Junior natural gas company Trident folds

 

ECA Review/T.Huxley

All 33 employees and 61 contractors associated with Alberta based natural gas producer Trident have been laid off after their announcement on Wed. May 1.

On April 30, the company ceased operations, leaving 4,700 wells into the hands of Alberta Energy Regulator (AER).

Trident’s total estimated abandonment and reclamation obligations are approximately $329 million.

The company was in talks with the AER since February when the AER ordered the company to properly manage its approximately 4,400 energy licenses by addressing end-of-life obligations through decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.

Trident did not respond to this order and informed the AER on April 30 that it had ceased operations entirely.

Trident blames the combination of extremely low natural gas prices and high surface lease and property tax payments which has exhausted the liquidity of the company.

“Behind these obligations, we do not anticipate any recovery for shareholders and unsecured creditors. Likewise, any recovery for secured lenders is highly uncertain. We had been working openly and collaboratively with our lenders and the AER since February,” noted the news release from Trident.

These challenges reached a tipping point with persistent, unaddressed capacity constraints on TransCanada’s NGTL system leading to April Alberta gas prices averaging $0.81 and summer prices currently averaging $1.00.

“Although we had substantially settled the terms on a financing solution with our primary creditors for an orderly restructuring and sales process, we were unable to secure AER support for a restructuring in a timely fashion.”

Trident is worrisome of the future of Canadian energy jobs, subsequently growing the Orphaned Well Association.

“We fear that many other companies may falter without clear, sound policymaking post-Redwater. In the face of this extended uncertainty, lenders and investors may flee Canada and further job losses will occur. Without access to financing, we expect that the Orphaned Well Association may grow exponentially.”

As of its 2018 reserve audit, Trident has approximately 458 billion cubic feet equivalent of proved reserves.

The junior company had 64 leases located in Kneehill County, 88 leases in Starland County, and 22 in the County of Stettler.

Local companies left unpaid

Roger Chapman of Roger Chapman Oilfield Services based out of Carbon, Ab. was left with a $35,000 bill from Trident after nine months of contracted work completed.

He claims out of his 40 years of experience as a trucking company in the oil and gas industry, this has ‘been the worst I’ve ever seen.’

For months, smoke screens in the form of ‘confirmed’ or ‘misplaced’ cheques in the mail were provided by Trident administration yet none were ever received.

Two weeks before they folded, Chapman spoke with four other trucking companies that were also hauling for Trident.

They banded together to boycott by abstaining from working for the company until they saw their rightfully earned revenue.

Oil and gas companies do have leeway as they can choose to hold off on contractor payments for up to 120 days due to current provincial government rule.

“That has to stop,” said Chapman. “It should be 30 to 45 days at the max. 60 on the outside because if you get two months of work tied up with these guys you got a lot of money out and we are still owed invoices from Trident since last September.”

“There will be no freebies and no forgiveness for anything [from now on],” he continued.

This isn’t the first time the truck company owner has been on the hook for bills as a couple other oil and gas companies folded a few years ago.

They had smaller invoices to pay at roughly $2,000 rather than $35,000.

“This Trident one bites,” he said.

Procurement groups have also been to blame for contractor profit as they tender for the lowest price and find the most efficient use of that company’s revenue, causing prices for work to drop.

“You hear of other companies that are bidding so low there [that] you’re probably going to lose your work so either you have got to bid low or you have to shut it down so you get hooked into doing shit like that too so then you end up with your profit at five, ten per cent at the most. When you’re held out for 160 days, your five or ten per cent profit just went out the window,” said Chapman.

Chapman’s daughter, Jaena Downe said in one invoice to the company, “I hope you realize the impact this has on the smaller companies that provided services to you,” she said. “It is a shame that we ‘unsecured creditors’ are considered the bottom of the barrel when it comes to paying what you owe.

“I am sure you realize but care little that acts like this are what end up taking the small companies out of business and starving the families that work for them. But of course, you would know that after you stopped paying your own contractors at the end of March and then subsequently fired everyone with no notice on April 30, 2019.”

Chapman has maintained his operations through the help of his farm finances although he prefers to keep the two separate.

Despite the downturn in income, Chapman has chosen to stay in business for the sake of his younger crew who have started their own families and his loyal customer base.

He wishes to continue supporting local businesses and organizations in the future but is frustrated by the implemented Carbon Tax and the federal government.

“It hurts everything. It hurts the local economy. You have to tighten your belt.”

Picking up where they left off

AER spokesperson Shawn Roth, Senior Advisor of External Communications mentioned the AER is currently pursuing all options available to them to make sure that the infrastructure left behind is transferred to “responsible operators, safely decommissioned, or, as a last resort, transferred to the Orphan Well Association.”

“Many of Trident’s wells were still operating and once transferred to responsible operators can still contribute to royalties, keep Albertans working, and deliver value to our economy,” said Roth.

As for landowners, any with safety concerns are directed to call the AER’s 24-hour response line at 1-800-222-6514.

Any legal action can be done by contacting the Surface Rights Board with concerns around outstanding lease payments as this is their jurisdiction.

The AER has no jurisdiction regarding lease payments.

Landowners may also find information from the Farmer’s Advocate Office useful.

 

Terri Huxley

ECA Review

 

Edited May 16 at 11:55 a.m. – The AER’s 24-hour response line is 1-800-222-6514.

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