This is a printer friendly page!
Western Lakota Energy
Services builds and operates state of the art drilling rigs in partnership with Aboriginal
communities in Canada
Energy
Contract Drilling Services
(WLE-TSX)
Western Lakota Energy Services Ltd.
Suite 1050, 400-5th Avenue S.W.
Calgary AB Canada T2P OL6
Phone: 403-214-5970
Elson J. McDougald
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
June 16, 2005
BIO:
Elson McDougald is a co-founder and the President, Chief Executive Officer and a director
of Western Lakota Energy Services Inc. In addition, Mr. McDougald is a director of
Canadian Chemical Reclaimers, listed on the TSX, 3MC Stock Farms, Phoenix Technologies
Inc. and Malibu Engineering and Software Ltd.
Mr. McDougald was formerly
Chairman, Chief Executive Officer and a director of Tetonka Drilling and founder of Laredo
Drilling as well as past Chairman of Alberta Petroleum Equipment Company, Lakeside
Industries, Biotechnica and a director of Vencap Equities and the Alberta Treasury
Branches.
Company Profile:
Western Lakota Energy Services Inc. is one of Canada’s fastest-growing oil and gas
drilling contractors. The Company’s first two drilling rigs began operating in
December 2001 and the fleet has since grown to 22 rigs. An additional eight rigs are
scheduled to be built by the end of 2005, bringing the total rig fleet to 30 rigs (Western
Lakota’s net ownership of 22.5 rigs). Western Lakota continues to provide one of the
newest fleets of safe and efficient drilling rigs in Canada, while striving to deliver
strong results for shareholders, customers and partners.
The Company works closely with Aboriginal communities for ownership and employment
opportunities. Western Lakota acts as the general partner in the separate
partnerships that have been established with seven Aboriginal communities on the joint
ownership of thirteen drilling rigs. In this capacity, Western Lakota retains full
financial control of each partnership and also coordinates the construction, marketing,
personnel, safety and all other aspects associated with the day-to-day management of the
drilling rigs.
CEOCFOinterviews: What
was your vision when you founded Western Lakota and how has that played out?
Mr. McDougald: “The vision was to create a drilling
company that was a contractor of choice for the oil and gas companies and bring the
community into the ownership and employment, train them and make them part of the
business. Today we have built and put in the field sixteen drilling rigs; fourteen of them
are 3000-meter rigs and two of them are 3600-meter rigs. There are eight more in progress
and we hope they will be out by the end of 2005. We also recently finalized the purchase
of a six-rig company, which will take us to thirty rigs by the end of 2005. The first full
year of the company was in 2002, so we are just a little more than three years old.”
CEOCFOinterviews: What
interested you in starting the company when you did, and what is the interest in the
aboriginal community?
Mr. McDougald: “The interest in the aboriginal community
is due to the fact that the oil and gas customers have that as one their top priorities.
The reserves and the traditional areas cover the majority of the land where the oil and
gas interests are. Oil and gas companies need access permits and everything else into the
community. They are going to be there producing the oil and gas for a long time into the
future. They can have good relationships through the partnerships they have with us and
part of the money paid for these drilling rigs goes directly into the communities. It
works very well for our customers and very well for us because there are very capable
people there that we can train.”
CEOCFOinterviews: Is
there an advantage to having newer rigs?
Mr. McDougald: “There definitely is! The customers and
employees prefer the new rigs. Nobody would work on an older rig if it were possible to
work on a newer one. The newer rigs perform better. There is an advantage to the newer
equipment.”
CEOCFOinterviews: Are
you able to charge more for your services because of the new equipment?
Mr. McDougald: “If you look at the publicly released
information on the average rates per day compared to our peers and competitors, we are
higher than our competitors. There are only three things that allow you to do that. One is
performance, one is safety and the other is aboriginal community relationships. We have
more aboriginal community relationships than any other company in Canada.”
CEOCFOinterviews: Why
are you purchasing some rigs, and having some built?
Mr. McDougald: “All the rigs that we started, we built
and put into the field. Other than our rigs, the six double drilling rigs we just acquired
are some of the premium rigs in the oil patch. We think they fit well with the performance
and quality of our equipment and the family run organization we acquired them from was
very keen to have their employees go to a company that they trusted and were comfortable
with.”
CEOCFOinterviews: What
differences are there between digging for oil and gas, and do you prefer how you use your
rigs?
Mr. McDougald: “No, not at all. We are drilling about
70% for gas and 30% for oil. There is no difference at all. Sometimes they prefer larger
drill pipes for various reasons or smaller. It does not matter to us as long as the
activity is there and they are willing to pay for the service.”
CEOCFOinterviews: Will
you tell us about the area you cover and what the activity is like due to the heightened
interest in oil and gas?
Mr. McDougald: “When we started the company, we were
mostly up in northeast British Columbia and moved the rig down through northwest Alberta
into central west Alberta. The activity is hot. Most of our customers would take more of
our new rigs at the present, if we could supply them. Part of our reason for relocating
some of them down into Alberta was to get better utilization in Q-2. If you are up in
north B.C., in the muskeg, April, May and June are usually very tough months to get a lot
of activity. So we hope to get more activity during that period by changing the geological
location and there is a strong demand for good drilling services.”
CEOCFOinterviews:
Everyone sees activity increasing; but how do you deal with downturns or do you have to
worry about it at this time?
Mr. McDougald: “Definitely, you should always be
thinking about it. I have been in the business since 1963, and have seen some ups and
downs. This is the third drilling company that I have put together. I put together Laredo
Drilling with seven rigs in the seventies, Tetonka Drilling with twelve rigs in the
nineties and with this one, we are up to 22 rigs. You always have to think about how many
rigs are in the field, what capacity is there, and the nature of the business. With all
our experience, we are evaluating that continually and looking at the demand and
sustainability of the activity. We feel very comfortable right now with the commodity
prices, which have created a lot of cash flow for the gas companies. They have many
prospects that need to drill and the world demand is gradually increasing. It is getting
to the point where the supply and demand is almost equal. It could change the whole world
picture. The US is building up reserves, but those reserves are only good for so many
days. There is not any margin available and I think that goes well for activity. It looks
very sustainable for 2005 and 2006. We cannot see beyond that but we do not see any reason
for it to slow down.”
CEOCFOinterviews: What
is different and unique about the rigs you design, which may not be on other rigs?
Mr. McDougald: “We do not have any technological secrets
or patents or anything like that but we design our rigs with a small footprint. They are
telescoping derricks, and move efficiently. We do not have an exclusive on that. Other
rigs are doing similar things. The other half of the equation is how you run your
operation, the experience of your people and what kind of crews you can attract to operate
the rigs. The equation is about half equipment and half personnel. You have to pick the
right people, train them properly and make sure you are performing for your customers.
Customer performance is number one.”
CEOCFOinterviews: Would
you tell us about the history of the rest of the management team?
Mr. McDougald: “I am sixty years old but the rest of the
management team is young. Our VP & COO is a drilling engineer that has worked both
sides of the table. He worked as a drilling contractor and he has worked on the drilling
programs on the customer side, so he knows that field very well and is one of the
strongest in the business. We have a V.P. Marketing that has been in the business for 25
years or so, he is very strong with putting the contracts together and negotiating prices.
Our CFO is a Chartered Accountant in his late thirties. He is very strong in the financial
department. Our Executive VP is an MBA and is very strong on community and customer
relations as well as investor relations. Our operations manager is a drilling man with
many years of experience and a person that puts a lot of quality into the performance of
these rigs.”
CEOCFOinterviews: Why
should investor look at Western Lakota and what should they realize about the company that
they might not notice when they first look?
Mr. McDougald: “I think the public information is the
first place to look. When you look at all of our peers, which we do on a regular basis,
our utilization is right at the top of the page. We cannot find anybody that has the gross
margins that we achieve. Our G and A is the lowest of all of our peers. Our return on
equity is right up there at the very top. All those factors are reasons to look at Western
Lakota and we feel very strong and comfortable with the quality of operation that we put
together. The thing that people need to look at and understand is the aboriginal community
relationships and the tremendous opportunity to bring these people into the business and
have the ability to get the rigs and the utilization with the customers and the tremendous
labor pool and talent that is in these communities. We have taken our training program
right up to the reserves and trained people that have never seen a rig and put them into
the business. So far, we have seventy percent retention on these folks. There is a
tremendous pool of capable people there that will enhance the performance of the company
on an ongoing basis.”
CEOCFOinterviews: In
closing, what would you like readers to remember?
Mr. McDougald: “What we have tried to design is a
win-win situation. It is a win for the customers, a win for the government that is
supporting long term sustainable business for the aboriginals and it is a win for Western
Lakota and their shareholders. We have designed something that wins for everybody. We
think that with the momentum and position that we have in the market, that we have a
tremendous future ahead of us.”
disclaimers
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited.
|
