Features Commercial Oil & Gas
Great Explorations

Standing pat.” “Not taking many chances.” “Sticking to the status quo.”

Phoenix Helicopters president Paul Spring has built his organization into an industry leader in a number of key areas. (Photo courtesy of Phoenix Heli Flight)

Cautious perspectives all, but given the extremely volatile economic conditions that have prevailed worldwide in the past several months, it’s hardly surprising these are the standard refrains shared by major Canadian operators Canada-wide heading into 2012.

Careful perspectives make perfect sense given “the new normal” economic environment operators face. Add in an ample dose of political uncertainty here (a permanent leader of the official opposition NDP has yet to be named) and in the U.S. (a presidential election is set for November and it’s anyone’s guess as to the outcome), and forecasting financial stability is indeed a challenge.

“If you keep reading the newspapers, you just won’t do anything,” says Troy Fisher, operations manager for Ottawa-based Questral Helicopters. Founded in 1987, Questral is the only commercial helicopter service in North America specializing in airborne geophysical surveys. “You just have to put your head down and have faith in your product and realize that the world is still going to need oil, it’s still going to need nickel, gold and diamonds, and there’s people out there who need to find it.”

Fisher says 2011 “was a very busy year” for Questral, with all machines working to capacity. “And if I had another machine, I could have put it on fires,” he says. Fisher is optimistic 2012 will offer significant opportunity for operators, as renewed interest in sectors such as oil and gas, and mining, will keep machines in the air. “Going forward, we should be better off. And nothing is finalized, but we are looking at adding another B3 to the fleet, hopefully in the spring, which will help.”

A report by the Conference Board of Canada in late 2011 reinforces Fisher’s notion positive developments are in the offing. The report notes Canada will see economic growth next year with western provinces leading the way, benefiting from higher commodity prices and related investments in the energy sector.

Growth in central and eastern Canada will be less robust due to provincial government efforts to reduce deficits, a weak U.S. economy and sluggish consumer spending, but the overall picture is encouraging.
In short, it’s good news for the more than 130 Canadian helicopter operators that dot the Canadian landscape, as many rely on the riches our resource-based economy delivers both here and abroad.

Groundbreaking Developments
Operators such as Questral that benefit from mining exploration should experience steady opportunities in 2012. Mining is one of Canada’s most important economic sectors and is a major driver of our country’s prosperity. According to the Mining Association of Canada, the mining industry contributes more than $32 billion to our gross domestic product (GDP) and employs more than 306,000 workers in the sectors of mineral extraction, processing and manufacturing.

Cougar Helicopters continues to focus on improving safety procedures in 2012. (Photo courtesy of Cougar Helicopters)

The Conference Board of Canada notes that the indicators used to assess mining – economic output and exploration expenditures – all point to a strong mining future for many regions in Canada, particularly in the North. Emerging hot spots include the northern B.C. interior (various minerals), Northwest Territories (diamonds), the Yukon (gold, silver, lead and zinc), Nunavut (gold), northern Ontario and Quebec (chromite, iron ore, uranium), and northern Saskatchewan (uranium and gold).

“Northern Canada has a long history of mining and the future looks bright. Even in 2009 –the worst year for mining in recent history – the industry contributed $6.5 billion to the Canadian economy in real terms and continued to export a diverse variety of resources,” says Len Coad, director, environment, energy and technology policy, for the Conference Board of Canada.

Questral Helicopters did significant work in the B.C. interior in 2011 and in the Arctic. Says Fisher: “Mineral wise, we did everything from gold, diamonds, nickel – you name it. We did surveys for diamonds in the Northwest Territories, gold out West, we did surveys for uranium. I wouldn’t say it’s all wine and roses right now, but I think, in the future, it’s going to be positive.”

Renewed interest in the mining sector is also being seen at Interior Helicopters, notes line pilot/director of special projects Brad Vankoughnett. The company’s eight helicopters have been busy servicing mining clients in the northern B.C. interior. “We do a lot of small, grass-roots-tent-camp-on-the-side-of-a-mountain kind of jobs, but we had a couple of machines on a big environmental assessment this year for one of our big mining customers.

“There’s a little of everything driving the business right now. Gold is always hot and it goes up when there’s a spike in the market – people get gold rush fever. But there’s lots of different minerals and industrial minerals that you don’t see in the news per se that you need for everyday applications.”

STARs is looking to build on an outstanding year in 2011, with the anticipated opening of its two new bases in Saskatchewan. A long-term medevac agreement with the Manitoba government is imminent as well. (Photo courtesy of STARS)

Jeff Denomme, president of Great Slave Helicopters, says mining exploration is a significant part of his company’s operations – and it will continue to play a key role in the business mix in 2012. “The price of gold has certainly helped in the gold exploration side of things, and there’s still a lot of activity in the diamond industry, so typically the expansion of exploration in the Yukon and Nunavut is very active. The Northwest Territories have shown a bit of a slowdown in the last number of years and that’s just because of regulatory issues, as well as environmental issues. That’s why we see the uptick here.”

Operators in Newfoundland have often played second fiddle to their counterparts in other parts of the province, but strong economic activity in the province in 2011 has Geoff Goodyear, president/CEO of Universal Helicopters, feeling confident about his company’s offerings going forward. Universal has been providing support for mineral exportation for more than 30 years, and has extensive experience in field camp support, long line drill moves and more. Clients have included Falconbridge, NDT Ventures, Castle Rock Exploration and Shell Exploration.

“I see a continuation of mining exploration activities, yes,” he says. “Despite a downturn in China, there’s still a demand that outstrips supply, and there’s lots of potential here for base metals that they are looking for. The government here has discussed lifting its moratorium on uranium mining, which we’re hoping will bring two or three very high-volume clients back to the table and back in the area, which will serve not only us, but other operators in the area. So, I see at least a maintaining of, or an improvement of, activity in 2012.”

Priming the Pump
While mining prospects offer renewed hope for operators, those with oil and gas clients seem primed for steady work. Prospects in Canada for oil and gas production remain solid, says Peter Tertzakian, chief energy economist of ARC Financial Corp. (ARC).

ARC’s research reveals that the scale of what’s going on in the Canadian oil and gas industry is impressive by any world standard. From B.C. to Newfoundland, the upstream oil and gas industry generated more than $115 billion in annual revenue, $20 billion in royalties, land sales and taxes, and $50 billion in investment into infrastructure and jobs in 2011 – with similar prospects for 2012. Major projects coming down the pipe include:

• Keystone Xl project. An expansion of Calgary-based TransCanada Corp.’s existing Keystone pipeline system. It will carry up to 830,000 barrels of crude per day from northern Alberta to refineries in Oklahoma and the Gulf Coast in Texas. The Canadian portion of the project extends for about 529 kilometres and will cost $1.7 billion. The project is a political hot button in both the U.S. and Canada.
• Northern Gateway. A pair of 1,172-kilometre pipelines to carry blended bitumen westbound and condensate eastbound between Bruderheim, Alta., and Kitimat, B.C., on the Pacific coast. Construction, subject to numerous proposals, is scheduled for 2013.
• MacKenzie Gas Project. The Mackenzie Gas Project will build a gas line that extends from the Mackenzie Delta to Alberta. The 1,196-kilometre pipeline will create more energy opportunities in the far north. Construction is set to begin in 2015.

Great Slave Helicopters president Jeff Denomme says staffing in 2012 will be a challenge for his firm. (Photo courtesy of Great Slave Helicopters)

“The seismic side of the business has picked up in the fall and it is continuing throughout the winter,” says Denomme. “We’re looking at a very busy seismic season in Alberta, Saskatchewan and B.C., so it’s nice to be able to see that work pick up. It sort of helps to take the seasonality out of our business – and that’s another aspect of keeping the right crew numbers.”

Great Slave has also extended its oil and gas business internationally, by supporting ongoing oil and gas seismic exploration activity with South American Exploration LLC’s Peruvian operations. It allows the company to diversify its revenue by tapping into the Latin American oil and gas market. Adding international revenue streams is a goal many Canadian-based operators have set in order to diversify operations in as many markets as possible.

Paul Spring, president of Phoenix Heli Flight in Fort McMurray, is optimistic his firm will continue to benefit from consistent Alberta oil production in the new year. While the gas market “is dead for us” due to the Crown’s decision to curtail opportunities until oil in the oil sands is extracted, work there has helped keep his seven Eurocopter helicopters busy. (For more on the oil sands and future prospects, see “Supporting the Oil Sands,” pg. 22.)

“We never know what the future will bring, but looking back on last year, we had the best year we’ve had. And we don’t just judge that on hours, it’s judged on profitability,” he says. “We saw a return to, in our area, survey activity as well.”

Spring, like many operators, is wary about the future. With economic chaos in Europe and uncertainty with the global economy, significant changes in operations at Phoenix will not occur right away, he says.

Working closely with clients to improve safety and maintenance procedures internally will carry the day.
“We’re like most companies now, we’re just hoarding cash,” he says. “We built up a bit of buffer so that if we do see a retreat in business next year, we can weather the storm. You know in 2008, everyone was chugging along, spending and buying helicopters and building things. . . it looked like the world was good and everyone was never going to stop. Well, 2009 and 2010 taught us a lesson. Now, it’s consolidation of cash and assets and getting ready to ride out the storm in case we get a second wave.”

A cautious approach also carries the day in the offshore business. Hank Williams, general manager of Cougar Helicopters, says while his Sikorsky S-92s were kept busy servicing a number of offshore oil projects in 2011, the new year will be spent concentrating on existing clients, improving safety standards and mending operational voids. The company is also working closely with Sikorsky to improve safety standards and optimize the fleet.

Globally, Cougar flies crews to offshore platforms in the Gulf of Mexico, the North Sea, Greenland, the waters around Newfoundland and Labrador, Nova Scotia, Brazil, Australia, Malaysia and China. Cougar also provides SAR services for emergency response and medical evacuations. “It was a very positive year for Cougar in 2011, and we’re looking to maintain activity in 2012,” says Williams.

Powering the Future
While the mining and oil and gas sectors are producing real opportunities for operators, new projects in the hydroelectric and energy sectors will provide other opportunities – now and in the future.

With 120,000 kilometres of distribution lines to service in Ontario, it is no wonder Hydro One’s helicopters are always on the go. (Photo courtesy of Hydro One)

In Ontario, Canada’s largest provincial electricity consumer – the government – plans to close its four remaining coal-fired plants (in Atikokan, Lambton, Nanticoke, and Thunder Bay) by Dec. 31, 2014, citing environmental and health concerns. The government plans to replace coal-fired generation with natural gas, nuclear, hydropower and wind.

Other major hydroelectric projects in construction across Canada include: Hydro-Québec’s construction of a 768-megawatt facility near Eastmain and a smaller 150-MW facility at Sarcelle; and a 200-MW Wuskwatim project in Manitoba. Also, Fortis Inc., in partnership with Columbia Power Corp. and Columbia Basin Trust, says it will construct a 335-MW hydropower project at an estimated cost of $900 million near Waneta Dam on B.C.’s Pend d’Oreille River. The project also calls for the construction of a 6.2-mile transmission line. These, and other major projects, will keep operators in Quebec, Manitoba and B.C. with a vested interest in hydro work energized this year and well beyond.

Ontario’s Hydro One’s contingent of eight helicopters based in Barrie, Timmins, Dryden and Thunder Bay are tasked with a variety of responsibilities – from storm restoration to ongoing maintenance. With more than 30,000 kilometres of transmission lines and 120,000 kilometres of distribution lines threaded throughout the province, it’s a daunting task – 1.2 million customers need to be safe, warm and powered up. Has the economic slowdown zapped the power out of Hydro One?

“For us, status quo is the order of the day,” says John Bosomworth, chief pilot for Hydro One. “A few years ago, when the economy was booming, we felt that we were not picking up the pace like everyone else and moving with it. We were very busy, but then when the economic slump happened, because of the nature of the work that we do, we weren’t impacted as much. There were other helicopter companies that were hugely affected by slumps in mining and forestry and everything that goes along with the resource-based economy.”

To keep the lights burning bright in the new year, Hydro One is enhancing its fleet by adding another new helicopter in 2012, upgrading a Longranger to the highly versatile Eurocopter AS350 B3. “Our wheels sometimes turn slower than we like, but that’s OK. Sometimes, it’s at a glacial pace, but that can be good, too,” says Bosomworth. “It takes a lot of effort, and a whole lot of patience, but at the end of the day, it works.”

Shooting STARS
Of all Canadian operators, Alberta-based Shock Trauma Air Rescue Society (STARS) may have shone the brightest in 2011 – and 2012 looks to be just as successful. Through November 2011, STARS had flown more than 21,881 missions since its inception and will now have the opportunity to provide medevac services on a full-time basis in two new provinces – Saskatchewan and Manitoba – while continuing to serve Alberta and eastern B.C.

In April of last year, STARS signed a service agreement with the government of Saskatchewan to provide air ambulance services from bases in Regina and Saskatoon. The Regina base, to be located at the Regina International Airport, is scheduled to open in the spring of 2012, while the base in Saskatoon is anticipated to open in late 2012. The government of Saskatchewan is investing $10 million per year beginning in 2012-2013.

In Manitoba, STARS was initially contracted to provide flood-related emergency service from April 1 to May 31, 2011; however, that contract was extended. The province and STARS then signed a memorandum of understanding on June 28 to facilitate future discussions and work toward a permanent helicopter air ambulance program in Manitoba. A long-term agreement to provide medevac services out of a base in Winnipeg will likely be signed this year.

STARS is also taking possession of its second and third AW139 aircraft to serve its new bases – and is seriously ramping up operations. Although a foray into the fixed-wing side of things isn’t in the plans at the moment, an understandably upbeat vice-president of aviation Scott Young doesn’t rule it out.

“2011 was an incredible year for STARS,” says Young. “And heading into 2012, we’re hiring in excess of 35 pilots, probably eight AMEs plus the paramedics, nurses and doctors that we need to support our mission. So, we’re doubling our size.

“We also work closely with the fixed wing operators in Manitoba, Saskatchewan and Alberta. All three provinces have very established fixed wing programs on the medevac side of things, and we work them to get things done. They also have ground ambulance services, so they are fully integrated already. We are not. But we would look at it given the opportunity. But organizationally, we’re not actively seeking fixed wing at this time.”

While one of the country’s leading medevac services experienced significant success in 2011 and is primed to soar in 2012, Ontario’s medical transport provider, Ornge, was crushed near the end of 2011 amidst allegations of mismanagement and misuse of funds following an extensive in-depth report by the Toronto Star.

Ornge chief executive officer Christopher Mazza went on indefinite medical leave in late December just before it was revealed that his salary, $1.4 million, was the highest of any Ontario public official. Mazza was relieved of his duties – along with the entire executive board – early in the new year and replaced by Ron McKerlie, a deputy minister in government services. Health Minister Deb Matthews made the switch, saying it “was abundantly clear” the province’s medical transport services was not performing up to snuff.

The medical service was heavily scrutinized about service, inadequate staffing, equipment decisions, and alleged mismanagement in a number of areas. It dulled any accomplishments Ornge had in 2011, including the establishment of a new operations base in Oshawa, supplying southeastern Ontario with another important medevac option.

Moving Forward
While opportunities in many natural resource-based industries are indeed at hand, most operators Helicopters spoke with for our annual Market Report are concentrating on core values: working closely with existing clients to improve services; looking for ways to improve their fleets; finding creative ways to retain staff; and meeting stricter client demands. Resting on their laurels isn’t part of the equation. As Cougar Helicopters’ Williams aptly points out: “If you aren’t looking, you aren’t going to find any opportunities.” For Canada’s top helicopter operators, great explorations are certainly words to live by.