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As is the case with many other energy service companies, firms that specialize in work-camp services have seen a share-price drop over the past two years.Getty Images/iStockphoto

When Horizon North Logistics Inc. went to name the new camp placed on the site of its Blacksand Executive Lodge – a 665-room facility completely destroyed by the Fort McMurray fire – the choice was clear: Phoenix.

But having risen from the ashes, how busy the Phoenix camp will be in the months ahead is an open question. There are hopes the facility will be occupied as workers travel into the region for maintenance jobs at nearby oil-sands sites. But the company has yet to sign a significant contract.

"It is commodity price driven," said Horizon North chief executive Rod Graham.

The global crude price drop and the resulting drive to slow or halt new projects, or look for cost reductions in Alberta's oil-sands region, means the remote work camp sector is grappling with a glut of unoccupied beds.

Industrial work camps have long played an critical role in Alberta's oil sands, as nomadic workers from across Canada fly in and out for jobs in oil-sands operations or construction. The oil-sands region is home to approximately 50,000 work-camp beds.

As crude prices increased and the competition for labour grew, oil-sands producers were willing to spend more to lure workers with private rooms and washrooms, higher-end finishings and recreational facilities including gyms and squash courts.

But in the era of $40-a-barrel oil, the work-camp industry is preoccupied with filling rooms, cost-cutting and shutting down camps that are no longer needed. As is the case with many other energy service companies, firms that specialize in work-camp services, such as Horizon North, Black Diamond Group Ltd. and Civeo Corp., have seen a share-price drop over the past two years.

Work-camp occupancy rates in the oil-sands region began slackening in 2015, according to Edmonton's Orissa Software Inc., which tracks work-camp occupancy in Western Canada and the United States. By the first quarter of 2016, occupancy in oil-sands regions stood at about 48 per cent.

"We've observed an unprecedented number of camp closures, a tightening of investment capital, a freeze or retraction of investment capital, and significant worldwide cuts in workforce sizes in the sector," Orissa said in a note about the North American market.

"Mining camps have also contracted, as companies in these sectors continue to exercise caution and review of their operating strategies. Consequently, we've seen a precipitous drop in camp activity – though the freefall now appears to have perhaps hit bottom."

Construction of two major projects – Suncor Energy Inc.'s Fort Hills and Phase 3 of Canadian Natural Resources Ltd.'s Horizon site – is set to wrap up next year, which could lead to more vacant beds as construction trades pack up and head home. The planned building of multibillion-dollar liquefied natural gas (LNG) projects on the West Coast, which tantalized with the promise of more work for camp companies, is now far from certain.

And in the summer, even more stock came onto the market when Royal Dutch Shell PLC listed its near-new, 1,200-person camp built for the now-cancelled Carmon Creek project for sale through Ritchie Bros. Auctioneers.

Described as "the size of a small town" – with a medical clinic, a bar lounge, executive-style rooms and fully equipped gym with an indoor running track – the high-end, Atco Ltd.-built facility likely cost $70-million to $80-million for Shell, according to industry sources.

But the camp is located near Peace River, Alta., in the remote northwestern part of the province, and there is no obvious home for the facility, which will cost millions to transport to another site.

However, Shell spokesman Cameron Yost said there has been some interest in the facility. "We'd be open to all offers," he said, noting the camp could be sold as a whole or in parts. "What we're hoping to get for it is what the market is looking to pay."

There are some positive signs for camp companies with a strong presence in Alberta's oil sands. While no new investment is expected, the long duration of bitumen projects means even as North American crude prices linger well below $50 (U.S.) a barrel, oil-sands production continues.

The Blacksand lodge and Nexen Energy ULC's 150-person camp at Long Lake were destroyed in May's wildfire. But other work camps in northern Alberta made it through the massive blaze unscathed, aside from smoke damage. Once the fire was under control, occupancy bumped up as insurance adjusters, cleanup crews and aid organizations descended on the region.

The rebuilding of Fort McMurray has yet to begin in earnest. But once it does, construction workers will need a place to stay.

Mr. Graham believes that like other firms that service oil and gas producers, the work-camp sector "fits the profile" of being headed toward a period of consolidation.

Horizon North is not sitting still. In May, it acquired Okanagan Falls, B.C.-based Karoleena Inc., a manufacturer of high-end prefabricated modular homes, in its bid to push into the residential and commercial building spheres. The company is in talks with Fort McMurray property owners considering a prebuilt home as a replacement for houses destroyed in the fire.

But Mr. Graham said industrial work camps will always be integral to the company's business. "There will always be demand for what we provide."

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