CALGARY — The latest failure of a Calgary-based junior oil and gas producer could add more than 1,400 wells to a provincial inventory of orphaned petroleum assets, warns the Alberta Orphan Well Association.
The total estimated abandonment and reclamation bill associated with wells, pipeline segments and other assets owned by Houston Oil & Gas Ltd. is $81.5 million, says the industry-funded organization that steps in when operators of oil and gas facilities can't or won't meet their obligations.
“I believe it is imperative and in the interests of public safety that a receiver be appointed to ensure that Houston's wells are properly cared for and maintained and shut in where necessary,” said an affidavit filed in Alberta Court of Queen's Bench by OWA executive director Lars De Pauw.
He added that, where possible, the assets should be sold to responsible producers to avoid having them designated orphans.
The OWA reports it has more than 3,400 orphan wells scheduled for abandonment on its books as of Nov. 1 thanks to a string of recent failures among Alberta oil and gas companies.
In May, the association asked a court to appoint a receiver for private Trident Exploration after the company abruptly stopped operations and laid off all its staff. It had 4,400 wells, pipelines and other assets and abandonment and reclamation obligations of about $329 million.
Last year, private Sequoia Resources Corp. ceased operations, leaving 2,300 wells, almost 200 facilities and nearly 700 pipeline segments to be sold by its bankruptcy trustee or handed over to the OWA.
There have been 10 insolvencies declared by Canadian oil and gas companies so far this year, said Alan Tambosso, president of Sayer Energy Advisors in Calgary.
“Although the numbers are all over the map, we generally state that in a typical year there are roughly eight to 10 oil and natural gas producers which become insolvent,” he said in an email.
“We don't necessarily catch the ones which quietly slip away, so the numbers could be higher for any particular year.”
Sayer statistics show that insolvencies jumped to 20 in 2015 as global oil prices fell, then spiked to 28 in 2016 as American benchmark oil prices tumbled as low as US$27 per barrel. They moderated to 17 in 2017 and six in 2018.
The Alberta Energy Regulator suspended all of Houston's licences for wells producing natural gas containing toxic hydrogen sulphide on Aug. 30 after the company warned it would have to shut down all of its oil and gas operations due to its financial distress.
Last month, the AER ordered all of Houston's licences suspended and noted it hadn't paid $1.34 million in levies it owed to the orphan well fund.
It said Houston had advised it no longer had any employees.
The company's production is about 95 per cent natural gas, mainly from wells in southeastern Alberta.
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