Calgary-based Houston Oil & Gas ceases operations, leaving almost 1,300 wells needing cleanup
Another company folds as sector struggles with low prices, less investor interest
Another Alberta oil and gas company has closed its doors, leaving more than $80 million in estimated costs to clean up its remaining wells, pipelines and facilities.
Calgary-based Houston Oil & Gas told the Alberta Energy Regulator (AER) last month that it was ceasing operations and no longer has any employees, according to court documents. Houston entered receivership last week.
The company is focused primarily in southeast Alberta and predominantly produces natural gas, according to its web site.
"I feel bad for them," said Marc Raedschelders, who has a Houston natural gas well on his property near Pincher Creek in the southwest corner of the province.
Raedschelders said he's not surprised the company is no longer operating, since Houston's surface rights payments to him were often delayed. He's unsure whether the well on his property will be sold to a different company or be decommissioned.
"I don't know what my options are," he said.
Houston has 1,264 wells, 41 facilities and 251 pipelines, according to documents.
The court documents say some of the wells have already been transferred to the Orphan Well Association (OWA) to be decommissioned. The OWA is an industry-funded organization that cleans up old oil and gas infrastructure when companies go bankrupt and the assets cannot be sold.
"If all of Houston's wells are ultimately designated as orphans, the orphan inventory of wells requiring [decommissioning] will increase by nearly 30 per cent," according to a court submission by the OWA. In that event, the AER estimates the price tag at $81.5 million.
Houston is the latest oil and gas company in Alberta to fail.
Last month, Bellatrix Exploration entered creditor protection and is still looking for a buyer.
In May, Trident Exploration shut down, which put 94 people out of work and left approximately 3,650 wells without an owner.
While there is no official list of how many firms have declared bankruptcy since the oil price crash in late 2014, many others have declared bankruptcy or entered creditor protection.
Some small and mid-sized companies are faring better than others, according to Patrick O'Rourke, an analyst with Calgary-based AltaCorp Capital.
"Everybody is facing headwinds here on a number of fronts," he said, pointing to "lower capital flows, less investor interest and weaker prices."
Big or small, the more successful companies are focused on oil properties or natural gas wells that are "liquid," meaning they also produce higher valued commodities such as ethane, propane, butane, isobutane, and pentane.
Companies primarily focused just on natural gas, seem to struggle the most.
"Gas prices have been extremely challenging, specifically in Alberta," said O'Rourke. "We've seen some strengthening in October with low storage levels and the weather out the window here being pretty cold, but generally, the producers who have pursued that liquids strategy have fared better than some junior gas producers."
According to Houston's web site, the company formed in 2002 and began production in 2015.
"Houston Oil & Gas Ltd. is steadfast in the management of its end-of-life liabilities. The company invests on a monthly basis, addressing the down hole abandonment of wells, decommissioning of facilities, infrastructure and reclamation of wells that are non-productive," according to its web site.
Hardie and Kelly Inc. has been appointed to ensure Houston's wells are properly maintained and to look at possibly selling some of the assets.