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Junior Oil Companies, the Unsung Heroes

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Why it’s hard to contemplate a world without junior oil companies

BY NICK WILSON

This month I tried to get definitive information about the total number of junior companies in Alberta; their combined output of oil and gas; the revenue they send to governments; the property tax they pay to municipalities; and the value of the work they provide to the services industry. I’m still looking.

Juniors are a moving target, making it very difficult for industry associations and government ministries to collect this data. So it’s hard to describe in numbers what a world without juniors would look like. It’s easier in words: grim. The energy downturn, combined with the Alberta Energy Regulator’s drastic toughening of the solvency test it applies to well owners, isn’t helping things. The cascade effect of majors selling low-producing wells to juniors—they’d rather buy higher-producing assets than work with lower-output wells—is key to the industry. But the chilling blast from the Redwater Energy bankruptcy case earlier this year, which triggered the AER’s interim doubling of the Liability Management Rating, is cooling this cascade. And if the majors can’t sell these wells, they may simply cement them up as being more trouble than they’re worth.

Junior companies are champions at nursing lower-value wells to get more barrels out of them. This puts revenue into government coffers, and into the service industry through hiring lawyers, accountants, drillers and the like. But, the junior’s value doesn’t end there. Majors are often cautious about risking new technology, whereas juniors will take the plunge, spearheading deployment of new technology and speeding up its spread and acceptance across the patch. They played a key role in cracking the shale code to launch North America’s oil and gas revolution over the past 15 years, and they are driving the Montney and Duvernay field development in Western Canada.

CNRL and Crescent Point Energy had to learn to walk before they could stride across Canada’s resource-rich terrain. They did so as juniors.

It’s the can-do attitude of the juniors that makes them special. And it started generations ago in Western Canada as young work-hungry farmers raced to oil strikes in Alberta’s Turner Valley and on to Leduc. One such farm boy who shouldered hard work in harsh climates to enter the Canadian Petroleum Hall of Fame was Dan Claypool from Saskatchewan. He took this just-do-it thinking with him, crossing North America and the North Sea during half a century of oil hunting. “The whole industry had a philosophy and it came from Turner Valley: The tough jobs we’ll do right now; the impossible takes 10 minutes,” he says.

Out of this attitude flow the barrels, revenues and innovations. Yet, as far too many of them shutter their shops in the slump, we are unable to record the slowing data streams from these unsung heroes.

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