Calgary, Estevan – Sanjel Energy Services is launching a new remediation business line, dedicating specific staff and equipment to the growing issue of well abandonments.
CEO Shane Hooker spoke to Pipeline Newsby phone on Dec. 1. He said, “We’re going to further commit resources to the remediation service line that existed as part of our primary business, previously. We’ve created a standalone division that has separate management and client solutions efforts around the remedial and decommissioning space, which is evermore important with aging infrastructure challenges as they are, around Western Canada.
Abandonments and orphan wells have been rising in the headlines, especially in Alberta. “This is the big conversation point, right now, and has been most discussed in the open in Alberta with the Orphan Well Fund, and the 100,000 inactive wells that currently exist,” Hooker said.
“We believe this is a Western Canadian Basin opportunity, and we’re going to be targeting it across the basin.”
“In Estevan, we’ve got a dedicated resource in a pumping unit, and we’re looking to add another one for that very purpose.”
“Right now, we’re going to stick to the cementing and acidizing end to the opportunity, with our eyes wide-open around other ways we can provide a more efficient, fulsome solution to customers, which could include service rigs or wireline or surface remediation – all the other pieces that go along with properly abandoning or decommissioning infrastructure. Right now, our focus is the cementing piece,” Hooker said.
Asked if those other services would be in-house or third party, he said they could be either way. Their growth strategy is not limiting what that could be. “We’re looking at all opportunities that make sense,” he said. “We’re in a very good position, based on the strength of the business, and our performance in the last year with our core business to be able to do that.”
“We’re open to all opportunities that make the process more efficient, and cost effective for our customer. We believe you don’t have to always do things the way you always have, and that there’s opportunities to implement technology and build fit-for purpose equipment that could lead to totally different ways of doing things.”
“We’re separating out a certain portion of our business to be standalone, to be able to leverage the infrastructure we’ve already got in place, because we’ve got 11 service locations across Western Canada, but have them focused on remediation business, and not have them drug into the primary side of the business. Conventionally, people would share those resources, where you have a truck that will do both. We’re dedicating those resources to just the remediation, so it won’t be out on a drilling rig, when a guy calls at 6 o’clock to go to work tomorrow morning on a squeeze.”
To that end, a major part of the announcement was a splitting of the top executive duties. Murray Bickley will assume the role of president, effective immediately. Bickley will lead the execution of the company’s strategic initiatives, which include its expansion plan with the formation of the new dedicated remediation business line. Hooker remains as chief executive officer, leading the company’s growth strategy to maximize Sanjel Energy Services’ value for employees, clients and shareholders.
Hooker said, “Of our core business, which is primarily cementing, and now of the remedial space, he’ll be day-to-day planning around how we keep that business healthy and moving forward. My role is going to be looking for other opportunities, outside of those, that can create value for our shareholders, and opportunities for our employees.”
That means looking for other opportunities, but “in our backyard.” The previous Sanjel entity had international operations, including in the United States and Russia, both of which where shed when the downturn hit, before the old Sanjel went down and this new entity was born.
“We’re going to look to add complimentary services to our core businesses, or things that run alongside, but don’t compromise. Our strategic plan isn’t to recreate a full service upstream pumping company. Not at all. It’s to look to add things to the existing business, whether that be through vertical integration of supply of materials or chemicals, or when we talk about this remediation services group, something that adds onto the cementing that we do there to create a better solution for our customer that’s more cost efficient,” Hooker said.
With regards to cementing pricing these days, Hooker said that compared to peak, it’s safe to say pricing is off 20 per cent. “It’s still a very competitive business. In our strategic plan, nowhere does it include getting back to pricing levels of old, because we just don’t think that’s the new reality. We think the current environment and cost pressures and efficiencies are going to be what they are, as things grind, I guess, upward, long term. There’s been a reset in this environment. We’re embracing that and figuring out how we’re going to be successful with it,” he said.
The company is hiring, but by early December they were getting close to their headcount targets for this winter. “In our business, it’s always planning for Q1, which is the high activity period, and trying to anticipate what Q2 is going to bring and the rest of the year.”
They took a different path in the spring, called “green to competent.”
“We just looked for good guys who had able bodies and good attitudes but no experience. We had training programs in place to give them the tools they need for operational competency, as well as driving. That’s paid off, in that we’ve been able to reach our headcount targets, but the rate we’ve been able to grow them has been slower than anticipated,” Hooker said, adding, “We always have room for good people.”
They move equipment and people around Western Canada to “level load,” deploying those assets to places that are busy and moving them to other locations when an area slows down. Their locations are spaced to generally cover a two-hour drive from each base.
Sanjel has locations in Swift Current, Kindersley, Lloydminster and Estevan in Saskatchewan.
New Estevan location
In Estevan, this past year the company consolidated its longstanding two yards, one on the east side, and one on the north side of the city. As of Aug. 1, all operations are now on the west side of the city, in the shop built for Kelly Lafrentz Trucking, and most recently occupied by Sonic Oilfield Services.
“That move sort of speaks to the business in the last year-and-a-half. In the early days, it was about keeping wheels rolling, and currently, we’re finding and looking to optimize our operations. Having two shops in the same town, and trying to manage assets across town, wasn’t the best way to run our business. We were fortunate to find the location that we did, that would work well for us to consolidate our operation and run a good business out of Estevan,” Hooker said.
In Estevan they have 34 people working. It will have its own remedial division, with different trucks, different people dedicated to it.
Asked how things are going, and looking towards 2018, he said, “The landscape is fresh, and we are embracing those realities in the way we are running our business. It’s a continuous grind. There’s pressure everyday around costs versus revenue, not unlike everyone else in the service side right now. And our customers’ side, you know, commodities have not been strong for them over the last number of years, which has resulted in pressure over the last number of years.
“We’re focusing on people, rewarding them as much as we can, with a long-term view that things are going to turn around, and trying to do a good job in the field and exhibit a service attitude.”
With regards to the rates they can charge, he noted they are widespread across the basin and have a good measure of where the market is in terms of pricing acceptance. “There’s still a lot of competition in the space. Pricing is not one thing we’re anticipating changing greatly over the next year. We’re going to continue to be faced with the competitive environment we’re in, and relying on efficiency and utilization in order to generate earnings.”
