Industry News

Aldon Oils buys 350 bpd from Enerplus

By August 23, 2019 No Comments

Weyburn – If you want to find someone eternally bullish about the Saskatchewan oil and gas sector, just sit down a few minutes with Del Mondor, owner of Aldon Oils, a private, Weyburn-based producer.

After all, you’d have to be bullish to be buying right now, which he is. In the late spring he picked up 350 barrels per day of production from Enerplus. That company’s second quarter report stated they brought in $9.6 million from divestment of 350 bpd in southeast Saskatchewan.

The deal closed June 1, Mondor said on Aug. 16.

“These were three properties that were competitively marketed by Sayer Energy Advisors in Calgary. I understand it was a fairly competitive offering, and we were the winners,” he said.

There were about 65 wells in all. “There’s a mixture. There’s a few shut-ins, a few disposals, a couple injectors, lots of verticals and horizontals.

“Honestly, I’ve been driving by these assets since I was 18 years old, kind of dreaming of owning them one day,” he said with a smile.

“I would think that kind of makes me bizarre, 18 years old, thinking of owning oil assets.”

The properties are next to Tatagawa, Colgate, and an Enerplus’ piece of the Whitecap-operated Weyburn unit. This increases Aldon’s ownership in the Weyburn Unit, but it’s quite a small fraction, nonetheless.

The deal started with Aldon “hearing rumblings of them selling” earlier in the year. They evaluated the properties, like they do so many times. “And so many times, disappointed, but in this particular case, they gave us a call back, and we got the deal done,” Mondor said.

“We took on two of the Enerplus operators,” he said.

Competitiveness

“We remain bullish on the oil business despite Saskatchewan having issues with competitiveness, and some of the negativity that we are seeing. We still maintain a fairly bullish outlook on Saskatchewan and producing assets in Saskatchewan,” Mondor said.

“There’s been a real disconnect between the price of oil, and the value of assets. I think that’s holding a lot of deals back. There was just a report today in the Calgary Herald about the stock prices of oil companies and the price of oil. So much political interference and policies of certain governments are negatively affecting it. First and foremost, the federal government, which is certainly not promoting our business,” he said.

While he’s confident enough to put his money down to buy additional oil wells, that doesn’t mean there isn’t a level of frustration with moves governments have made reducing the competitiveness of the industry.

“The governments of the day, at all levels, are so focussed on the liabilities, and the negativity of what’s going on, that it’s getting in front of the underlying value of the assets. So when we have a conversation about an asset, the first thing that gets talked about is the liability. That should be the fifth, or sixth, or eighth. It shouldn’t be a conversation about the liability. It should be a conversation about asset management. These things are assets. Why do they keep referring to them as liabilities? As soon as you drill an oil well, you have a liability. Are you kidding?” he said.

“The policies of the governments of the days are pushing companies into bankruptcy, and making the liability issue even worse. Rather than supporting these resource companies, and working with them, we hang all these deposits and all this liability first policy in front of all of them. Thus, it becomes a self-fullfilling prophesy.

“You see, Aldon Oils wouldn’t have started, if these policies had been in place. When my dad first started in this business, picking up old wells, making them better, doing the proper work to get these things producing oil and creating employment. Guess what? Technology changed, and we started drilling horizontal wells next to these old wells that my dad was so smart about bringing back up. If we had these policies, back in the day, Aldon oils would have never started. It wouldn’t be 450 wells today.”

“That whole liability-first mentality is killing this thing. I think we need to change this whole thing from liability to asset management, because that’s what these things are – assets.”

To that end, he said that a couple of bad managers that have abused the good stewardship that 98 per cent of oil companies have conducted themselves.  

Asked about talks between Saskatchewan Headquartered Oil Producers (SHOP), an informal group of junior oil producers, and the Ministry of Energy and Resources regarding regulatory competitiveness, Mondor said, “The ministry is taking steps, and they promised us to address Saskatchewan’s competitive issues. And I think they’re taking it seriously, but there’s a level of frustration between SHOP members, the other people that are right on top of it in southeast Saskatchewan, southwest Saskatchewan, and other areas. Overregulation and rural municipality taxation are really forcing us to take our minds and hands off the prize of drilling for and producing more oil.”

All this leads to confusion, and confusion in the industry is not a good thing, he noted, as it results in companies not spending. But he is drilling right now at Lampman. And he sees future development and drilling in the newly acquired former Enerplus properties.

“We’re going to work at it, and put our people on it and try to make things better and manager our asset. We will be doing some drilling. We’ll be doing some conversions. And we are expanding the waterflood. That’s why we bought it,” he concluded.



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