Houston Oil & Gas collapse could bring $81M well cleanup bill
POSTMEDIA NEWS November 6, 2019
Alberta’s orphan well count could grow by more than 1,000 after the receivership of Calgary-based Houston Oil & Gas Ltd., adding to the province’s growing inventory of oil and gas liabilities.
Lars De Pauw, executive director of Alberta’s Orphan Well Association, said in an affidavit filed last month that the junior petroleum producer held 1,438 well licences when it ceased operations, mostly in southeastern Alberta. More than 1,200 were not properly shut in, it states.
The estimated cost of abandoning and reclaiming those assets is $81.5 million, according to documents filed with receiver Hardy & Kelly Inc.
In an interview, De Pauw said the receiver’s appointment could mitigate the potential financial burden on the industry-funded association.
“We’d be hopeful that most, if not all, of the assets could be transitioned to another responsible operator,” he said Wednesday.
Houston Oil & Gas was founded in 2002 and began production in 2015, according to its website. The Alberta Energy Regulator suspended the company’s operations on Aug. 30.
The company last month informed the AER that it no longer had any employees and would cease operations.
The OWA, backed by an industry-funded annual levy, decommissions oil and gas wells and other assets abandoned by insolvent companies. The association has about 3,400 wells for abandonment on its books and expects to clean up about 800 this year.
“The numbers have been growing. We are hopeful that we’re going to start seeing some light at the end of the tunnel but it’s largely a commodity price issue related to the number of sites coming to us,” said De Pauw.
“So until we see some improvement in the economics on that side and capital coming into the industry, we do expect this trend to somewhat continue.”
The OWA’s industry levy will rise to $65 million in 2020, from $60 million this year, said De Pauw.
“We’re definitely confident we can meet the ongoing increasing inventory, but it is a question of funding, as well about what the timeframe is,” he said.