CALGARY – Fred Hensel can’t offer any insight on when major, multi-billion-dollar liquefied natural gas projects will begin construction on the B.C. coast. He doesn’t know.
What Akita Drilling Ltd.’s vice-president of marketing does know, however, is that his company is nearly finished work on a state-of-the-art $35-million drilling rig for one LNG project proponent that will be ready to drill for liquids-rich natural gas by next month.
He also knows that his company currently has two drilling rigs working for Progress Energy Canada Ltd., a subsidiary of LNG project proponent Petronas, and more rigs drilling for other LNG hopefuls such as Shell Canada Ltd.
“We’ve been focused on working with operators that are in those LNG areas,” Mr. Hensel said. “I think we’re positioned well if we get some positive [final investment decisions].”
Analysts focused on the energy service sector seem to agree. A number of investment read-throughs released last week pointed to Akita and a number of its oilfield service peers as companies that stand to directly benefit from the growth of B.C.’s LNG export industry now that the provincial government has introduced a lower-than-expected tax rate for LNG.
AltaCorp Capital Inc. analysts in a research report this week said that the stock prices of many oilfield service companies have significantly declined since the summer, which could provide a “compelling entry point” for investing in companies levered to LNG.
The investment firm said that drilling companies, hydraulic fracturing companies and camp providers — and their shareholders by extension — were well positioned to benefit from projects such as Petronas’ proposed $11-billion Pacific Northwest LNG project. Petronas has signalled it will make a decision on whether or not to go ahead with the project in December.
Similarly, a research report last week from FirstEnergy Capital Corp. said that a green light for one or more LNG projects would have a “positive impact for essentially all services.”
A consensus pick among analysts at National Bank Financial, FirstEnergy and AltaCorp is Trinidad Drilling Ltd.
Lisa Ottmann, Trinidad’s vice-president of investor relations, confirmed Friday that the company is on track to bring a new, ultra-deep drilling rig into service for an LNG project proponent by the end of the year. Trinidad is also one of the most active drillers for Petronas’ Canadian subsidiary.
“We typically have four to six rigs operating for them at any one time,” Ms. Ottmann said. “If they do make a final investment decision and it’s positive, they have talked about needing additional equipment.”
That equipment includes bigger, better and deeper-reaching drilling rigs. It also means more of them.
An AltaCorp report released the week of the B.C. tax announcement pointed to Western Energy Services Corp., CanElson Drilling Inc., Ensign Energy Services Inc. and CWC Energy Services Corp. as companies that could also see increased activity if Petronas green lights its LNG project this year — as all those companies are already drilling for the firm.
The wells they drill will also need to be fracked. Calfrac Well Services Ltd. and Canyon Services Group Inc., analysts said, are in the best position to be the frackers of choice if the Pacific Northwest LNG project goes ahead.
Aside from fracking and drilling equipment, each LNG project will require a more straightforward type of equipment: beds — by the thousands.
Between the liquefaction facility and the pipeline needed to deliver natural gas to the west coast, FirstEnergy expects a single LNG project could require as many as 15,000 beds.
Camp providers such as Horizon North Logistics Inc. and Black Diamond Group Ltd. have had their share prices whipsawed following the delay of a number of highly publicized oil sands projects in recent months.
But National Bank Financial research shows that both companies have been actively looking to grow in the “LNG fairway.”
MNP LP national oilfield service leader David Yager said the drillers, frackers and engineering service providers are among the sectors poised to see the first financial benefits of an LNG project going forward, followed thereafter by the smaller-scale transportation and logistics firms needed to get people and equipment to site.
Should the projects not go ahead, however, these oilfield service companies may be among the first to feel the pinch.
As National Bank Financial pointed out, Progress has been spending $2-billion on its upstream operations per year in the absence of LNG — buying drilling services from companies such as Trinidad and Akita.
“In the absence of the [Pacific Northwest LNG] consortium giving the go ahead, we see roughly $2[-billion] in annual upstream spending coming off,” the report says.
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