize
OH&S legislation governing oil and gas operations in the four
western provinces. This proposal is being advanced through the
process set up by the premiers of Alberta, British Columbia and
Saskatchewan under the New West Partnership.
RIG MOVING AND HEAVY HAUL IN SASKATCHEWAN
PSAC arranged a meeting in Regina between member
companies and representatives from the Saskatchewan Ministry
of Transportation to discuss concerns raised by members
related to the permitting process for the movement of rigs and
heavy equipment in Saskatchewan.

INTERNATIONAL BUSINESS AND TRADE

PSAC had the opportunity to sit down with senior policy
personnel from the Department of Foreign Affairs and Trade
Development to introduce PSACs membership and to discuss
technology, exports and corporate social responsibility initiatives,
all of which have an impact on Canadas image abroad.

PSAC PRESENTS
In February, PSAC delivered presentations to the following:
The University of Calgary School of Public Policy, on hydraulic
fracturing
The Association of Financial Professionals Calgary chapter on
PSACs 2015 revised Canadian Drilling Activity Forecast, and
The Energy Council of Canada on workforce and labour issues
CONGRATULATIONS TO PSAC MEMBERS
Calfrac Well Services Ed Oke was honoured as Senior Human
Resources Executive of the Year in Alberta Oils C-Suite Energy

WWW.PSAC.CA

Executive Awards. ComplyWorks Ltd. and McCoy Global

were both recognized in Alberta Ventures Fast Growth 50
rankings, and ENTREC Corporation and STEP Energy
Services ranked first and second place respectively on the list.
Congrats to all!
PSAC IN THE MEDIA
PSAC was recently quoted or featured by several media outlets,
including the Calgary Herald, CTV News Calgary, Daily Oil
Bulletin, Edmonton Journal, and National Post.

25

Pitching In

The 21st-annual STARS and Spurs Gala rings in another year of big success
More than 1,000 people attended the 21st Annual STARS and Spurs Gala
presented by PSAC

A STARS helicopter

Canadian country music artist Corb Lund entertains the crowd

26 SPRING 2015

ESPITE A TROUBLING ECONOMIC FORECAST

amid falling oil prices, Canadas energy
sector showed its support for STARS
on January 24, by helping to raise more
than $1 million.

The long-running STARS and Spurs Gala, an

annual fundraiser in Calgary presented by the Petroleum Services Association of Canada (PSAC), has raised more than $11 million over the past
21 years. Mark Salkeld, president and CEO of PSAC, says he is proud of
the industrys support for the one-of-a-kind event, and credits all sectors
in oil and gas for working together to help ensure STARS is available to be
there for critically ill and injured patients.
This years event was another huge success, says Salkeld. Our event
helps ensure that STARS emergency medical response services stay in the
air. Our partnership with STARS has endured two decades, and its no
wonder with the continued generosity and support of PSAC members and
the industry as a whole.
The continued backing of individuals, corporations and the energy industry left STARS president and CEO, Andrea Robertson feeling
overwhelmed. We are humbled by the support we received from PSAC
and those who participated in the gala this year, says Robertson.
Twenty-one years and more than $11 million raised has led to thousands
of lives saved. This partnership reflects the commitment our community
has to helping others.

PETROLEUM SERVICES NEWS

Premier Jim Prentice and his wife Karen were among the special
guests in the audience, as was MLA Rick Fraser. In a speech, Prentice
acknowledged the downturn in the economy, noting that Albertans are
tough and will weather the storm.
The event, held at the BMO Centre at Stampede Park in Calgary, was
attended by nearly 1,200 guests, who enjoyed dancing to music by local
country singer Corb Lund and participated in an entertaining live auction, led by auctioneer Bill Brown and his team from Elevate Auctions.
The live auction was an incredible success and a highlight of the evening,
raising $657,000 through 16 different items. The live auction packages ranged
from a Primetime Emmy award experience to drilling services valued at
$100,000. One energy company generously spent $268,000 on three different
industry packages. Meanwhile, there were 194 items in the silent auction that
raised nearly $100,000. The silent auction saw spirited bidding too, with the
top prize a Paul McCartney-autographed guitar selling for $4,600.

OUR PARTNERSHIP WITH STARS HAS ENDURED

TWO DECADES, AND ITS NO WONDER WITH THE
CONTINUED GENEROSITY AND SUPPORT OF PSAC
MEMBERS AND THE INDUSTRY AS A WHOLE.

THANK YOU TO THE SPONSORS OF THE

2015 STARS AND SPURS GALA,
PRESENTED BY PSAC:
DIAMOND SADDLE:
Clean Harbors
Halliburton
Ruby Reins
Canyon Technical Services
Black Diamond Group
EMERALD LARIAT:
DiCorp
Williams Joseph

Savanna Energy Service

Newalta Corporation
MNP
Baker Hughes
Grant Production Testing Services Ltd.
Crescent Point Energy
Western Energy Services Corp.
Strad energy Services

SILVER SPUR:
JuneWarren-Nickles Energy Group
Cargill
Wells Fargo

BRONZE BUCKLE:
CIOC
Tenaris
Schlumberger
Willow Park Wines & Spirits
Style Craft Printing

MARK SALKELD

In addition to representatives from the energy sector, the event was

attended by a number of STARS volunteers and Very Important Patients
(VIPs). One of those VIPs, Larry Stevens, was injured in November 2011,
when he fell into an auger while working on a farm near Stettler in central Alberta. He was joined on stage by STARS flight paramedic Ron
Pasieka and flight nurse Pat Jeffery the air medical crew on Stevens
mission. The trio painted a vivid picture of Stevens ordeal and rescue,
which ended with him losing his leg due to the extent of the damage.
Despite his loss, Stevens said he is grateful every day.
Before all of this happened, STARS was just a few helicopters that flew
around, Stevens told the audience. I will admit, I never really donated at all,
but I am living proof that it really can happen to someone you know. I donate now more than ever and I am there to help out STARS any chance I get.
Next years gala, the 22nd-annual, will be held on January 23, 2016.

PSAC presents STARS with a cheque for close to $1.1 million. From left to
right: Andrea Robertson, STARS President and CEO; Mark Salkeld, PSAC
President and CEO; Wally Dumont, PSAC and Gala Committee Chair

WWW.PSAC.CA

ner

Part

ce

plian

om
s in C

Partners In Compliance

Member organizations exceed

benchmarks developed by industry
leaders, Alberta Transportation
and Enforcement. PIC members
have transformed their safety
programs into safety cultures.
To learn more about what membership
might mean for you please call
18774487456 (Northen Alberta)
18002671003 (Southern Alberta)
www.partnersincompliance.com

Excellence

on our roadways
27

MEMBER PROFILE

A Family Affair
ELLIOT & ASSOCIATES CONSULTING COMBINES LOFTY
SAFETY STANDARDS WITH CLOSE CLIENT RELATIONSHIPS
BY ROBBIE JEFFREY

OR TWO DECADES,

Debbie Elliot worked for a major

oil company, managing its
cathodic protection operations
and supervising field surveys for engineering coop students every summer. After the company
left Canada, she started Elliot & Associates Consulting, which was incorporated in 2004. Today,
the companys logo is the Elliot clan badge, and
Elliot runs the company along with her niece,
April. Its a small operation, but the company thrives on close-knit relationships with its
clients. Elliot says she cant imagine ever being
big enough that someone else is answering my
phone, and she stands behind a decade-long
commitment to safety and enduring partnerships with her clients.

OUR RELATIONSHIP WITH OUR CLIENTS IS

VERY PERSONAL IF THEY HAVE A CATHODIC
PROTECTION PROBLEM, THEY CAN CALL THE
OFFICE AND KNOW WHO THEYRE TALKING TO.
DEBBIE ELLIOT

Cathodic protection, as Elliot succinctly describes it, is the science of protecting steel using a
sacrificial metal. It can happen through galvanic
corruption, where a less noble metal will corrode
when its attached to a more noble metal, or with
an impressed current system, using a DC current. Cathodic protection fell under the purview
of electricians until February 2013, when it became a designated occupation under regulations
drafted by industry associations and Albertas
Apprenticeship and Industry Training Board.
Now, the industry requires some extra training
of its practitioners, including a week-long training course at Enform. But thats nothing new for

28 SPRING 2015

Elliot & Associates, where safety is the bedrock of the company.

With its office in Lethbridge and operations predominantly around the
Fox Creek and Red Deer area, Elliot & Associates distinguishes itself by
making safety paramount. Were a lot more adamant about safety than
some people with skilled experience are used to. We have quite a high work
standard, Elliot says. I wouldnt be able to handle someone being seriously hurt doing the work we do because our standards are rigid enough
where that really shouldnt happen. Elliot & Associates sends its employees to a driver training evaluation, and Elliot personally spends a few days
with them in the field to establish a strong, trustworthy relationship.
And while the company has grown to include large international
clients, it stays true to its roots. Our very first client had three fields and
a total of seven wells and seven pipelines, Elliot says. That was his entire
operation, and we still do his work. He was our very first field survey. Our
relationship with our clients is very personal if they have a cathodic protection problem, they can call the office and know who theyre talking to.
Elliot says that even if she had her way, the company would never be
bigger than eight to 10 people, and she sings the praises of April, whom she
says her clients can call upon at any time and her response will be instant.
I really like to work that way, and I like to work with other companies that
also work that way, she says. Ultimately, the most rewarding part of the
job for Elliot is knowing that her company effectively balances rigorous
safety standards and close relationships with its clients. If you dont believe
it, you can call them Elliot will answer.

PETROLEUM SERVICES NEWS

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WWW.PSAC.CA

29

A LOOK AT LEADERSHIP
PETROLEUM SERVICES NEWS TALKS WITH PSACS
BOARD OF DIRECTORS AND TAKES A PERSONAL
LOOK AT LEADERS IN THE SERVICES SECTOR.
THIS ISSUE WE MEET:
IAN MCCONNELL
Vice-President,
Corporate
Core Laboratories Canada Ltd.
DAVE MCHATTIE
Vice-President,
Institutional Relations, Canada
Tenaris Global Services Inc.
IAN MCCONNELL

DAVE MCHATTIE

IF YOU COULD HAVE ANY OTHER JOB OR OCCUPATION, WHAT WOULD YOU BE?
IM: Airline pilot.
DM: University professor.

WHAT MOTTO OR PHRASE DO YOU LIVE BY?

IM: Treat people the same way that you would want to be treated.
DM: What is the right thing to do?

WHAT IS YOUR FAVOURITE BOOK OF ALL TIME?

IM: Because We Are Canadians: A Battlefield Memoir by Sergeant
Charles Kipp.
DM: Good to Great by Jim Collins.

IF YOU COULD TRAVEL ANYWHERE IN THE WORLD, WHERE WOULD YOU GO?
IM: The Cook Islands and New Zealand with my golf clubs, a hat and
some sunscreen.
DM: The guesthouse in Hawaii from Magnum, P.I.

WHAT ABOUT MOVIE?

IM: Butch Cassidy and the Sundance Kid.
DM: Tin Men or Ferris Buellers Day Off.

IN 10 WORDS OR LESS, WHAT WOULD YOU SAY ABOUT HOW 2015 IS GOING TO
TURN OUT?
IM: Please God, give us one more chance at this oil patch.
DM: An opportunity to build a strategic platform for the future.

IF YOU COULD INVITE THREE PEOPLE (DEAD OR ALIVE) TO DINNER, WHO

WOULD THEY BE AND WHAT WOULD YOU SERVE?
IM: Winston Churchill and my two grandfathers. Id feed them my
signature meal (below).
DM: Wayne Gretzky, Mahatma Gandhi and Warren Buffett. The meal
would be unimportant.
WHAT DO YOU THINK IS THE BIGGEST CHALLENGE FACING CANADAS ENERGY
INDUSTRY AT THIS TIME?
IM: Low oil and gas prices, quickly followed by public perception.
DM: To provide Canadians with the economic literacy required to
understand the opportunity of energy development for our nations
economy. If they dont understand the value of developing the oil and
gas sector, I fear Canada will never again see private businesses invest
in the infrastructure projects required to get our energy to market.
WHAT WOULD YOU SAY IS YOUR BIGGEST ACCOMPLISHMENT TO DATE?
IM: In my personal life, my three sons, all taller than me, though that
last bit isnt saying much. In business, I took a f ledgling, struggling
company and, along with my team, made it the best in class in its
niche industry.
DM: Achieving a career that brings challenges every day.

30 SPRING 2015

IF YOU COULD CHANGE ONE THING ABOUT YOURSELF, WHAT WOULD IT BE?
IM: Height-to-weight ratio.
DM: I would like to be more outgoing.
WHAT IS YOUR MOST TREASURED POSSESSION?
IM: Ryan, Michael and Matthew, who call me Dad.
DM: My Wayne Gretzky rookie card.
WHO ARE YOUR HEROES IN REAL LIFE?
IM: My parents (who grew up during the Great Depression and started
a family after WW2 with nothing) and my wife Laurel.
DM: My family.
WHAT FOOD DO YOU CRAVE? BETTER YET, WHAT IS YOUR SIGNATURE MEAL?
IM: Are jelly beans a food group? I crave veal cutlets, and my
signature meal is fried chicken, creamed corn, salad with
poppy seed dressing and a cold Canadian 67 beer delivered in
a Saskatchewan Roughrider frosted glass, followed by
another beer.
DM: I crave penne arrabiata, but I no longer have any time to cook
for myself.

PETROLEUM SERVICES NEWS

SUCCEEDING
in turbulent times
Maintaining in a downturn market means
knowing how to leverage your optionspursuing
acquisitions or divestitures, corporate carve outs,
accessing and structuring debt or equity capital,
as well as preserving cash flow.
KPMGs Corporate Finance advisory team has
robust experience to provide strategic advice to
help meet your business objectives.
For more information on how KPMG can assist you,
please contact:

Rhys Renouf

Managing Director
KPMG Corporate Finance
403-691-8426
rrenouf@kpmg.ca

Othello Tuason

Vice President
KPMG Corporate Finance
403-691-8384
otuason@kpmg.ca

kpmg.ca/energyservices

2015 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. 8316

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