Toews in Vortex

Interesting story, my heart goes out to Murray's family. I'm a GP reared and raised, so this is all closer to home than you might suspect. Of note from this article too is mention of Markin's presentations across Alberta; does anyone have a video copy of Markin's speech? I'd love to get it up on the blog.


Toews in vortex of oilpatch royalty storm

Jon Harding, Financial Post

Published: Wednesday, October 17, 2007

GRANDE PRAIRIE, Alta. -- If there is a face in Alberta that represents the dread now gripping the province's troubled oil-and-gas sector, it is that of Murray Toews, whose well services company, Bonnett's Energy Services Trust, could either soar or spiral into an abyss in the wake of Premier Ed Stelmach's bitterly divisive royalty review.

The past 12 months have been excruciatingly difficult for the 39-year-old oilpatch executive, professionally and personally.

Following Bonnett' s initial public offering in September, 2005, and then a year-long stretch of robust expansion, Mr. Toews was forced a year ago to take stock of the beginning of a significant downturn in natural-gas drilling activity.

The price-driven pullback by producers was then compounded by Ottawa's trust-tax bombshell last Halloween, and in the aftermath Bonnett's market value fell to about $55-million from a high of $400-million, about 100 staff were laid off and management has accepted a pair of wage rollbacks, the latest taking effect Sept. 1.

Meanwhile, in May, Mr. Toews found himself battling with the governments in Canada and Mexico on a personal front when his younger brother, Jeff, who was Bonnett's 34-year-old manager of field sales, died from a head injury suffered in a mysterious accident that took place in the middle of the night while he was vacationing with other family and friends at a resort in Cancun, Mexico.

Murray Toews, who was not on the trip but flew to Mexico to recover his brother's body and uncover answers from the resort and from authorities there, has led the family's fight to find out what really happened in Mexico, reach closure on the tragedy and impress upon other Canadian travellers to Mexico to be aware of risks and of where to best reach out for help if needed.

"Professionally, it's been a perfect storm of negatives. Now we have this provincial mess," said Mr. Toews, seated in his office at the company's new headquarters.

"Personally, we're still looking to find out what happened and looking after Jeff 's wife and son.

"I've lost a lot of respect for government at both levels., which extends over to what happened to Jeff. Basically, once our family got home and the media went away, Ottawa, which was so eager to help us, went away too."

Should Mr. Stelmach's Alberta Tory government adopt measures contained in the Sept. 18 report, which some believe will cripple Alberta's natural-gas industry, Mr. Toews said the months ahead will no doubt be darker still.

Grande Prairie, near Alberta's northwest border with British Columbia, is the heart of the province's deep-basin natural-gas drilling industry.

It is also Alberta's fastest-growing small city after oilsands hub Fort McMurray, with a population that has jumped from 30,000 to 51,000 in just six years.

The heady growth has spawned the kind of resentment toward the oilpatch that is puzzling to people in Calgary and Edmonton.

"You [in Calgary and Edmonton] expect us to work in the north while you extract the wealth and have the better quality of life," said one high-ranking Grande Prairie city bureaucrat, who asked to remain anonymous for fear his views could wind up hurting the municipality, depending on which side of the royalty debate line the Premier ultimately lands on.

The special panel appointed in February by Mr. Stelmach to review the province's revenue take from oil and gas development recommended the government claim another 20% through new taxes and higher royalties. If adopted, the change would generate an extra $2-billion based on the $12-billion the government collected in 2006.

While some of the panel's recommendations apply to the oilsands, it also proposed a small increase for conventional oil and natural gas wells using a formula it said would actually allow most wells in the province to pay a lower rate.

High-producing wells in the so-called deep basin - they make up a small percentage of all wells drilled - such as those found along the foothills stretching from Pincher Creek in the south to Grande Prairie, would pay a 5% higher royalty.

Mr. Toews is in the camp of those who believe the measure would destroy activity by making the deeper, more expensive wells uneconomic, costing jobs and pushing production companies to abandon the play.

Large gas producers such as EnCana Corp., Talisman Energy and Canadian Natural Resources Ltd. have said the recommendations will deter them from spending billions in Alberta looking for gas.

In fact, debate over the panel report really only began raging here last week, following a presentation to about 500 people at a Grande Prairie hotel by Canadian Natural's vice-chairman Allan Markin. The oilpatch heavyweight made Grande Prairie his first stop the day after the company said it would drill 65% fewer gas wells next year in Alberta if the government adopts the whole panel report.

"[Mr. Markin] said CNRL will just leave this area -- that it will be like someone just pulled the plug in the bathtub," said Mr. Toews, who attended the meeting. "He said if you're an investor in a service company, be prepared to sell your stocks, if you're an employee, prepare to transfer."

Bonnett's, said Mr. Toews, needs the Alberta government to take a stance. With the Premier expected to make a formal response on Oct. 24, the last thing he wants to see is waffling, otherwise the winter drilling season could be shot.

"So many service companies are in the same boat as us," Mr. Toews said. "If we could just give the junior to mid-size producers some momentum and confidence that they might be able to raise equity again in the market, get the confidence to pull the trigger on spending plans, we know the majors are ready to go. We just need that big headline where the premier says here's the deal, now get back to work."