Jarrod Oils: Keeping it in-house in the southwest

Gull Lake– The aftermath of the Saskatchewan NDP governments’ Bill 42 in the early 1970s ironically is what got Eldon McIntyre into the business of owning his own oil wells. Now, with over 100 producing wells (and interest in a few dozen more) and over 1,000 barrels per day of oil production, the Gull-Lake company is still going strong.

McIntyre, 74, started working in the oilfield in 1969. His father died when he was six, so he did not initially complete his high school, as farming was keeping him from classes. At the age of 27, with a wife and three kids, he found work operating a nearby oil well, then contract operating several more. While taking some night classes he met a foreman for Mobil Oil, the biggest operator in the area at that time, who insisted their workers had Grade 12. This foreman, who was working towards his Grade 12, encouraged McIntyre to continue getting his education and recruited him as an employee.

Those early days of operating taught him many principles that would serve him well in the years to come – like the necessity of doing as much of your own work as possible, what’s now known as ‘vertical integration.’ It also taught him how to squeeze a profit out of wells that produce as low as three barrels a day, even today.

Due to his lack of knowledge at the time, he missed out on a chance to buy what turned out to be a good well near his farm for only $10,000. McIntyre resolved to learn all he could so that wouldn’t happen again.

“Realizing what I missed, by not knowing anything about it, I figured there would be more chances out there. So I set my sights on learning as much as I could with Mobil for three years. It was like my university education. They had new, big equipment. I picked everybody’s brain that I could. I learned what I could and then I looked around and found a bigger contracting job,” he said.

As a contractor, he could own wells, whereas being an employee, he would be in a conflict of interest.

Bought a well for the price of the tubing and rods

In the aftermath of Bill 42, a 1973 law which caused the Saskatchewan oilpatch to all but shut down, one well, not far from his Hazlet farm, saw its owner pull his treater and everything he could out of the property. When McIntyre phoned to buy the well the owner told him there was still about $3,000 of tubing and rods left in the well so if you give me that much you can have the well and the lease. That is how McIntyre got his first well in 1975, which went on to produce 50 barrels a day. (It was initially shut in until 1979.)

“I bought a 50 barrel per day well for $3,000,” McIntyre said on March 23. That well still produces 40 barrels of oil per day now, roughly 40 years later, and he drilled another four wells on that land.

Since the Roseray zone produces an awful lot of water, he needed an injection well. That was doubly the case when another well he drilled produced 150 bpd, but again, had a lot of water.

Another company was drilling nearby and came up with a duster. He took it over for a dollar, set it up as an injection well and set up his first battery in 1979.

(That initial well now produces 97 per cent water. In December, it made 40 barrels of oil and 1,305 barrels of water per day.)

When the National Energy Program came in in the 1980s, big companies were getting rid of their small-producing wells, but he always could make a little money on those because he was operating the wells himself.

“Governments made me what I am, and I never voted for NDP or Liberals,” he said.

Triangle of production

Jarrod Oils’ production area is in a triangle from Hazlet to Swift Current to Gull Lake, all north of Highway 1. While the initial core area was near Hazlet (it still produces about 100 bpd), the bulk, about 1,000 bpd, is closer to Gull Lake. They have offices in Gull Lake and his home town of Hazlet.

The formations produced don’t get a lot of attention these days. Indeed, one, the Roseray, has never been mentioned by anyone in the eight years Pipeline News has been published in this form, yet it is one of the province’s most prolific plays.

“That’s the best zone in the area. They last for 50 to 60 years of production. I’ve got five Roseray pools,” he said.

Jarrod’s focus is medium oil. They produce from the Roseray, Upper Shaunavon and Cantuar Sands formations. McIntyre said the Roseray has the best oil wells in Saskatchewan. When he was 11, the discovery Roseray well was 11 miles east of his home. It was a gusher, blowing oil all over the quarter section. It was one of the first oil wells in Saskatchewan, he noted. He’s writing a book about his oil plays.

“This well, Fosterton No. 1, has made five million barrels,” he said. Although he doesn’t own that well (which was owned by Mobil Oil), he went on to work for the company from 1969 to 1972 as an operator. However, the driller on that well rented a room from his mom at the time and took him out see the well, changing his life forever.

He’s had production in the Estevan and Kindersley areas, but has sold that off over the years to concentrate close to home.

“At my age, at 74, I just want to concentrate in one area. It’s pretty much all drilled up here. There’s not much left to find. But we’ve got production for another 40 years,” he said.

He doesn’t think much of horizontal wells in shale plays, like the nearby lower Shaunavon. “I want the old, conventional pools that last 40 or 50 years, which I have a number of. Those shale plays, they don’t last very long. I typically stay away from them. They cost too much money to drill,” McIntyre said.

“I just think the conventional plays will always make more money, and for a long period of time. At my age, I’m working for my great-grandchildren, I want something that’s going to last a long time. I don’t want to drill a well that’s going to last for seven years.”

“I pull my wells slow. I don’t pull the hell out of them like the big companies do,” he said, adding the company is family-owned. “We’re not trying to get rich and pay a lot of tax. We just like drilling oil wells and to have something that will last for years down the road.”

Closeology

In his early days, McIntyre soaked up as much knowledge as he could. “I started working for Mobil at the grass roots. I could see quickly how they could do things easier. I would try to talk to people, and they would say, ‘No, we’re engineers, we’ll do it our way.’

“So I thought, well, I owned a farm, so I would sell my farm and do it my way. I’ve got more oil out, at a better rate, for longer years, than any engineer, geologist or geophysicist. I’ve drilled probably 300 to 400 wells in my life, some of them dry because a geologist or engineer told me to drill that location. I’ve never found one oil well that a geologist or engineer or geophysist told me to drill. I found it all myself by ‘closeology.’ I find a well that’s producing, I try to buy it, or I drill close to it. I watch the production. I know it should deplete in a year, to a certain point. If it doesn’t do that, that tells me there’s more oil around it, so I start drilling in every direction,” McIntyre said.

“I call it closeology, not geology. It’s worked well for me. And then I pull everything really slow. If you were to drive by some of my wells, you can’t even see my pumpjacks going up and down, unless you stop or drive real slow. But they’ll last so much longer than everyone else’.

“Last month, our price was only $20.98 (per barrel) and we still made money, and lots of other companies are going bankrupt. We still made money at $20 a barrel.”

Vertical Integration

Jarrod Oils does everything it possibly can in-house. They have their own shops, crew and pipelining capability, including a few excavators and a trencher. From his early days operating for other companies, he soon found you could get bumped to the bottom of a contractor’s list if another larger customer had priority.

He also found that field operators are typically busy in the morning, but afternoons are taken up by maintenance. If there’s trouble with a well, they can be there until midnight. But if there’s no maintenance to be had, they don’t end up doing much. So Jarrod’s field staff uses that time to do all the things most other oil companies contract out, including pipelining, oilfield maintenance, you name it. They do their own snowplowing and steaming, too.

“My men do all the work. We rarely hire crews. We don’t hire where you’re paying $150 an hour for a crew truck driving two hours to get there and two hours to go home. My guys do everything. We have two shops. We have our own steamers, we put our own pipelines in. We do all our work ourselves and my men still have a job. I never let one guy go because we have lots of work to do in the field. We’re totally different in the field. We just don’t hire anybody. That’s why we can probably make money at $15 a barrel,” McIntyre said.

He added the staff suggested they switch to an eight days on, six days off instead of nine and five, as a way of coping with the downturn.

He says his shops have the cleanest floors and the best painted equipment. They do their own mechanical work, too.

“My men want to work. My men love working out there. They know they have a job. I never laid anybody off or cut any wages.

“I’ve got the best men in the country, I know it,” he said.

“I’ve got a three-barrel-a-day well here. I can produce a three-barrel-a-day well and make money … The secret is I’ve trained men that work.”

Eldon’s late wife Marilyn, did the administration until she passed away in 1982.

His daughter Joselyn Hughes, who has a degree in business administration, runs the office with four women. They have six men in the field.

His son Darrend was also involved in oil for many years, but his job evaporated with the sale to Celtic Exploration of the properties Darrend operated. So these days he’s retired from the patch, but he flies their company jet, an Embraer Phenom 300.

Janet McIntosh, the eldest of his three McIntyre children, married straight out of high school and raised a family of three, is not involved in the oil business. But her youngest son, one of McIntyre’s 12 grandchildren, Brett McIntosh, has joined the firm, with a masters of petroleum engineering. “He’s probably more eager than I am,” McIntyre said.

Before the recent downturn, Jarrod would typically drill 20 to 22 wells per year. The main field is near Gull Lake, producing about 1,000 bpd. He expects that field to produce another 40 or 50 years.

“I’ve only drilled one horizontal. I’m not a fan of it, because of the expense. When oil was $100 a barrel, we drilled one. It has paid out. When everyone’s (horizontal wells) cost them $1.5 million to drill, I did it for $960,000, flowlined, electrified and put on production with a pumpjack.”

Only two of his wells are freehold mineral rights. The remainder are all Crown mineral rights.

Investor side

While he’s run an oil company for decades, Eldon McIntyre says he’s actually made more money investing, having been a frequent director on boards. One was Celtic Exploration, which was sold to ExxonMobil for $3.1 billion three years ago. He’s currently a director of Kelt Exploration. In the 1980s he was involved in Strike Energy and Genesis Exploration in the 1990s.

Since banks are reluctant to invest in oil, he would roll in lesser properties that he wasn’t so much in love with as seed properties, and that new public company would invariably grow. McIntyre would always take part in the public company as a director as he believes it is ok to keep all your eggs in one basket, so long as you keep a close eye on the basket.

He nearly lost his shirt in the mid-1980s downturn. He shut everything down, sold off his two drilling rigs and everything else he could sell to satisfy the bank. After that, he’s drilled his wells with his own money.

And he’s now bidding on property because he’s got money in the bank. “When you’ve got money in the bank, life is a lot easier,” he said.

After having drilled his most recent well in December, he’s run out of land to drill. “I have no more land left. I am totally drilled up,” he said. He’s currently bidding on adjacent production.

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