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Showing Support for the Communities We Live In

As we continue to move our way through the COVID pandemic, it is more important than ever to show compassion and care for those in need. 

Employees at our Jumping Pound and Caroline gas plants made donations and spent time helping their communities this holiday season. 

At Jumping Pound, workers donated to both the Cochrane Food Bank, and the Iyahrhe Nakoda food bank, which provides nutritious food hampers to the people of the Stoney Nakoda First Nation. Their donations will go a long way to supporting families throughout the holidays and beyond.

Colin Sale, who works at the Jumping Pound complex, shares what helping the community means to him and his colleagues. “The majority of us live in Cochrane and know someone that has gone through hard times, especially in the last few years. We like to help out and support local families in need, “said Colin.

Kathy Tucker, who is chairperson at the Cochrane Food Bank, notes the affects the second year of the pandemic had on the community. “It has been a very up and down year in terms of how many people need help,” said Kathy. “We are seeing more now with the government taking assistance away.”. 

With people needing more help around the holidays she greatly appreciates how much the community has stepped up. “Words can’t express how generous the community is. People are unbelievably great with spending their time and money to support us. This is such a great community. We are really thankful for Pieridae spending their time to help out the community so much.”

Donations made this season will be going towards the Cochrane Food bank’s school lunch program to ensure kids have a healthy lunch every day. 

“Kids are really the backbone of our community and world,” Kathy adds. “People will drive out here on Tuesday and Thursday nights to let us know how much they need. We make good and healthy perishable lunches with fruits and veggies, meats, dairy, etc.. Some parents are struggling to provide during this time of year, this program gives them another option to ensure their kids get the nutrition they need.”

The Iyahrhe Nakoda Food Bank Society serves the Stoney Nakoda members of Bearspaw, Chiniki and Wesley bands in the communities of Morley, Eden Valley and Big Horn. Currently they support more than 40% of the total Nakoda population. Due to limited economic opportunities and limited education, many in the community must depend on social programming as a way of life. 

Since 2019 workers at Pieridae’s Jumping Pound Gas Plant have been supporting the Iyahrhe Nakoda Food Bank.

At our Caroline Gas Plant, workers there believe in supporting both Sundre Santa’s and the Shepherds Food Bank in Caroline. Every year, they partner with Santa’s Anonymous with a donation to help provide over 300 individuals with food hampers during the holiday season. This will help many families throughout the holidays and during harsh winter months so that they will have food on the table.

The Shepherds Food Bank is run out of the Caroline Church of the Nazarene and delivers food hampers to families to relieve some of the pressure of the holiday season. Employees at the Caroline Gas Complex donate their time to help put together these hampers and help out their community during this time of need. Thalia Aspeslet, the Consultation and Regulatory Advisor as well as Community Liaison Officer for Caroline, did her third annual hamper building for the food bank since starting with Pieridae.

“This year we made 47 hampers and took about two hours to complete this project,” said Thalia. “Helping out those who are struggling is a humbling experience for me. I put a lot of care into building these hampers and think about the people who need this service and what it must feel like to have to use it. Parents around this time of year may have to choose between feeding their family or getting their children gifts. This program helps those families to not have to make that decision and provide some Christmas magic,” she added.

It is important to keep supporting each other during these difficult times, and continue to be a good neighbour in the communities our staff live and operate. The holidays can be difficult for many, even when we are not in the midst of a pandemic, so please show kindness and help out those who need it most.

If you want to learn how you can help any of the organizations mentioned click any of the links below:

Pieridae CEO Looks Back at 2021 and Ahead to Next Year

There was much to celebrate in 2021, especially on the operations side of our business. We had a pair of large turnarounds, which are planned maintenance shutdowns, at two of our gas complexes: Jumping Pound and Caroline. Both were completed very close to on budget and on time and that took a significant amount of planning effort. 

The fact that we were able to continue those two turnarounds without any degree of interruption because of COVID is a testament to the efforts of the Pieridae team, led by Jason Billick, Conrad Kenney and Mark Weiss. 

A big win for all!

From an overall macroeconomic perspective, the rise in energy prices, including the recovery of oil prices after the beating they took in 2020, helped to stabilize the ship somewhat and allowed us to begin the process last summer to find ways of either recapitalizing Pieridae or selling assets or the company itself. 

Both these events had a very significant impact on our 2021 story and continue to have a big impact. The turnarounds have ensured the facilities are ready for the winter and that should allow us to do a significant amount of upgrading of our financial situation by the fact we have all of our assets well maintained as we get ready for the inevitable cold!

Specifically with the Strategic Review, the process was initiated to identify potential partners or other organizations that would be able to do one of two things: recapitalize the balance sheet or look for some type of a transaction that would either monetize the assets or monetize the company. 

We have partnered with Peters and Co., a leader in this space, to develop and implement a very in depth and robust process. Over 400 companies received a detailed ‘teaser’ that laid out the positive aspects of the company. Twenty six companies participated in presentations and discussions with Pieridae to gain further knowledge about the firm, leading to about 10 putting in notices of interest. 

One key learning out of the whole process is that our conventional natural gas assets are very specialized and suited for the Alberta Foothills. What we've seen since the unconventional boom in natural gas occurred well over 15 years ago now, really showed that conventional gas was overly risky for the risk/reward profile. Where unconventional gas tends to be much more of a manufacturing process, conventional gas still remains a bit of a hit and miss type scenario.

You go from having a very high probability of hitting a resource base to a scenario that, even with the greatest planning, could still end up resulting in no production. And because of that, I think the marketplace, right now, has no real interest in developing conventional gas fields. This was demonstrated in the results that we saw over the course of the Strategic Review where there were very limited players who came to the table. Those who did come forward tended to have very specific reasons for looking at the assets of Pieridae. We are still determining where things will ultimately land.

Concurrent with the Review, we have been looking for ways to recapitalize Pieridae’s balance sheet. We had two companies that showed a significant interest in recapitalizing Pieridae with the view of developing long term gas supply for their needs. Discussions continue to try and come to some terms that make sense for both shareholders and for Third Eye. Obviously, Third Eye plays a big role in this whole story because they are our majority lender today. And we need to find a way to significantly deal with the roughly $275 million we owe them.

That has really been the catalyst to this whole process, to find a way to ensure that not only our shareholders receive a return on the investment they made, but also that employees themselves get a good outcome out of all this and we don't end up in a scenario where the assets are acquired and no staff went with them.

We were targeting resolving these matters as quickly as possible. At the very least, we have already begun discussions with Third Eye to try and postpone the term loan deferred fee payment on the 4th of January, 2022 and to continue working with them to find the resolution that fits everybody's needs.

It seems we cannot escape any sort of a company update in the last two years or so without discussing COVID. While we have not experienced any significant production setbacks due to the pandemic, it has had quite an impact on us by essentially derailing the company’s basic business plan. That plan was to build the Goldboro LNG project, fully integrate it into the natural gas markets in Western Canada, and finance that whole process by having our long term natural gas sales agreement with German energy company Uniper. 

Almost all of that business plan has now been sidelined. 

COVID helped lead to the demise of the LNG Project as the cost structure just got out of hand where price inflation put the project on its heels to a point where building it was going to be very speculative, very expensive, and maybe it would end up being a white elephant. And that's what some are saying about LNG Canada’s initiative right now - these big LNG projects, perhaps, their time in the sun has come to an end. 

That said, many European countries need natural gas but do not want to be seen as supporting multi-stage fracking. And so, Pieridae’s Foothills assets checked a lot of really good boxes as they produce conventional natural gas. But unfortunately, without the access to an LNG terminal, we can't access those markets that are willing to pay a premium for conventional gas. 

LNG facilities aside, we do still need to resolve the issue of the transfer of licenses from Shell to Pieridae for the Foothills assets we purchased in the fall of 2019. Recently, there's been a major development where the Alberta Energy Regulator or AER has put out new guidelines for companies when transferring assets. Those guidelines are significantly more stringent than what existed when we originally did the transaction with Shell. I think that had these new restrictions been in place or conditions for transfer, it's unlikely that Shell would've sold us the assets, and it's unlikely Pieridae would've accepted them. So, this becomes a difficult scenario that we're going to have to deal with. In speaking with Shell, we've been trying to come up with what makes the most sense. 

One of the positive things that has come out of the last two years is that we have worked really closely with Shell to make sure the assets are maintained properly.

The Pieridae team has done a superb job of this with the employees of all three gas processing facilities doing most of the heavy lifting to make sure these assets have been well maintained. When we look at the inspections that have occurred over the last two years, the majority of the time when we have been given a thumbs down on inspections, it has been because of work that was not completed before we took over these assets. And in places where we have been inspected, where we have done all the work that Pieridae was supposed to do, we always pass. Yvonne McLeod and her team have done a really great job of making sure the assets are maintained in a spectacular manner.

When you look at our workers compensation claims history, it has been so minimal that our cost of WCB for the upcoming year is going to be almost 50% lower than industry average, all due to the hard work that's being done on the health and safety side to make sure we prove to the regulator we can operate these assets well. So, if we are able to divide these assets up into two separate groups, I feel we will be able to make a transfer work.

There is probably no clear path in how to deal with Waterton and Jumping Pound. Pieridae's balance sheet will never be big enough to deal with the reclamation work that has to occur at those two sites. We knew that going into the sale process. And that is why Shell proposed a solution and we accepted, because they were going to continue to wear that liability. 

The important thing for everyone to remember is that Pieridae continues to own these assets. That has not changed. And ultimately, Shell has to find a solution that works for them.

These assets have performed well for us. Our first quarter 2021 results recorded Pieridae's highest ever quarterly natural gas production and we maintained solid production throughout 2021. 

Another big win is that we are likely going to end the year with a production decline rate of less than five per cent. A lot of that has to do with the fact we have been able to do small deals that brought in new production for a low cost. When you look at unconventional players, decline rates are 30-40 per cent annually and so they have to spend $200-$300 million dollars every year just to stay flat. At a cost of less than $10 million, we managed to keep our production within a two per cent decline rate – a very large accomplishment for our geology and engineering teams. They all should be proud of that outcome.

Where low decline rates were a highlight, hedging has been a challenge. Most of our hedges did fall off before winter but due to requirements from our lender, we are still significantly hedged for next summer. Prices remain volatile but much higher than the last few years. We were looking to see how much revenue we could collect in the first quarter of next year to get us off to a really good start. Commodity prices have moved a lot and continue to do so. They always have and always will. 

As we go through this process of refinancing the business, one of the things that we're looking at is removing volumetric hedging and embracing a revenue protection model of hedging. That should have a bigger impact on our ability to understand the marketplace. 

One should remember hedging isn't a bad thing, it's just often very expensive because you've got to have credit to do it, you've got to ensure volumes are going to be made available when they are needed. It’s a very delicate game you have to play when it comes to understanding the impact hedges have on your overall business. And they do play a role in protecting revenue. And I think that's the lesson out of the last six months - it's very difficult to hedge in a rising market, but you need to do hedging. You need to be prepared to hedge in a falling market. And that's really what we're trying to do right now, is find a much lower cost way of protecting revenue rather than the hedging program that we had in 2020 and 2021.

Just to put it in context, if you look at what happened in 2020, when natural gas and crude oil prices collapsed significantly, more so than they'd ever had in the history before. Pieridae was hedged going into that and those hedges were well in the money. One of the reasons why we survived part of 2020 was the fact that we took advantage of our hedge position and it allowed us to take some money off the table, which helped us pay bills and helped keep us going. So, hedging is a bit of a double edged sword, but it can be used effectively to manage budgetary risk and that's really the way we're going to look at it in the future.

I mentioned LNG earlier in this piece and it is unfortunate we were not able to reach a final investment decision for our Goldboro LNG Project last summer. I do think that, ultimately, Canada has to have more than one customer. And the Americans aren't there to do us any favours. The fact we had a significant amount of support from German energy company Uniper to bring Canadian gas into the German marketplace reinforces the disappointment that we couldn't close the deal. These LNG projects are marathons and like any marathon, the most disappointing result is to fail at the very end of that long race. Having run a few of them myself, there's nothing worse than feeling you're not going to finish and that's somewhat what happened here. We were so close to the finish line, so close to realizing a new marketplace for Western Canadian gas, that for it to all fall apart in the last three or four weeks of May, early June, certainly was disappointing.

As we said last summer in our Q2 earnings news release, Pieridae is analyzing the potential for a floating LNG option. What we are looking at is a much smaller project than Goldboro LNG. Any initiative must work with our current production and we would need to get the gas to market sooner than later. The third criteria is that we absolutely need to have a partner, and we're not going to take all of the risk on our balance sheet. We tried that already. Ultimately, this approach put too much financial strain on the company and we will not repeat this under any circumstances. 

Natural gas continues to be viewed as a bridge fuel as the world continues a methodical, even-paced transition to lower carbon fuels. This path and a greater focus on diversity and equity in the workplace have propelled ESG, or Environmental, Social and Governance, into the spotlight in recent years. Pieridae recognized this and we were proud to release our inaugural ESG Report in 2021. 

We are on our way to being able to achieve carbon neutrality by 2050. A lot of that is centered around carbon sequestration and methane emissions reduction. We need to show the marketplace Pieridae is serious about meeting this goal, and, in fact, the marketplace itself is going to continue to demand it. That said, it is going to be challenging to meet some of the requirements government has put in the path of the industry.

Our Caroline Carbon Capture Blue Power Project announced earlier in 2021 provides a long term solution to meeting those requirements. It is quite an innovative plan where we combine large-scale carbon storage underground while producing clean power to both operate our Caroline Gas Plant and then sell the remaining clean electricity to the Alberta grid. This strategy of carbon neutrality can become a significant part of the company's forward business plan.

Emissions aside, we do know that filling up Caroline and our other two plants with natural gas is key to the long term financial success of Pieridae. We are hopeful to begin a drilling program in 2022 that would begin to do just that. The plan is focused on drilling our assets near the Caroline facility first. We have a lot of the approvals in place and less consultation needs to be done there.

Pieridae also continues to look at what kind of relationship we could build with our First Nations neighbours on the Stoney Nakoda reserve lands. They contain the largest untouched conventional resources so bringing that gas supply to our Jumping Pound facility is important and we hope to begin planning that process next year, with drilling happening in 2023. It's a way for us to work with our First Nations partners and allow them access into the gas plant and the benefits that come with it.

With our current business plan, we know that our liquidity challenge and paying all of our vendors continues to be an issue. Our number one priority is to continue to work on clearing up the stale-dated payables over time. By the end of 2021, we're going to be in a very good position to have removed a significant portion of late payments. 

Derek Frechette has done an excellent job of weeding out those suppliers where Pieridae just wasn't the right fit for them. Today, we have probably over 500 vendors. We want to get that list down to under 200 over time. 

As I look ahead to next year, energy continues to be an important part of the Canadian story. You look at our export numbers in the last few months of 2021, it's all been driven by energy and it continues to be a big part of our ability to finance Canadian social programs. Now that Enbridge’s Line 3 is back in service and Trans Mountain is coming towards the end of it's a construction phase, that's going to be a significant amount of pipeline capacity available to move crude oil, which will continue to bring funding into the Western Canadian Sedimentary Basin. I feel liquids and liquids prices are going to remain stable and where Canada is a significant player exporting product into the United States. On the natural gas side, the growing demand for gas south of the border to feed their LNG business is key as the US grows to potentially becoming the largest supplier of LNG to the world.

We may not participate on the LNG side directly, but indirectly we will. The biggest new source of natural gas the US has right now is to begin looking at taking more from Canada. So that bodes well for the price here. I don't think we're going to see prices going back to where they put us in financial jeopardy. We are a high cost producer and need prices above $2 to make any money. Given the current environment in North America for natural gas, we see a much strengthened marketplace, less requirements on our balance sheet, and if we can get our restructuring done, the company is in a position to grow next year.

With the challenges of 2021, not the least of which was another year under the weight of the pandemic, my hope is we are able to embrace 2022 and the promise it will hopefully bring. 

Spend some time with family, with friends and loved ones over Christmas and the holidays and celebrate what you treasure most.

I’ll close by stealing some wisdom from Canadian actor and Parkinson survivor Michael J Fox:

‘Gratitude makes optimism sustainable…” 

Alfred Sorensen
Pieridae Chief Executive Officer

Keeping Carbon in the Ground & Producing Clean Power for Albertans - Pieridae’s Unique Carbon Capture & Clean Power Project Pushes Forward

Experts feel we won’t achieve net zero GHG emissions by 2050 unless we use technologies such as Carbon Sequestration, Utilization and Storage (CCUS) on a large-scale. CCS is the process of capturing carbon dioxide (CO₂) formed during power generation and industrial processes and storing it so that it is not emitted into the atmosphere.

At Pieridae, we are doing our part by advancing the Caroline Carbon Capture Power Complex. This large-scale CCS and blue power production complex will be located at our Caroline Gas Plant in Alberta.

The Complex will capture and store underground up to three million tonnes of CO₂ annually produced by the gas processing facility, power production at site and third parties. Every year, that’s the equivalent of taking more than 650,000 cars off the road, or eliminating 4.4 billion kilowatt-hours of coal-fired power, enough electricity to power more than 610,000 homes annually.

The underground depleted gas reservoir that will store the carbon has enough capacity to sequester up to 100 million tonnes of CO₂ over three-plus decades.

This initiative positions Pieridae to play a key role in helping to lower overall Canadian greenhouse gas emissions. By capturing and storing carbon on such a large scale, we move further down the strategic path of ensuring our company is net carbon negative.

Business Development Engineer and former Project Lead Hesanka Garusinghe did a lot of the heavy lifting for the project before leaving the company recently. He says what sets Pieridae apart with its CCS project is that the company will reuse and repurpose existing infrastructure at Caroline. But what a lot of people don't know is this project was originally proposed by Shell, where Hesanka used to work.

“It was close to five years ago when Shell started looking at how could they make the Caroline Gas Complex fit for the future and deal with emissions regulations,” says Hesanka. “So, they analyzed potential options, including CCS, but at that time, there wasn't enough government policy certainty to pursue that option. But they did do a lot of detailed work on a similar project and had progressed it quite far to where half of the work needed was completed.” 

Hesanka says Pieridae’s initiative is an exciting opportunity and he was grateful to lead it in the development stage. 

“We're trying to build up to a gigawatt of power generation, clean power generation, and then up to three million tons of CO₂ stored underground. The project includes a combined cycle, gas fired power generation unit, where its emissions are captured and the resulting clean power is both used at site and also sold to the Alberta grid. You are also capturing the CO₂ produced from the gas processing facilities. So, we're going to start with phase one which is a smaller, 100 megawatt unit power generation unit.”

Hesanka reminds us most Albertans get their power from coal fired plants. Once those plants are retired, which the provincial government is commitment to doing by 2023, or even once the coal plants are decommissioned, the majority of the province’s power will still come from older natural gas-fired facilities that do not have a CCS component. So, he adds, the entire Alberta grid is essentially not as efficient or cleaner than the power component of Pieridae’s initiative - your output is both clean power and green natural gas and liquids coming out of the plant.

With the Canadian Government committing at the 2021 COP26 meeting in Glasgow, Scotland to stronger emissions restrictions for the country’s oil and gas sector, your ability to limit or eliminate emissions across the value chain becomes paramount. Canada’s energy industry has big plans for carbon capture and storage to help meet whatever targets come its way but as Calgary Herald energy journalist Chris Varcoe asked in one of his columns: will producing oil with carbon capture technology allow for continued, or even additional, production as Canada moves toward a net-zero target by 2050?

That is a key question, and one Varcoe asked Canada’s new Environment and Climate Change Minister and self-proclaimed activist Steven Guilbeault when he was in Calgary meeting with leaders of local oil and gas companies. His response: “In theory, if it’s carbon-free oil, it could. But will the demand be there in the same way it is now, I think is a fair question to be asking. “My issue has always been with pollution. But I’m part of a government that has been very clear on this: We’re not going after production; we are going after the emissions.”

Pieridae will do just that – focus on analyzing what it can do with its emissions.

Hesanka Garusinghe has done his CCS research, analyzing other projects such as the Alberta Carbon Trunk Line, Saskatchewan’s Boundary Dam CC Project, and Shell’s Quest initiative. All have provided helpful insight and data through the Alberta and Canadian Governments used to progress Pieridae’s venture.

“You're able to calibrate some of your cost side and some of the concepts on the capture side, transportation and storage to be able to create a more credible project. That's where, for example, Shell’s Quest project gave some indications on dollar per time, and then you were able to compare and calibrate to make sure you're within similar numbers so it all makes sense. And then the Boundary Dam project in Saskatchewan, where it was using some of the same capture chemicals we would use, which gives a good performance analysis of an actual operational project,” explains Hesanka.

He adds the next important step is an updated feasibility study to gain a good understanding of project costs and how to best achieve the CO₂ capture and sequestration that you want to do. The good news here is that money to complete this study is part of Pieridae’s 2022 budget.

Hesanka continues to cheer on the Caroline Carbon Power Complex initiative and the opportunities it would provide.

“There is the opportunity to produce a gigawatt of clean power where most of it could be added back to the Alberta's grid and clean that up,” says Hesanka. “I know the Alberta Government is looking at potentially 2035 to have a clean electricity grid, right? So, I think that would definitely help in the short term to get there faster and as a reliable base load source of power to support renewables.

“Pieridae already has a great transmission and distribution infrastructure at the Caroline plant that would be advantageous to upgrade rather than looking at other sites where you'd have to do a lot of upgrades. And our project location itself is very central to Alberta. So, that's where, we could help other industrial facilities and other power generation facilities sequester their CO₂. That gives a lot of capacity to build that grid or a hub that can help others be able to lower their emissions and become clean operations as well.”

Here are some links to facts and analysis of Carbon Capture Utilization and Storage:

Remembrance Day 2021 - Pieridae Team Members' Stories of Service

Remembrance day is a time for us to reflect on the sacrifices that countless men and women made to protect the freedoms we take for granted. Many people in our country have a connection to someone in the military whether they had family, friends, or themselves who have served or are current members of the Armed Forces.

For the people of Pieridae, it's no different. Many of our employees either served themselves or had family who fought to make sure this land we call home is free. We want to share some of those stories, stories of those who served in the Royal Canadian Navy, have long standing military history in their families, and some even served for nations across the globe. They come from different walks of life, but to share this common connection a desire to preserve and maintain our freedom.

Remembrance day is a time for us to reflect on the sacrifices that countless men and women made to protect the freedoms we take for granted. Many people in our country have a connection to someone in the military whether they had family, friends, or themselves who have served or are current members of the Armed Forces.

For the people of Pieridae, it's no different. Many of our employees either served themselves or had family who fought to make sure this land we call home is free. We want to share some of those stories, stories of those who served in the Royal Canadian Navy, have long standing military history in their families, and some even served for nations across the globe. They come from different walks of life, but to share this common connection a desire to preserve and maintain our freedom.

Follow the link at the bottom of the page to read their stories.