Failure of Houston Oil & Gas threatens to create up to 1,400 orphan wells

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.

The OWA intervened to ask the Court of Queen’s Bench to appoint a receiver for Houston Oil after the company told the Alberta Energy Regulator its precarious financial status meant it could no longer look after its wells.

The court’s decision to appoint Hardie & Kelly Inc. as receiver means there’s hope that at least some of the assets will be sold to responsible new owners, said OWA executive director Lars De Pauw in an interview.

“Ideally, they’d all go to somebody else from an operational standpoint and that’s what the role of a receiver would be,” he said.

A growing backlog of abandoned wells prompted the Alberta government to loan the association $235 million in 2017 to hasten cleanup but De Pauw said that while the money helps, OWA still hasn’t been able to keep up.

“When the loan was announced, there were 1,400 wells to be decommissioned. Since that time, we’ve done 1,200. And now we have 3,400 left to do,” he said.

Industry levies are expected to continue to rise to pay for cleanup and to repay the loan, he said.

The annual levy has climbed from $15 million a few years ago to $60 million in the current fiscal year and is expected to be $65 million next year.

In May, the association asked the court to appoint a receiver for private Trident Exploration after it abruptly stopped operations and laid off all its staff.

The receiver has since sold about one quarter of its 4,400 wells, pipelines and other assets, De Pauw said.

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.

Just Posted

Toronto cop takes stand in assault trial, admits causing victim’s eye injury

OSHAWA, Ont. — A Toronto police officer accused of beating a young… Continue reading

Quadruple killing trial hears man suffered blows to the head, gunshot wounds

CALGARY — A jury has seen graphic photographs of numerous injuries inflicted… Continue reading

Alberta premier says proposal to pull out of CPP due to hostility from others

KANANASKIS, Alta. — Premier Jason Kenney is defending his idea that Alberta… Continue reading

Red Deer city council salary increases now up to city manager to determine

Councillors wanted to avoid the awkwardness of setting their own compensation

Petition to ‘bring back Don Cherry’ goes viral after immigrant poppy rant

Cherry was fired from his co-hosting role for the Coach’s Corner segment on Nov. 11.

Your community calendar

Wednesday Pain 101 class — learn to take control of your chronic… Continue reading

Toronto cop takes stand in assault trial, admits causing victim’s eye injury

OSHAWA, Ont. — A Toronto police officer accused of beating a young… Continue reading

High School 4A zone volleyball finals set for Thursday

The Lindsay Thurber Raiders kept their regular season rolling going in the… Continue reading

Quadruple killing trial hears man suffered blows to the head, gunshot wounds

CALGARY — A jury has seen graphic photographs of numerous injuries inflicted… Continue reading

Alberta premier says proposal to pull out of CPP due to hostility from others

KANANASKIS, Alta. — Premier Jason Kenney is defending his idea that Alberta… Continue reading

NHL players, politicians weigh in on end of Cherry’s run on HNIC

Max Domi wasn’t about to offer his opinion on Sportsnet’s decision to… Continue reading

Canadian show jumper Nicole Walker suspended for positive Pan Am drug test

Canada’s participation in show jumping at the 2020 Olympic Games is in… Continue reading

Split Supreme Court appears ready to allow Trump to end DACA

WASHINGTON — Sharply at odds with liberal justices, the Supreme Court’s conservative… Continue reading

Most Read