Weyburn– One thing is clear to Del Mondor. We are going to get good at this, no matter what the price of oil is.
A little under a year ago, Mondor had the privilege of chairing the 2015 Saskatchewan Oil and Gas Show in Weyburn. For the president, CEO and owner of Weyburn-based Aldon Oils, it was a little more public exposure than he’s used to, but it came with the role.
Pipeline Newshad the opportunity to speak with Mondor in his Weyburn office on Feb. 17 in a rare interview about Aldon Oils, a junior producer with a long history in Weyburn. From humble beginnings, it has grown considerably. Under his stewardship, the intention is to keep growing.
Optimism
“You’re going to get from me a very positive conversation, one of growth and optimism. We’re going to see a whole bunch of volatility over the next five years-plus, but there’s going to be some good volatility in there as well. It’s not all going to be negative,” he started out.
Asked about how the downturn has been going, he replied. “It has been brutal. One of the things I keep saying around here, around our employees and contractors, is the phrase, ‘It’s not when are we going to get through this?’ it, ‘When are we going to get good at this?’
“So, what we’ve done is spend a whole bunch of time, effort, and an exhausting amount of brainpower to try to look at all of our processes, the things that we do, the things that we should be doing, in an effort to streamline and get good at this. So if we do see US$50 a barrel, we are going to absolutely kick butt.”
Mondor and Aldon have been working their brains around how to deal with the reality of lower price. In the summer of 2015 he told Pipeline News they were working on how they would “Thrive at $65.” The numbers have since changed, but the concept has not. Aldon is still seeking to thrive, no matter what the WTI price is.
“There’s all sorts of rhymes with ‘five.’ Thrive at $45. Thrive at $55. Thrive at $35. Many numbers rhyme with five. I’m basically taking what I get, because I can’t control the price, and I’m working with it,” he said.
Beginnings
The privately held company started out very small.
“Aldon Oils was a family company that was first started as a one-well company many, many years ago. My dad bought the one-well company in 1974. He operated Aldon basically by himself, moonlighting. My brother and I moved back in 1996. We came back to a very small producing 60-well company. Together the three of us built the company up.”
Normand “Pierre” Mondor is the father and Kerwin Mondor is the brother he refers to.
“It was all stripper wells. He didn’t drill. So I’m sitting at my job at Amoco looking at Dad’s assets going, ‘Wow, what a gold mine,’” Del said. “So we made a deal for me and my brother to come back and get on the horse.”
Del described Kerwin as a with a business brain who could make anything. Kerwin ran the field, while Del ran the drilling and business side.
Del took engineering and business in university, got a business degree, followed by business and engineering classes in Calgary. In all it was 10 years of school, either night school or full-time.
He had intended on going back to finish the engineering degree, but Del said, “I got the job out of university and I ended up moving to Calgary.”
That job was with Amoco. There weren’t a lot of jobs to be had in those days, and many were in Calgary. “When I went into Amoco, there lots of people with boxes leaving,” he said. “I got hired during layoffs.”
He worked up into a supervisor position looking after Fox Creek, Alta.
“I always wanted to stay on the oil side with whatever I was doing, because I knew this was back here,” Del said. That was at time gas was king, when the movement was to get rid of oil assets and develop gas assets. He said, “It proved to be a misguided endeavour.”
Southeast Saskatchewan used to have a number of large oil companies like Shell and Gulf, but they left. Shell was one of the last, selling the Midale field around 1999. “I don’t think they liked the Blakeney years. This company benefited from that exodus, because they left behind the properties. They left behind the stripper wells, and more or less left the province, looking for that bigger oil play, and big gas, deep gas.”
“It was a very unfriendly place to do business.”
Consistency
That changed with Grant Devine’s Progressive Conservative government. The NDP under Roy Romanow and Lorne Calvert carried on many of those policies, Del said. “Us in the oil business, what we’re looking for is consistency. Credit to Romanow and the other governments, they didn’t do much in the way of change.”
The Saskatchewan Party administration has carried on policies set under the Calvert government. “It allows guys like me to sit back and go, ‘What am I going to do? Now that the government, and several governments, have committed to not changing anything, what should I be doing or not doing?’
“This company is 250 drilled wells into this thing. We’ve committed a lot of capital, a lot of effort, and we need that consistency to pull the trigger on it.”
Those wells were drilled since 1997, when Aldon began drilling its own wells.
Pierre started in the service industry, with service rigs and production, which was where the capital came to develop the oil business. Kerwin and Del have since expanded into a lot of different service companies. Indeed, Kerwin is running their Alberta service company with operations in Medicine Hat and Wainright. Del said, “In Medicine Hat we have drilling rigs. We have heavy-haul trucking, along with other service companies. That was more of my brother’s forte – the service side, things that move.
Four-rig Komat Drilling is the drilling company, and is the “mother company.” Ryker Hauling is in Wainright, and is a rig-moving company. Those are primarily Kerwin’s operations.
“We still talk mostly every day, and are best of friends, which is completely amazing, that we were able to pull off this deal in 2011 to sell Aldon to me, from my siblings and mostly from my dad. Our goal was to get through it, and most importantly, remain a happy family. We’ve done that,” Del said.
The other family members involved in ownership of Aldon oils prior to 2011 included father Normand, mother Shirley, the aforementioned brother Kerwin, and sisters Rachelle Mondor-Smith, Carla Skinner and Twyla Mondor.
Brownstone Resources Ltd. is the parent company for Aldon. Del described it as the mouse that bought the elephant. It is mixed up in all operations and some of the core areas are actually under the Brownstone operation.
Brownstone is a huge part of the story as it was his personal company started in 1996. About 75 of the 400 wells are Brownstone’s.
Transition from family to single ownership
“This is my passion, that I wanted to carry on. At that point it was decided the best alternative was to sell. It was a pretty big company when it was sold. It was tough to do.”
Since 2011, Aldon Oils has grown substantially, through both the drill bit and acquisitions. However, the drilling side has slowed down, as it has through much of the oilpatch.
“We drilled two wells in 2015. We normally would drill over 20 and participate in another five or six with various partners,” Del said.
Asked about vertical integration of the oil company with interests in other ventures, he said, “We do believe in baking our own bread here. We do try to do things as efficiently as possible, working with contractors and trying to manage our wells as effectively as possible.
“It’s a different mentality. We’re a sizeable company that still has the smaller company mentality.”
Operations
There are approximately 25 people working directly for Aldon Oils. At peak, that number was as high as 35.
“We run from Ceylon, Sask., to basically Lampman. That’s kind of our area. Within that we have approximately 12 core areas,” Del said. “We’re over 400 operated wells.”
There are additional non-operated wells and mineral rights from the Alberta foothills to the Manitoba border.
They’re in a lot of oil pools, but not all.
Del thinks it gives their technical team a lot to look at, because they have a diverse breadth of assets: Ratcliffe, all levels of Frobisher, Midale, Bakken, Birdbear, Red River, going from shallowest to deepest. .
As for production numbers, like nearly every private operatorPipeline News has spoken to over the years, he’s reluctant to say. Aldon Oils does not show up on the top 30 producers in Saskatchewan, with the No. 30 producer, Crew Energy Inc., coming in at an average daily production of 2,295 barrels. However, Mondor’s holdings are spread beyond just Aldon Oils.
Aldon has been very active in drilling, acquisitions, land acquisitions and growth in every aspect possible. “And we will be again,” Del said. “In fact, I’m looking right now for acquisitions. We are actively looking at several deals, and we’ve concluded a few in the last few months.
“There are deals to be had. There are some ‘Grade A’ assets we would have never seen at $100 oil. A Grade A asset is a premium, lots of upside, real desirable property, that we would have never seen at $100 oil. Those are still trading at a decent number. But there’s distress out there.”
He noted lease expiries for Crown land come up March 31, but few companies have been drilling except for Crescent Point. “And thank goodness for that, for this province,” he said.
“They’ve floated the entire industry, I’ll give them a whole bunch of credit for that.
“Crescent Point has done what they said they were going to do. ‘Help us out with a reduction in cost and we will operate. We will drill, we will do these things.’ They’ve done what they said they were going to do, and I respect them for that.”
Opportunities
Asked if there will be a lot of oil producers and service companies selling off this spring, he replied, “Yes, I believe there’s going to be producers and service companies going down. I think the banks are going to be the main determining factor on that. Do they want those assets? There’s competition between banks right now as to whose going to come out first, as well. Those assets are going to come out sometime in 2016 if things don’t recover. The people that are well-situated may be the benefactor of that. Whether that will be my company or not, I don’t know that.”
“To me, there’s opportunity in that, as well. To my other comment of this industry is full of innovators and entrepreneurs and people that stand up to challenges, whether it’s B.C., Alberta, Saskatchewan or Manitoba, we will get good at this. Whether that’s getting good at $35 or $75 or whatever, we will get good at this.
“Two years ago, I used to ask our technical team or operations team, ‘Did it get done?’ Now I’m asking, ‘How is it getting done?’” he said.
Noting a change in mentality, questions like, “Should we do this?” are now part of the thinking.
“It’s a challenging time,” Del said. “Money is extremely tight, so we have to make decisions on which dollar we are going to spend where. So, that’s the conversation. Do we spend to fix a well, or to drill a well?”
“We’re looking at each well on an individual basis.”
Potential for growth
A lot of land is locked up, but there’s a lot of opportunities, still, he said.
Del expects in the coming years, land whose leases have expired will come up for purchase. Regarding the low numbers in recent Crown land sales, he said, “People A.) don’t have money, and B.), don’t have real drilling plans. We’re all just trying to survive.”
Aldon Oils has an active technical team looking, with the eye of building, at all times. “Whether we do anything, because of finances, is another story. We’re looking daily, and all day long.”
Oil show
Del Mondor will be chairing the 2017 Saskatchewan Oil and Gas Show as well.
Noting there was a lot of bad news that had come about by the time the 2015 show took place, he said, “It was a very successful show. We were full. We had a waiting list. It was a resounding success.
“Somebody said to me one time, ‘During down times, that’s when the marketers really earn their money.’
“So the whole getting out there, maintaining your name, battling for a reduced amount of work, is absolutely critical. We’ve seen that in the oilshow.”
Strategies might change, but they still take part. “We’re expecting a successful 2017,” he said. “It’s too early to tell, but there are indications a lot of our regulars will be back, and we expect new people.”
There’s activity going on right now, but things really pick up this fall.
What’s next
Very cognizant of the history of Aldon, and the work done by his family, Del said, “For me, I’m of course grateful to my mom and dad. I enjoyed working with my brother. But this is the new Aldon. There will come a day when Aldon is no longer a family company.
“My efforts, my thoughts, my steering of this company – when I think of Aldon, I think of Aldon, 2011-version, on.
“Our story is about this team, and our field operators, in 2016.
“I’m looking to steer this ship into the future. I’m going to react accordingly, at various times and with various restrictions, but upward and onward is my thoughts. Upward and onward in a logical way.
“I’m 47 years old. I have no intention in changing anything. I’m having a good time, albeit less of a good time right now, but I enjoy the people. I enjoy the business. I don’t need to have a liquidity event, not for 20 years, or 30 years, or 40 years,” he concluded.
