Weyburn, Lampman鈥� On May 5, there was just one rig working in southeast Saskatchewan 鈥� Lasso Drilling Rig 1. That grey rig was making hole a few kilometres northwest of Lampman for Weyburn-based, privately owned Aldon Oils Ltd.
Del Mondor, owner of Aldon, was eager to get back in the field, offsetting two wells drilled in February. That鈥檚 because, according to BMO Capital Markets, those two wells were the top producing wells in Saskatchewan for the month of March, producing 545 and 385 bps respectively.
Those two wells were drilled on land Aldon had held for many years. Another producer drilled a successful well next door, and upon seeing that, Aldon drilled its own immediately adjacent, offsetting the first.
鈥淲e鈥檒l be drilling another in three days,鈥� Mondor said on May 11 in his Weyburn office.
Each of these wells have been two-leg horizontals, running north-south in the Frobisher formation. Being Frobisher, that means they鈥檙e conventional reservoirs, not requiring fracking for completion. Also, they are not as deep as some other formations in the region, and therefore are less expensive to drill.
Mondor said Frobisher wells have bigger early days, but don鈥檛 last as long. In comparison, he owns Midale wells which were drilled in 1956 and have been producing ever since.
鈥淭hey came on like gangbusters,鈥� he said, adding, 鈥淲e鈥檝e had our share of failures, and surprises. We always have estimates and we鈥檙e rarely right.
鈥淚t鈥檚 a crap shoot. That鈥檚 why not everyone鈥檚 doing it. The old saying about an oil well is, 鈥楩irst day of production is the beginning of the end.鈥欌��
These new wells are using progressive cavity pumps, something that鈥檚 pretty new for Aldon. While they鈥檝e used one a few years ago, Mondor said, 鈥淲e thought we鈥檇 try it.鈥�
He noted the servicerig can more or less install it.
鈥淲e鈥檝e bought five in a row, now,鈥� he said.
The wells are, 鈥淔lumping,鈥� he explained, flowing and pumping.
While hitting a sweet spot is a good feeling, the better feeling is seeing oil over US$70 per barrel. 聽
For the first time in three years, Mondor said, 鈥淲e鈥檙e drilling for the wallet as opposed to commitments.鈥�
In other words, during the downturn, drilling was primarily targeted at ensuring land was secured before leases expired. Now, he鈥檚 drilling with profit in mind.
鈥淚鈥檓 nervous about the price, but I鈥檓 not smart enough to know where the price is going to go,鈥� Mondor said.
Punching into a calculator, he pointed out that with oil at US$71.01 per barrel and the Canadian dollar at 78.26 cents compared to the American greenback, the price is now over C$90 per barrel.
鈥淭hose two numbers, together, mean we can produce and get the profits I need to pull the trigger on some projects we鈥檝e held off on,鈥� Mondor said.
He noted how, when oil prices were depressed to almost a third of what they are now, there wasn鈥檛 much ambition to develop prospects whose best production would be during low-paying times.
鈥淲e drilled eight wells in the last 12 months. We just added six more to our program. We鈥檒l do 10 more wells from this point in 2018.鈥�
In addition to the Lampman area, the other drilling focus is south of Weyburn in the Midale-Elswick field. 鈥淲e did a purchase from a large oil company,鈥� he said. 鈥淲e turned some wells on and did some drilling in other areas as well.鈥�
Factoring in tariffs and transportation costs, he said, 鈥淭o me, there are getting towards good times. I have no idea how long they鈥檒l be here for.鈥�
He noted there is now geopolitical risk incorporated into the price of oil again, and that includes uncertainty from the United States.
鈥淲e don鈥檛 like uncertainty around here. We have to be careful and tread lightly,鈥� he said. That could mean curtailing a drilling program quickly, if necessary.
But to that end, he added, 鈥淭he bulls are out.鈥�
Royalty company
For many years, Mondor maintained two oil companies, Aldon Oils and Brownstone Resources. But he鈥檚 taken a page from a movement that tools off when Encana, when it spun off PrairieSky Royalty Ltd., a wholly-owned subsidiary which hold the mineral rights to its properties, and more.
Brownstone is now the mineral rights company, and Aldon Oils is the operating company. Their combined production is at a record, but what that number is, he holds close to his chest.
鈥淚n recent months, we鈥檝e taken all the producing assets from Brownstone and moved them into Aldon,鈥� Mondor said. Brownstone is now a mineral title company and a farmland company. The transition began six months ago.
Brownstone was started during his time working in Calgary in 1996.
He said Brownstone has 鈥渟izable holdings鈥� for mineral title. It holds property that not only Aldon operates, but land other companies are drilling on, too. Indeed, he said, 鈥淢ost of my minerals are not Aldon-producing.鈥�
Asked why make Brownstone a mineral rights company, he said, 鈥淚鈥檓 turning 50 years old. Not that I鈥檓 thinking of retiring, but that day will come.鈥�
Mondor said he could sell Aldon one day, and still maintain Brownstone, which is much less management-intensive.
The other aspect of Brownstone is the same sort of royalty thinking, but on the surface, in the form of rent. So far they鈥檝e acquired 52 quarters of land.
鈥淪ome 20 years ago, an old man told me they鈥檙e not making anymore farmland, so buy,鈥� Mondor said.
鈥淲e are interested in buying more farmland,鈥� he said. 鈥淲e purchased a couple quarters over the winter.鈥�
Price escalation in farmland is starting to be noticeable, however.
On the mineral rights, he said they are aggressively pursuing it. 鈥淵ou know your backyard better than any other,鈥� he said about the area of highest interest.
