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Floorhands Robb Phillips (right) and Bartosz Konstanty (left) during the tripping process of Rig 15. Beaver Drilling Rig south of Grande Prairie, AB.CHRIS BEAUCHAMP/The Globe and Mail

Robb Phillips remembers the day in September, 2015, when he got the call. His oil rig was getting shut down.

"As soon as you finish this hole, that's the end of it," he was told as he sat in the driller's chair in the "doghouse," a steel cabin with a view to the drill floor, where operations for the rig are controlled.

Mr. Phillips gathered his five crew members in the doghouse and broke the news.

"It's nothing to do with your performance," he explained. "We've had a perfect safety record. We've been drilling record wells. It comes down to dollars and cents," he told them.

"The money isn't there. We're getting cut."

The crew members were stunned. "I'm screwed," blurted out one young worker who had recently moved to Alberta from New Brunswick.

The scene, at a Beaver Drilling Ltd. operation deep in the oil patch of Northern Alberta, is one that has played out across Western Canada countless times over the past 20 months amid the energy industry's worst downturn in memory. The price of West Texas intermediate, the benchmark North American price for crude, plummeted below $30 (U.S.) in January from highs of above $100 a barrel in July, 2014, although it has recovered some ground recently and is now hovering just below $40.

Collapsing oil prices have left companies in the sector with huge losses, battered share prices and worried creditors. Hunkering down, producers big and small have slashed spending by billions of dollars, curtailed output and put tens of thousands of employees out of work. Total revenue for Canada's energy industry in 2016 is forecast at about $74-billion (Canadian) this year, according to Arc Financial Corp. In 2014, it stood at more than $149-billion.

Drilling companies, which are hired by oil companies to do some of the heaviest lifting in the field, have been hard hit. But the prospects for starting new wells are particularly grim.

In Western Canada, companies saw depressingly low levels of drilling through the past winter season – usually the busiest time for drilling activity. Even accounting for the current seasonal spring slowdown, the number of active drilling rigs has plunged more than 75 per cent from the five-year average, according to RBC, and is now down to only about 50 working on new wells in Western Canada. In once-bustling Saskatchewan, this week there was not a single rig drilling new oil or natural gas wells.

Canada's largest drilling rig contractor, Precision Drilling Corp., suspended its dividend earlier this year. Precision and another big driller, Ensign Energy Services Inc., have decommissioned dozens of older, less-efficient rigs. Staff reductions of 40 per cent or more have become the norm.

Most expect it will only be worse this year. With little in the way of a financial cushion heading into what is already a normally slow season, many energy companies are now teetering on the edge of a financial abyss. But so far, surprisingly few have gone outright bankrupt. Lenders are reluctant to call in loans when oil field equipment is selling at such a steep discount, and companies across the sector are also taking every possible step to overhaul their cost structures and find efficiencies in an all-out battle for survival.

For those who are still working, it's a matter of slogging through. The experience of Beaver Drilling – a private, family-run firm – shows how a few companies are weathering the commodity storm through a combination of cost-cutting, job-sharing in the field, new rig technology and a conservative financial approach. Beaver Drilling and others have also shifted their focus to drilling wells in natural gas plays in northwestern Alberta and northeastern British Columbia, where the newer technology and an abundance of the resource makes the numbers add up for producers.

In mid-2014, when oil was above $100 (U.S.) a barrel, all of Beaver Drilling's nine rigs were at work and the company had about 250 employees in the field. But as the price drop began in the latter half of 2014, the small drilling firm started to see some of his customers – oil companies – cancel production plans or lineups.

The severity of the situation became apparent to Beaver Drilling president Kevin Krausert in November, 2014, when the Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia, threw oil markets into turmoil with its announcement that it would not to cut its production in the face of an international supply glut.

"That was the 'holy crap' moment," Mr. Krausert says.

In the months that followed the OPEC announcement, Beaver Drilling saw further lineups cancelled by oil and gas companies, and the company had to start laying off staff. Four of its oldest rigs were permanently decommissioned – the firm couldn't envision any scenario where they would go back to productive use.

Even so, as late as the spring of 2015, Mr. Phillips, 27, was making close to $50 (Canadian) an hour as a driller – which entails controlling operations and overseeing safety from the doghouse. Working two weeks of 12-hour shifts for Beaver Drilling, followed by one week off home in British Columbia, Mr. Phillips had no concern about paying the mortgage and talked about starting a family with his girlfriend.

But then the oil price rout hit harder. A rally in the first half of 2015 petered out and by August, North American oil prices dropped below $43 (U.S.) a barrel. Energy companies realized in the fall that the downturn was going to last much longer.

Over the past winter, Beaver Drilling operated just four rigs. Even though profits were plunging, Mr. Krausert felt comfortable enough to pay a Christmas bonus to every staff member who had done work going back to May, rather than the usual spring bonus. New lineups were set to start in January and he wanted his crew members "whole." Plus, "I knew how hard of a year it was," he says.

But two lineups were unexpectedly cancelled in January, as oil prices sank below $30 a barrel, and Beaver Drilling was forced to idle more rigs. It's now down to one active rig, for ConocoPhillips Canada, and another for a private oil company that is not working at the moment but will be running again intermittently in the months ahead.

Like almost every other drilling company, Beaver Drilling has decreased hourly drilling rig crew rates. It has added a fourth crew to what is usually a three-crew rotation, to "get more guys a paycheque," Mr. Krausert says, but that has resulted in a decrease in total working hours for all.

Beaver Drilling's effort to keep as many employees engaged as possible helped Mr. Phillips. When he lost his job last fall, Mr. Phillips headed back home to Kelowna, B.C. He found some work doing roofing, and he then guarded rigs for Beaver Drilling back in Alberta. But he worried about the future.

"I might be able to survive a few months, or six months, or up to a year. But how long is this going to go? Am I going to be able to survive past that point – so I've got to start thinking about what I'm going to do now – before I'm completely screwed."

In February, Mr. Phillips was summoned back to join a crew. Now, during 12-hour shifts on a Beaver Drilling rig south of Grande Prairie, Alta., Mr. Phillips shovels snow off all the machinery, scrubs the outside of the rig and cleans the inside of the metal rooms with rags. He helps other crew members as new lengths of pipe are added to a natural gas well to be drilled 4 1/2 kilometres deep.

But the new job comes with sacrifices. He is back working as a roughneck – the same labour-intensive, near-entry-level position he started with in Alberta's oil and gas industry as an 18-year-old fresh from his hometown of Grand Forks, B.C. He also gets fewer hours than he used to, and earns $20 an hour less than he did as a driller – a job he worked up to after years on rigs, and which combines the roles of shift supervisor and equipment operator.

"I'm still working and I'm still learning new stuff," Mr. Phillips says during a lunch break.

"Yeah, it's less hours. But it's more hours than zero, which I was getting before, right?"

Mr. Krausert says the firm's earnings for 2015 sank 50 per cent in 2015 from 2014, and he forecasts another decline of 25 per cent this year. But thanks to long-standing preparations for commodity price downturns, cost cutting and technology, the company remains profitable.

Right now, Beaver Drilling is selling its office property in Grande Prairie. About half of the company's field staff, which once numbered around 250, have been laid off. Those who remain are taking fewer hours in the name of job sharing, and lower positions and pay. As the oil price has found some lift in recent weeks, Mr. Krausert is scrounging around for more work for his company and his employees.

"I'm fighting for the work right now, at cost, because I need to get these guys to work. Because I need to make sure they have paycheques," he says. "You know when a rig has shut down, it's not just people losing their jobs, it's families losing their homes. That's the thing that keeps me up at night."

Mr. Krausert, 34, is the grandson of Sam Krausert – who worked as a roughneck in Alberta's nascent oil industry in Turner Valley, and who co-founded Beaver Drilling in 1965 to take on U.S.-based companies active in Canada. The company has stayed in the family, and thanks to a push by his father, chief executive officer Brian Krausert, to shave debt off the company's book in the 1980s, has no unsecured debt. The firm also has the benefit of experience – this is the seventh significant oil-price downturn the company has struggled through.

"The story that [Brian] tells me is when he took over Beaver Drilling in 1981, the Saudis were flooding the oil market and we had a prime minister named Trudeau. And Beaver Drilling had a mountainful of debt," Kevin Krausert says with a laugh.

Today, "the one thing he tells me is we don't have a mountainful of debt, so I've got things pretty easy."

Despite his family's roots in the business, Mr. Krausert's path to oil and gas industry executive was far from straightforward. At age 18, he was a vegan who wanted nothing more to get away from what he then saw as "redneck" Calgary and the energy industry. He went to McGill University to study neurobiology.

But after completing his undergrad degree, and before starting graduate school, his grandfather implored him to spend a year on the rigs to build character and earn some good money. Mr. Krausert took his grandfather's advice and ended up liking the hard work in the oil patch and the trust built between crew members. He stayed on the rigs for almost four years and became best friends with a motorhand, the crew member who operates the rig's engines. They travelled the world together – even spending time at an Indian yoga ashram – before Mr. Krausert eventually settled into the family-run company's corporate office in downtown Calgary.

He had the bigger picture in mind as Beaver Drilling's business development manager in 2012, when he worked with staff in his office in a push to build a state-of-the art drilling rig. With advice from machinery builder National Oilwell Varco and a promise of work from ConocoPhillips Canada, Beaver Drilling created Rig 15 – the rig that Mr. Phillips now works on.

Even now, Rig 15 is leading edge for the industry, with an operating system that constantly "optimizes" the drilling parameters and significantly boosts the output of the rig. In addition, like many new rigs, the machinery also "walks" itself, meaning it uses hydraulic power to slowly move metre by metre to the next well, instead of being completely dismantled and being trucked to a new nearby site. It runs on both diesel and natural gas, and produces less greenhouse gases than many rigs.

Mr. Krausert says the drilling industry is undergoing a change on the scale the manufacturing industry did in the 1990s. Mr. Krausert gets excited when talking about "wild" efficiency gains and software optimization. He scoffs at what he calls the current industry "pity party."

"This is the crisis that is going to force innovation in this industry," he insists.

"We can't keep waiting for some sort of turnaround in prices. Hope is not a strategy. You have to look at where we can innovate."

Technology that allows companies to keep operating costs low, combined with abundant natural gas resources in northwestern Alberta and northeastern British Columbia, allows the drilling to continue.

"If we can't do the stuff that we do economically, then the option is not to do it at all," says Russ Litun, a senior vice-president for ConocoPhillips Canada, one of the largest producers and operators in the area where Beaver Drilling is active. He says producers have cut their head office staff, capital investment, drilling activity and costs in the downturn, but also understand that service companies can only cut their rates so much.

"We've got to work together to help each other get through these low times."

As Beaver Drilling works on the ConocoPhillips site near Grande Prairie, Mr. Litun says if there's one positive to the downturn, it has spurred the push to lower operating costs through technology of the kind seen in Rig 15.

"If we can find a few bright lights in the environment that we're in, I think this slowdown in our industry – and these low commodity prices – have accelerated a lot of the work," Mr. Litun says. "There's more focus on advancing technology, which will ultimately make our industry more efficient."

The downturn has also forced the industry as a whole to be more active when it comes to public relations and awareness of how many workers from outside Alberta are affected by the low oil price, and how much the industry contributes to both provincial and federal coffers. Early this year, the Canadian Association of Oilwell Drilling Contractors launched an "Oil Respect" campaign to tell the personal stories of small oil-field service companies and laid-off oil workers.

Drilling firms are pushing to "get pipelines built so that we can compete on a level playing field against foreign oil" and to fight "against the misinformation spread by foreign celebrities, radical environmentalists and grandstanding politicians," according to taglines for the campaign.

As for Mr. Phillips, he says he is trying to make the best out of the situation. Even as he cleans the rig each day, or night, he takes time to examine all the components so he can understand how Rig 15 works. He says he tries to get his work done as quickly as possible so he can spend more time learning about the technical aspects of the computer and machinery.

Eventually, he says, he is certain the industry will rebound and he will be back on his way up the ranks.

"It is a bit of a hit to my ego, I guess, to go from being a supervisor down to being back to the bottom," he says.

"But that's something you deal with if you decide that you're going to work in this industry for a period of time. There are times when it's slow."

Rig 15

Beaver Drilling Ltd.'s Rig 15 is part of a wave of programmable rigs being embraced by big drilling firms such as Precision Drilling Corp., as well as private firms, such as the ARC Financial Corp.-controlled Citadel Drilling Ltd.

"They're pushing buttons on touch screens and controlling mechanical arms that swing all over the place," Beaver Drilling president Kevin Krausert says of the Rig 15 crews.

"The skill set you want is the guy that is really good at Xbox and understands what drilling is, and is going to be able to handle sensors and alarms – rather than hitting something with a sledgehammer."

Rig 15, he says, is so efficient it can make money in this price environment. And the rig runs on both diesel and natural gas – and can run on gas it has pumped from the ground. Mr. Krausert says that means a significant reduction in greenhouse gas emissions.

He said it's difficult to find the capital to build this modern kind of rig now, and before the oil price drop, the return on investment wasn't as good.

He says in 2014, one of the older-style rigs could be built for $10-million to $12-million, and operators could get a day rate in 2014 of about $18,000. Building something with the same specs as Rig 15 costs about $25-million, and earned a day rate of up to $25,000.

However, now the financial calculation has changed as older style rigs are being marketed for about $9,000 a day, if they're employed at all. The high-tech rigs, meanwhile, are more in demand and fetch in the region of $18,000 a day.

"Not a lot of drilling contractors saw the power of this technology to actually transform the market and displace things," Mr. Krausert says.

"The drilling industry has not been known for innovation. And the drilling industry likely hasn't been known for innovation because we haven't had to innovative. The margins, historically, were so generous that, why would you innovate?"