Luxury still sells as vacancy rates rise in Alberta’s oilsands workcamp sector

CALGARY — Driving by empty workforce accommodation camps along northern Alberta highways near Fort McMurray, the oilsands boom that became a bust still hits home three years after the slide began.

The empty parking lots surround plain, functional-looking buildings made up of modular units stacked, stretched end-to-end or lined up like dominos, some complexes containing thousands of deserted rooms.

Many oilsands lodges have been “temporarily” closed because they don’t have enough guests to cover the bills amid a 43 per cent drop in occupancy from a peak in 2014.

“Pretty much the entire area south of Fort McMurray has been deadly slow in comparison to what it used to be,” said Mike Sherman, whose website AllCamps.ca helps guests find workcamp rooms in northern Alberta and B.C.

“You’re looking at thousands of rooms in that area.”

There were almost 47,000 people living in oilsands project camps with capacity to house 72,000 at the peak of new project construction activity in 2014, when benchmark oil prices were still above US$100 per barrel, according to the regional municipality.

A study last spring, when oil prices were less than US$50, estimates that had dwindled to just under 27,000 people residing in camps with available space for about 51,000 individuals.

As oilsands capital spending falls to an estimated $15 billion this year, less than half of the record spending of $33.9 billion in 2014, workcamp providers must fight tooth and nail for customers from among full-time oilsands workers and occasional contractors.

Amid fierce competition for scarce customers, they focus marketing efforts on the luxurious offerings companies can provide to woo workers.

When Houston-based Civeo Corp. CEO Bradley Dodson gave reasons for buying Canadian oilsands workcamp provider Noralta Lodge Ltd. for $357 million last month, he talked as much about the appeal of its deluxe private rooms as he did about its contracts and stable revenue forecast.

“Working in the oilsands is a demanding task for our customers’ employees and contractors. They are typically spending long days working in remote locations with frequently challenging weather,” said Dodson on a conference call, describing a typical 21-days-on, seven-days-off work schedule for a fly-in, fly-out oilsands camp resident.

Many of those workdays are 12 hours long.

“It’s incumbent on us to create a home-away-from-home experience that prioritizes both comfort and privacy during their stay.”

Clients staying in the workcamps operated by Noralta and Civeo often have private washrooms, internet access and satellite TV. The camps usually offer daily housekeeping, three cafeteria meals a day and access to fitness and recreation facilities.

Civeo intends to expand Noralta’s offerings when its purchase closes in 2018, allowing guests at certain lodges to order a la carte meals through self-serve kiosks — ”hot and ready” at their convenience.

And, despite the bleak outlook, Civeo sees growth opportunities in offering to manage camps owned by others.

It says it want to follow the example of a joint venture between Noralta and the Fort McKay First Nation which took over last spring as manager of the 2,100 rooms in oilsands producer Suncor Energy Inc.’s (TSX:SU) lodging facilities north of Fort McMurray.

Publicly traded Canadian workcamp operators such as Horizon North Logistics Inc. (TSX:HNL) and Black Diamond Group Ltd. (TSX: BDI) have been coping with the slowdown by diversifying into non-energy-related fields.

Meanwhile, privately held Canada North Group Inc. of Edmonton is in court protection from creditors after admitting it can’t make payments on a $21-million loan from Canadian Western Bank. Its nine camps with room for 1,900 people, along with manufacturing facilities in Edmonton and Surprise, Ariz., are on the sales block.

A report from monitor Ernst and Young Inc. says Canada North’s revenues have been halved since 2014. It added customers have used their buying power to negotiate lower room rates, putting “extreme downward pressure” on profit margins.

The workcamps also face competition from Fort McMurray’s hotel sector, which has grown despite the destruction of two hotels with a total of about 300 rooms in the wildfire that swept through the city in May 2016.

The Alberta Hotel and Lodging Association says the average occupancy rate in September in Fort McMurray was just 55 per cent among 24 properties with 3,888 total rooms.

The workcamp sector is awash in rooms, said energy sector analyst Brian Pow of Acumen Capital of Calgary. In theory, the camps can be dismantled and moved but the built-in luxury of an average oilsands workcamp makes it a difficult fit for, say, a B.C. mining operation.

He added the Fort McMurray workcamps were built for a dry climate with winter temperatures that dip to nearly minus 40 C. They could require extensive renovations to be relocated to a different climate such as the warm, wet coast of B.C.

“These are effectively hotels with single rooms and washrooms,” Pow said.

“The mining side has historically tended towards dorm-style, with multiple people sleeping in each room and shared bathrooms. So there isn’t an ability to absorb that.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland responds to a question during a news conference on Parliament Hill in Ottawa, Tuesday, Aug. 18, 2020. THE CANADIAN PRESS/Adrian Wyld
Federal study details workers hit hardest by tax, benefit system for extra earnings

OTTAWA — Newly released documents show Finance Department officials calculated that workers… Continue reading

Cenovus. (The Canadian Press)
Cenovus to buy Husky Energy in deal valued at $23.6B, company will remain in Alberta

CALGARY — Cenovus Energy Inc. is buying Husky Energy Inc. in an… Continue reading

test tube with the blood test is on the table next to the documents. Positive test for coronavirus covid-19. The concept of fighting a dangerous Chinese disease.
The latest numbers on COVID-19 in Canada for Sunday, Oct. 25, 2020

The latest numbers of confirmed COVID-19 cases in Canada as of 10:49… Continue reading

NDP Leader John Horgan celebrates his election win in the British Columbia provincial election in downtown Vancouver, B.C., Saturday, Oct. 24, 2020. THE CANADIAN PRESS/Jonathan Hayward
New Democrats turn minority into majority in British Columbia election

The New Democrats won a majority government in the British Columbia election… Continue reading

Alberta Premier Jason Kenney arrives for an announcement at a news conference in Calgary, Alta., Tuesday, Sept. 15, 2020. THE CANADIAN PRESS/Todd Korol
Inquiry into oil and gas foes to deliver report next year: Kenney

CALGARY — An inquiry into who is funding environmental opposition to the… Continue reading

B.C. Liberal leader Andrew Wilkinson, B.C. NDP leader John Horgan and B.C. Greens leader Sonia Furstenau. (Black Press Media)
VIDEO: One day until B.C. voters go to the polls in snap election defined by pandemic

NDP Leader John Horgan’s decision to call an election comes more than a year ahead of schedule and during a pandemic

Alice Kolisnyk, deputy director of the Red Deer Food Bank, says the agency expects an increase in demand as the COVID-19 pandemic continues. Every new subscription to the Red Deer Advocate includes a $50 donation to the food bank. (Photo by BYRON HACKETT/Advocate Staff)
Support the food bank with a subscription to the Red Deer Advocate

The community’s most vulnerable members are always in need of a hand,… Continue reading

The Cogeco logo is seen in Montreal on Thursday, October 22, 2020. THE CANADIAN PRESS/Paul Chiasson
Five things to watch for in the Canadian business world in the coming week

TORONTO — Five things to watch for in the Canadian business world… Continue reading

President Donald Trump, left, and Democratic presidential candidate former Vice President Joe Biden during the second and final presidential debate Thursday, Oct. 22, 2020, at Belmont University in Nashville, Tenn. Stock market investors are breathing a little easier despite potentially facing higher taxes as the possibility of a contested U.S. presidential election appears to be fading, say investment experts. THE CANADIAN PRESS/AP, Patrick Semansky
Markets concerns about contested U.S. election fading with Biden lead in polls

TORONTO — Stock market investors are breathing a little easier despite potentially… Continue reading

(File photo)
Ontario records more than 1,000 new daily COVID-19 cases for first time

Ontario is reporting more than 1,000 mew daily cases of COVID-19 for… Continue reading

Pope Francis delivers his message during the Angelus noon prayer from the window of his studio overlooking St.Peter's Square, at the Vatican, Sunday, Oct. 25, 2020. (AP Photo/Alessandra Tarantino)
Pope names 13 new cardinals, includes US Archbishop Gregory

VATICAN CITY — Pope Francis on Sunday named 13 new cardinals, including… Continue reading

Dave Mercer, President of Unifor Local 2121, overlooks Conception Bay, Newfoundland and Labrador and the Terra Nova floating production vessel that is anchored there on Friday, October 23, 2020. THE CANADIAN PRESS/Paul Daly
As N.L.’s oil industry sputters, the emotional toll of the cod moratorium looms large

ST. JOHN’S, N.L. — Dave Mercer spent the early 1990s roaming around… Continue reading

Canada's Chief Public Health Officer Theresa Tam responds to a question during a news conference Friday October 23, 2020 in Ottawa. Canada's top physician says she fears the number of COVID-19 hospitalizations and deaths may increase in the coming weeks as the second wave continues to drive the death toll toward 10,000. THE CANADIAN PRESS/Adrian Wyld
Top doctor warns severe illness likely to rise, trailing spike in COVID-19 cases

Canada’s top physician painted a bleak picture Saturday of the toll the… Continue reading

Conservative Leader Erin O'Toole holds a press conference on Parliament Hill in Ottawa Wednesday, Sept. 2, 2020. Conservative Leader Erin O'Toole is naming his shadow cabinet, including his predecessor Andrew Scheer as the party's infrastructure critic. THE CANADIAN PRESS/Sean Kilpatrick
O’Toole tells Alberta UCP AGM Liberals were “late and confused” on COVID response

Conservative Leader Erin O’Toole says Alberta has responded to the COVID-19 pandemic… Continue reading

Most Read