Executives from Ensign Energy Services were in Toronto last week for the first investor day in the company’s 30-year history.
The focus was on what president and chief operating officer Bob Geddes called “Ensign 2.0,” or how the Calgary-based international driller will do business and make money in the new normal of $50 WTI.
“We believe that 2017 will be the beginning of a significant period of new opportunity for Ensign, a period as significant as was Ensign’s rapid growth back in the early 1990s,” Geddes said.
“We don’t think of it as a rebound, we think that this is a new normal. If you’re going to survive in this new normal, you’re going to have to figure out how to differentiate yourself; you’re going to need to be more efficient than your competitors and most importantly you need to figure out how to make money in this environment.”
Ensign has 170 marketable rigs and 29 reserve rigs with “limited marketability” under current conditions. About 75 percent of the fleet operates outside of Canada, half in the U.S. and the rest across Venezuela, Argentina, Kurdistan, Oman and Australia.
The company’s vision for the future is informed by the lessons of its past.
In the 1990s, Geddes said Ensign saw the opportunity to consolidate its business, embarking on 63 strategic acquisitions generating $6 billion of free cash flow over the next 20 years and returning over $700 million to shareholders.
Consolidation is again key to success, he said.
“The business over the last 30 years has been drilling wells with what I would call a conglomerate approach,” he said.
“By that I mean that wells have been drilled by the orchestrated accumulation of many different services being hired to show up on location to perform an operation. With that, coordination is minimal and little or no data is ever shared as every service company protects their turf. The opportunity in the future is clearly intelligent consolidation of services on location.”
For example, Geddes said Ensign has “started the process of moving up the value proposition with integrated directional drilling and controls onto our rigs.”
Future drilling innovation will also be about more intelligent use of the tools already at hand, he said.
“We do believe the next innovation is not a machine or a component innovation, but how one coordinates and interrelates a machine and downhole operational data, creating algorithms that think and help drillers replicate best wellbores on a continuous basis.”
The drive for efficiency is not as simple as produces asking drillers to improve speed, Geddes said.
“What the operators are asking us for is not necessarily to drill 15 or 20 percent faster on our fastest rigs; what they are asking us to do is make sure we are consistent in that application as we add more rigs, and that of course involves people and equipment.”
Ensign has spent $3.5 billion “quietly constructing roughly 15 rigs a year over the last 10 years,” he said, focused on rigs that are more automated and able to construct consistent and reproducible wellbores. Today’s fleet is expected to be able to carry the company over the next decade with only maintenance capital spending.
“We believe that all the tools and technology to successfully and consistently deliver wellbores cost effectively are there,” Geddes said.
“The next phase for the oilfield services space is more service line consolidation and the application of analytics—we’re calling it entering the manufacturing phase of resource extraction.”