Cathedral Energy Services Profile
Cathedral Energy Services Ltd. (Cathedral), together with its wholly owned subsidiary, Cathedral Energy Services Inc., engages in the business of providing directional drilling services to oil and natural gas companies in western Canada and the U.S.
The company is a trusted partner to North American energy companies requiring high performance directional drilling services. The company works in partnership with its customers to tailor its equipment and expertise to meet their specific geographical and technical needs.
The company continues to build its presence in the dynamic Clearwater/Marten Hill play. The company continues to shift its market focus towards more active areas of the U.S., such as the Permian basin where the company can leverage the versatility of its RapidFire Measurement-While-Drilling (MWD) system.
RapidFire is the company’s latest generation MWD system, which is capable of transmitting data simultaneously via pulse and electro-magnetic (EM), allowing for high data rates and higher reliability through redundancy, resulting in faster drilling for its customers. The system can be configured in either a hard mount or retrievable configuration and is rated to operating temperatures that meet or exceed most competitive MWD systems.
The company has 1 RapidFire MWD system and is expecting to deploy 4 additional RapidFire systems early in 2021 Q2. In addition, in 2021 Q3, the company expects to commence trial runs with a retrievable downhole generator, which allows for high EM transmission on extended run applications. The company carries on its activities in Canada and the U.S. under the name ‘Cathedral Energy Services’.
Directional Drilling
The company provides horizontal and directional drilling services. These services are provided in conjunction with the use of drilling rigs provided by drilling contractors who deal independently with its customers.
Tools and Equipment
To facilitate directional and horizontal drilling operations a number of tools are often supplied by the company as part of the BHA (bottom hole assembly):
Measurement-While-Drilling Systems
MWD systems are installed in the drill string as part of the BHA to provide real time measurements of basic trajectory parameters, such as inclination, direction, tool-face and temperature. Additional sensors, such as pressure, gamma-ray and resistivity may be added depending upon the specific application to provide LWD (Logging-While-Drilling) capabilities. The MWD/LWD system generally consists of three basic sections:
Power Supply - Most tools are powered by batteries, however, the company’s MWD tools also use a downhole electricity generator to provide supplemental power.
Sensor Section - Hole trajectory is measured by a sensor stack that contains accelerometers and magnetometers. The inclination and roll of the tool is obtained using accelerometers. Magnetometers measure the earth's local magnetic field and provide a reference direction relative to magnetic north. Other sensors, such as pressure, gamma-ray, and resistivity, are typically housed in separate dedicated tool sections.
Transmitter - MWD tools transmit in two basic manners, by sending pressure waves through the drilling mud (mud pulse) or by transmitting EM signals through the earth to surface. These signals are decoded at surface and used to determine the BHA trajectory parameters. The selection of mud pulse or EM transmission depends on a number of factors related to downhole conditions.
The company’s MWD fleet consists of the following technologies:
RapidFire, the company’s latest generation MWD system, which is capable of transmitting data simultaneously via pulse and EM, allowing for high data rates and higher reliability through redundancy. The system can be configured in either a hard mount or retrievable configuration and is rated to operating temperatures that meet or exceed most competitive MWD systems. In addition, in Q3 2021, the company expects to commence trial runs with a retrievable downhole generator, which is anticipated to allow for high power EM transmission on extended run applications.
FUSION, the company’s legacy proprietary MWD system, which has multiple configurations:
FUSION EM (Electro Magnetic) is a proprietary EM transmission that allows continuous transmission of data from the BHA to surface, which allows a number of benefits to customers related to drilling time savings and the ability to more efficiently retrieve additional downhole information. The company’s EM system also provides for the ability for information to be transmitted downhole to manage power levels and other tool functions. The company has demonstrated that this technology works in formations where many conventional third-party EM systems do not have the same performance capabilities.
FUSION RP (Rotary Pulse) is the company’s proprietary mud pulse data transmission system that uses a direct drive rotary valve assembly, which significantly reduces the chance of plugging in high-viscosity or lost circulation applications compared to traditional hydraulic-assist linear pulse systems. Loss control materials are often added to the drilling mud to overcome mud circulation problems. These loss control materials have the potential to plug off rotary and linear pulse tools.
FUSION DT (Dual Telemetry) offers a data transmission system that uses both the FUSION EM and FUSION RP data transmission systems. The talk-down capabilities (from surface) of the FUSION platform enables the operating mode of the system to be quickly changed from its baseline EM setting to dual transmission mode in which EM and rotary pulse are both operating. The dual telemetry configuration captures the benefits of pulse or EM depending on drilling and formation conditions. The company’s latest generation of the FUSION DT system was commercialized in 2019.
FUSION LP (Linear Pulse) is the company’s proprietary mud pulse data transmission system, which uses a direct drive linear valve assembly for pulse transmission. The LP system can also be equipped with a hydraulic assist feature to increase pulse amplitude. The direct drive feature allows for better clearance of loss control materials along with the capability to produce large pulses, which are better detected at surface. This pulse transmission and detection capability allows for drilling in longer wellbores, with a larger range of drilling mud formulations and conditions and often at higher data transmission rates than most third-party available pulse transmission tools. FUSION LP is the company’s main MWD pulse telemetry platform going forward. The LP tool can be retrieved from the wellbore using wireline in the event the BHA gets stuck downhole. The company’s latest generation of the FUSION LP system was commercialized in 2019.
FUSION EMc2 Downhole Generator is a technology that supplements the company’s FUSION EM platform by using the mud flow in the drill string to generate electricity. The downhole generator FUSION EM add-on allows for higher EM transmission performance, allows drilling longer without concern over depleting batteries thereby saving non-productive time and mitigates safety concerns arising from use of lithium batteries.
High Temperature Retrievable Linear Pulse is a Cathedral-modified third-party pulse MWD tool used in situations that are not favorable to EM transmission or based on specific customer drilling requirements. This tool can also be retrieved from the wellbore using wireline in the event the BHA gets stuck downhole. Cathedral anticipates phasing out and replacing these High Temperature Retrievable Linear Pulse systems with the company’s proprietary FUSION LP system over time.
As of December 31, 2020, the company had a fleet of 63 active MWD kits, which were allocated between Canada and the U.S. based on current and projected job demand. Of the active MWD fleet, approximately 65% of the systems incorporate the company’s proprietary RapidFire and FUSION technology. It is the company’s plan to attrition the legacy third-party MWD systems by utilizing them in select environments and focus on operating the company’s proprietary RapidFire and FUSION MWD systems, each of which have distinct advantages. When additional MWD kits are added to the company’s fleet they will be its RapidFire technology. The RapidFire MWD system can utilize a significant portion of the components of the company’s FUSION MWD platform, which will allow expansion of the company’s RapidFire MWD fleet with a lower cost of capital for the first 15 systems. Typically, each directional drilling job requires one MWD kit, which generally consists of an active tool and a backup tool. Of the active fleet, approximately 75% of the kits are regularly being maintained or refurbished as they are typically shipped to each new job in like new condition. Kits that are in transport to and from jobs also reduce the fleet’s effective utilization. In 2020, the company’s active MWD fleet size declined from 84 kits at the end of 2019 to 63 kits due to equipment damage, equipment lost down hole on client jobs and the deferral of repairs as the company plans on utilizing components from inactive FUSION MWD tools for the expansion of the company’s RapidFire fleet.
As of December 31, 2020, the company had 1 RapidFire MWD system with an additional 4 RapidFire MWD systems expected to be included in the company’s active MWD fleet early in Q2 2021. In addition, in Q3 2021, the company expects to commence field testing a retrievable downhole generator for the RapidFire MWD platform, which will allow for high power EM transmission on extended run applications.
The company occasionally rents or purchases third party MWD equipment to satisfy specific customer and technical requirements.
Positive Displacement Mud Motors
Positive displacement drilling mud motors are designed to drill without drill string rotation by converting hydraulic energy (flow and pressure) into mechanical energy (torque and rotational speed). The drilling motor turns the drill bit. A bend in the mud motor is used to steer the wellbore trajectory in directional and horizontal drilling applications.
Cathedral utilizes a combination of its own proprietary bearing section, which is branded as nDurance and third party supplied bearing sections. Cathedral’s bearing section assets are predominately a sealed bearing design. Cathedral introduced a mud lube bearing section design (C4) into the market in 2019, with the first such models targeted for RSS applications.
Cathedral undertakes the design and manufacture of its nDurance bearing section in its Nisku, Alberta facility. Cathedral also conducts the repair and refurbishment of all bearing sections at its motor shop facilities in the U.S. and Canada. Since 2015, all bearing sections added to the fleet by Cathedral have been nDurance bearing sections.
Cathedral purchases power sections from independent suppliers that also provide power sections to Cathedral’s competitors. Cathedral works with the power section suppliers to develop power sections specifications that best suit Cathedral client’s drilling parameters. As such, several power section specifications are unique and proprietary to Cathedral. The key power section design parameters, which impact motor performance are the mud pressure and flow rate and the resulting torque and revolutions per minute generated by the power section. Cathedral typically works with up to six power section suppliers from time-to-time depending on their product offerings and other capabilities. A power section is consisted of two components, such as rotor and stator.
As of December 31, 2020, Cathedral had a motor fleet, measured in terms of bearing sections, consisting of 753 motors ranging in sizes from 3-1/2 inches to 9-5/8 inches, which is consistent with the vast majority of customer applications. Of the total motor fleet, 67% incorporate Cathedral's proprietary nDurance bearing section design. At the end of 2017, Cathedral wrote off a portion of its non-nDurance motor fleet due to low customer demand for these assets, which did not support their book value. Cathedral occasionally rents or purchases third party motors to satisfy specific customer and technical requirements.
Rotary Steerable System (RSS)
Cathedral does not own RSS systems, but has ability to rent from multiple suppliers. Since 2017, the company has provided its customers with a RSS offering in the U.S. primarily by way of renting from Schlumberger its PowerDrive Orbit RSS tool. Schlumberger’s PowerDrive Orbit RSS tool is generally accepted as the industry leader in RSS technology. Cathedral has been participating in the RSS market by way of providing specialized motors for operation with RSS. Cathedral is recognized as having strong performance and reliability metrics in these applications.
Drilling Jars
Drilling jars are tools typically run in the BHA to aid in the recovery of the drill-string in the event of it becoming stuck. Although there are several configurations of jars available (mechanical, hydraulic, and hydra mechanical) the basic function remains the same. Once stuck the drill-string is pulled into tension, storing elastic energy in the pipe (stretch). When the tension exceeds a pre-set limit (known as the latch setting) the jar ‘fires’ by releasing an internal mandrel allowing the drill string to slip by approximately 1/2 meter, delivering a slide-hammer impact to the stuck section of drill-string. The jar may be reset and the process repeated until the drill-string section is freed.
Shock Subs
Shock subs are used in the BHA to cushion heavy axial loading and bit vibrations that are encountered in rough drilling operations. These tools assist in extending the drill string life by reducing vibration and shock that can cause failures in the drill string. Additional benefits include extending the life of bits by reducing ‘bit bounce’ and increased rate of penetration as a result of consistently keeping the bit in contact with the drilling surface. Cathedral occasionally rents or purchases third party motors, drilling jars, shock subs and other BHA equipment to satisfy specific customer and technical requirements.
Drill Collars
Drill collars are used as part of the BHA assembly to house the MWD equipment and to allow the BHA to flex to facilitate steering the wellbore. Drill collars are made from non-magnetic materials in order to reduce the interference with the MWD tool magnetometer sensors.
Drilling Optimization Services
Cathedral's Drilling Optimization Group utilize analytics and engineering software applications to deliver comprehensive recommendations to clients to improve drilling efficiencies and ensure and accurate wellbore placement. The Drilling Optimization Group also supports the company’s internal operations teams to improve service quality by aiding in equipment selection, configuration, and optimizing workflow processes.
Well Planning Services
Cathedral's Well Planning team develops comprehensive plans for clients on how to drill specific directional and horizontal wells. A complete well plan includes a trajectory/directional profile that defines the well geometry; anti-collision and torque and drag analysis to confirm the drill-ability of the well; and BHA recommendations for each section of the well.
Customers
Cathedral's strategy is to have a diversified portfolio of customers. Cathedral's customers include large, intermediate and junior oil and natural gas exploration and development entities, which are diversified by geography, producing or exploration basin and petroleum target type (e.g. conventional and non-conventional source, and oil and gas focus).
Seasonality
A portion of the company’s operations are carried on in western Canada where activity levels in the oilfield services industry are subject to a degree of seasonality. Operating activities in western Canada are generally lower during ‘spring breakup’, which normally commences in March and continues through to May. Canadian operating activities generally increase in the fall and peak in the winter months from December until mid to late March, depending on weather conditions.
