Home' Trinidad and Tobago Guardian : September 12th 2013 Contents BG8 | ENERGY
BUSINESS GUARDIAN www.guardian.co.tt SEPTEMBER 2013 • WEEK TWO
Calgary-based Trinidad Drilling Ltd, the builder
of Western Canada s biggest energy drilling rig,
is forecast to rally another 18 per cent as producers
spend Cdn$55 billion (US$52 billion) on developing
natural gas to ship to Asia.
The company is the second-best Canadian energy stock
this year on higher drilling demand, including a contract to
build and operate a rig that will reach 8,000 metres (4.97
miles), or about 1.5 times deeper than an average machine,
at twice the cost to construct.
Trinidad and Western Energy Services Corp are the best
placed to win contracts for drilling that will secure reserves
to feed liquefied natural gas projects, and are already providing
supplies for an LNG plant proposed by Kuala Lumpur-based
Petroliam Nasional Bhd or Petronas, the most active developer,
according to Andrew Bradford of Raymond James Ltd. Producers
proposing 5.9 billion cubic feet a day of exports will spend
Cdn$55 billion on wells by 2021, estimates from National Bank
"The probability of these projects actually going ahead has
increased substantially, with companies like Petronas committing
capital," Dan Cheng, who helps manage Cdn$430 million at
Matco Financial Inc. in Calgary, including shares of Western
Energy Services, said in an August 28 interview. "The time
to invest is now as opposed to when the terminal is built."
Trinidad s recent gain has been partly due to a July contract
to build a 3,000 horsepower rig, Canada s largest land-based
oil and gas drilling rig, and operate it for five years in the Liard
Basin of northeastern British Columbia to drill for gas supplies
for a LNG terminal, Lisa Ciulka, a Trinidad spokeswoman,
said in an August 28 phone interview.
The company is budgeting a year to build the rig at its man-
ufacturing facilities in Nisku, Alberta, and as many as four
months to drill the first well for the client, whose name Trinidad
hasn t disclosed, Ciulka said.
Trinidad also added to gains on September 3, rising 4.4 per
cent to Cdn$9.48 after announcing a partnership with Hal-
liburton Company to provide and operate drilling rigs for Hal-
liburton s international markets, focusing initially on Saudi
Arabia and Mexico.
Mike Heier, Trinidad s founder and chairman, named the
company after his mother in honour of her Trinidadian heritage.
The company doesn t operate in T&T.
Together, Trinidad and Western Energy Services have con-
tracts for more than half of the 24 drilling rigs currently con-
tracted by Petronas in Canada, Michael Culbert, chief executive
officer of the Progress Energy Canada Ltd. unit of Petronas,
said in an e-mail on September 2. Trinidad operates seven
rigs and Western Energy Services runs six, he said.
Trinidad gained 38 percent this year through to September
3, second after Enerplus Corp. among top-performing stocks
on Canada s S&P/TSX Energy Index. Western Energy Services
rose 21 per cent over the same period.
Trinidad is forecast to rise to Cdn$11.14 over the next 12
months, up 18 per cent from the close of September 3, according
to the average price target of 16 analyst estimates compiled
by Bloomberg. The shares jumped 3.1 per cent to Cdn$9.76
at 9:58 am on September 4. Western Energy Services has an
average one-year price estimate of Cdn$10.42 from nine
analysts, a 22 per cent increase from yesterday s close. It fell
1.8 per cent to Cdn$8.41 in early trade on September 4.
"I would still have an upward bias on share price movement
today" for Trinidad and Western Energy Services, Bradford,
based in Calgary, said in an Aug. 30 phone interview about
the two top companies he anticipates will benefit from drilling
demand for LNG projects.
Western Energy Services benefits most from drilling for
Canadian LNG projects, Greg Colman, an analyst at National
Bank Financial, said in a July 9 report in which he estimated
producers will spend Cdn$55 billion on gas wells for LNG by
2021, or an annual rise of as much as 32 per cent in total
exploration and production expenditures in Western Canada.
He didn t return phone and e-mail messages seeking additional
Exxon Mobil Corp, Royal Dutch Shell Plc, Chevron Corp
and BG Group Plc are among energy producers which along
with Petronas are proposing to capture rising gas demand in
Asia by developing LNG export projects in Canada.
Stephen Doolan, a spokesman for Shell, declined to comment
in an e-mail on September 3. Lloyd Avram of Chevron didn t
immediately return a message seeking comment.
BG, which doesn t have land holdings in Western Canada,
is considering a "range of options" to secure gas for its proposed
Canadian LNG project, including "third-party suppliers and
open-market purchases from market hubs," David Byford, a
spokesman, said in an e-mail on September 3.
Pius Rolheiser, a spokesman for the Imperial Oil Ltd. unit
of Exxon, said in an e-mail that it s premature to discuss
specific drilling plans for a potential LNG project and that the
combined land position of roughly 665,000 acres (269,116
hectares) held by Imperial and Exxon in Canada s Horn River,
Montney and Duvernay areas would support a terminal.
Imperial is partnering with Irving, Texas-based Exxon on
Consumption of gas is the fastest-growing in the world
among fossil fuels and is expected to rise 64 per cent globally
by 2040 from 2010, according to a July 25 forecast from the
US Energy Information Administration in Washington.
Energy companies chill gas to -160 degrees Celsius (-256
Fahrenheit) to create a colorless liquid 1/600th of its original
volume for long-distance shipment aboard tankers.
Proponents of Canadian LNG may need 100 drilling rigs
starting later this year to prove there are enough gas supplies
to feed export terminals, up from about 80 rigs currently oper-
ating in the Montney formation linked to LNG in British
Columbia, John Stephenson, who helps oversee Cdn$2.7 billion
at First Asset Investment Management Inc in Toronto, including
Trinidad shares, said in an August 22 phone interview.
Western Energy Services has risen as producers looking to
build LNG export terminals spend more, chief executive officer
Dale Tremblay said in an Aug. 30 phone interview. Customers
including Petronas are seeking deeper, long-reaching rigs such
as the ones that make up one of the Calgary company s fleets,
The gain to drilling stocks from LNG depends on the con-
struction of Canadian projects which may face regulatory
hurdles and challenges locking in contracts to supply customers,
according to Colman at National Bank, who assumes four will
And while gains for Canadian drillers have largely been from
speculation around LNG demand, the sector remains most
exposed to conventional drilling, which makes up 65 percent
of capital spending from producers and poses the greatest
threat of reduced activity, Bradford said.
The rig count dedicated to LNG will probably rise slowly
as projects come online later in the decade and may not affect
the total number of operating rigs in Western Canada, as
machines in other parts of the region are redeployed to LNG-
focused areas, he said. Drillers with a track record in basins
being developed for LNG are most likely to secure a higher
share of the business, he said.
"There are a lot of big drilling contractors that are all vying
for a position and they re not all going to win," Bradford said.
Trinidad Drilling rallies
as C$55b seen for LNG
A World Bank arbitration panel said on
September 3 that Venezuela failed to act in
good faith or pay ConocoPhillips for three
big oil assets the country seized in 2007.
The partial ruling limited the scope of the
company s claims by excluding future tax
credits, and did not determine how much
money Venezuela must pay the US-based
A final ruling on damages could take one
or two more years.
The company s projects were taken over
during the leftwing administration of deceased
former President Hugo Chavez, who led a
wave of nationalisations that included the
oil, electricity and steel industries.
"The respondent breached its obligation
to negotiate in good faith for compensation
for its taking of the ConocoPhillips assets in
the three projects on the basis of market
value," the ruling of the International Centre
for Settlement of Investment Disputes (ICSID)
The company claimed victory.
"This ruling sends a clear message that
countries cannot expropriate their invest-
ments without fair compensation," said Janet
Langford Kelly, a senior vice president of the
ConocoPhillips initially asked Venezuela
for US$30 billion in compensation for its
stakes in the Hamaca and Petrozuata heavy
crude upgraders and a separate offshore proj-
ect called Corocoro, but Venezuela offered
no more than US$2 billion.
In 2007, ConocoPhillips took a after-tax
charge against its earnings of US$4.5 billion
related to its properties in Venezuela. At the
time, the Houston-based company said it
believed the assets were worth much more,
but that was the amount allowed under US
Venezuelan Petroleum Minister Rafael
Ramirez harshly criticised the panel and
"We reject the tribunal s affirmation that
we did not negotiate in good faith. We reached
deals with other companies, such as
Chevron," he said.
Several major foreign oil companies, includ-
ing Chevron Corp, reached agreements with
the Chavez government to pay higher taxes
and royalties, and give up majority stakes in
projects while hanging onto minority ones.
ExxonMobil Corp and ConocoPhillips did
not reach accords with Venezuela and even-
tually pressed their claims in arbitration.
Ramirez said he would ask for a new chance
to show the panel that the country acted in
good faith. (Reuters)
World Bank: Venezuela did not pay ConocoPhillips for assets
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