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Weekly UpdatesIncreased activity in Alaska's oil and gas industry, particularly on the North Slope, has translated into additional opportunities for the state's Native regional corporations participating in that sector of Alaska's economy.
Established by terms included in the Alaska Native Claims Settlement Act, which also cleared the way for oil development on the North Slope, the 13 Native regional corporations have grown in size and scope of business since their formation in 1971.
Today, Native corporation business entities are playing a major role in Alaska's oil and gas industry, particularly on the North Slope. Involvement ranges from drilling to construction to trucking to camp services.
"Native corporations are playing a huge role in providing goods and services on the North Slope," said Paul Laird, general manager of the Alaska Support Industry Alliance.
He noted that Doyon Drilling Inc., a subsidiary of the Interior-based Doyon Ltd., is one of the largest drilling contractors working on the North Slope.
SUCCESS SHOWS
Success has increased in recent years for that oilfield contractor, according to the regional corporation's most recent annual financial report. In 2005, Doyon Drilling posted a total net operating income of $14.1 million, a 26 percent increase over the $11.3 million reported in 2004.
"In 2005, (Doyon Drilling Inc.) had its most profitable year yet and projections indicate 2006 will be even better," Doyon managers reported in the corporation's 2005 annual report.
The increase came due to a hike in drilling activity on the North Slope, where Doyon's five land-based drill rigs are located. "High demand has increased rig utilization to 92 percent in 2005, up from 70 percent in 2004 and 67 percent in 2003," the annual report said.
"It's a major part of our operations ... one of the rising stars of the corporation," said Daniel "Toby" Osborn, chief financial officer at Doyon Ltd. "Doyon Drilling is very successful, one of the most successful of our operating companies and it contributes significantly to our bottom line."
In 2005, Doyon Drilling contributed slightly more than half of the Native corporation's total net operating income of $27.7 million.
Founded in 1982, Doyon Drilling offers five conventional land drilling rigs and has recently formed a joint-venture partnership with Canadian-based Akita Drilling Inc. to produce a sixth drill rig. Completed in December 2005, the Arctic Fox drill rig is designed as a smaller, more mobile exploration rig, according to Ron Wilson, general manager of Doyon Drilling.
"It's more of a seasonal exploration rig," he said. "It's moved in smaller, lighter loads so we can get into more remote areas."
That compares to the other five drill rigs Doyon Drilling operates--which are mostly broken down into truck-able modules and designed to be Arctic friendly and environmentally sound, Wilson said.
"They're well-insulated, so you can work in coveralls on the rig ... work effectively in the 40-below environment," he said. "We're continually maintaining the equipment and completing upgrades to keep efficient."
The new drill rig has a multiple-year contract with North Slope explorer Pioneer Resources, Wilson said, although he's working with other oil and gas prospectors to utilize the rig in other parts of the state when available.
Increased oil and gas prices have helped boost industry's interest in exploring, not only in Alaska but also throughout the nation. "Different styles of rigs will be needed in the future," he said. "Alaska is a little different than the Lower 48--there's so much activity down there that drilling contractors are doing pretty good ... the activity level up here is starting to pick up with new players coming in."
Like other current operators in Alaska's oil and gas industry, Doyon Drilling has "survived the ups and downs," Wilson said.
Part of that is the company's performance. "Doyon Drilling is noted for its creativity and performance in the industry," Osborn said. "It's well respected for its achievements and a very productive producer."
Included in Doyon Drilling's "firsts" in Alaska's oil and gas industry is offering the first self-propelled, wheel-mounted drill rig developed specifically for the North Slope.
That same moving system was later applied to three other drill rigs owned and operated by Doyon Drilling. "That did change the thinking about how things were done on the Slope," Wilson said. "It also greatly lowered construction and moving costs-the days of down time due to moving ... the concepts and ideas that we stepped out and completed helped us get to where we are today."
The drilling company also provides some significant employment opportunities for both Doyon shareholders and Alaska residents. With the addition of the sixth drill rig, Doyon Drilling currently has about 330 employees, with 36 percent to 37 percent shareholder hire, Wilson said.
That's a significant increase from the 236 employees reported in mid-2004, the 192 employees reported in December 2003 and 188 workers reported in December 2002. "The last few years have been pretty steady," Wilson said.
In addition to oilfield drilling, Doyon, Ltd. participates in the oil and gas industry through its 50.1 percent interest in Doyon Universal Services LLC, which provides security and support services.
According to the company's 2005 annual report, Doyon Universal reorganized, separating the core functions of security and facility services. Now, the security division provides fire, medical and security services to clients. The facility division provides catering, janitorial, food service, housekeeping and other types of facility maintenance services.
Doyon Universal Services renewed all of its large-volume service contracts in 2005 and is now competing for commercial contracts outside of Alaska, according to the annual report.
The subsidiary contributed $1.1 million to Doyon's profits in 2005, on total revenues of $54.7 million. Doyon Universal's net contributions decreased in 2005 from the $1.4 million earned in 2004 and $2.2 million in 2003.
OTHERS INVOLVED
Other Native regional corporations involved in Alaska's oil and gas industry include NANA Regional Corp., based in Kotzebue, and Arctic Slope Regional Corp., based in Barrow.
NANA operates NANA Oilfield Services Inc., located in Deadhorse, providing petroleum products and related services to oilfield service and mining companies in Alaska.
From its North Slope offices, NANA Oilfield provides same-day service for bulk fuel and lubricants, same-day diesel deliveries in the Deadhorse area, full and self-serve 24-hour aircraft refueling and oil analysis. The company also supplies remote sites, provides equipment rentals on light trucks, operates a gas station and rents office space near the Deadhorse airport, according to the company's Web site.
NANA also has ownership interest in several other entities that provide contract support to the oilfield and mining industries. Those include NANA Lynden Logistics LLC, which provides trucking and transportation services; NANA Major Drilling LLC, which conducts exploratory mining drilling; and the Arctic Caribou Inn, which provides oilfield camp support.
The combined oilfield and mining support entities contributed $9.7 million in revenues to NANA in 2005, and increase from the $7.6 million reported in 2004 and $6.7 million in 2003.
Net income contributed to NANA by its oilfield and mining service entities was $1.4 million in 2005, an increase over the $500,000 contributed in 2004 and a $100,000 loss reported in 2003.
Based in Barrow, Arctic Slope Regional Corp. has several subsidiaries involved in Alaska's oil and gas industry, which produce hundreds of millions of dollars in revenue for its far north Native shareholders. ASRC Energy Services and its subsidiaries contributed $442.8 million in total revenue to the Native corporation in 2004, a substantial increase over the $368.2 million reported in 2003, according to the company's annual report.
ASRC Energy's earnings increased to $23.6 million in 2005, compared to a loss of $5.7 million reported in 2004, according to preliminary figures released in late April. The earnings were realized, in part, to strengthening markets throughout Canada and the Gulf of Mexico, the corporation said in its unaudited consolidated overview of operations. "While the Alaska market is showing some signs of improvement, AES continues to encounter pricing pressures in this market," corporate managers said in the report.
The various subsidiaries of ASRC Energy provide integrated engineering, procurement, construction, operating and maintenance services for energy and communications projects around the world. Operations are headquartered in Anchorage, with additional offices in Canada, Great Britain, Russia and the U.S. Gulf Coast.
ASRC acquired its initial interest in the energy sector in 1985, through its purchase of Houston Contracting Co., according to the company's Web site. ASRC later formed Natchiq as a holding company over HCC and Alaska Petroleum Contractors.
The marketplace has changed since the Native corporation entered the energy services industry, as maintenance and technical services are needed more in recent years than the traditional construction services required for exploration of an oil field. To compensate, the Native corporation has developed additional technical service capabilities through its 2004 purchase of Lynx Enterprises Inc., an early field life permitting and environmental consulting firm.
"With this acquisition, AES has filled out its product offering to comprise the entire "Formation to Production" spectrum of the oil field lifecycle," the company said in its 2004 annual report. "This focus has given AES a dominant position in new oil and gas development initiatives through early partnering with the independent producers in the conceptual stages of their projects."
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