Year in review
The Oil & Gas sector is an Industry that has a large impact on the assets of the Onihcikiskowapowin Business Trust; the Trust has a Partnership with Savanna Energy Services Corp. named the Savanna Energy Services Limited Partnership #7 (SESLP7). The activity of the Drilling Rigs has been negatively impacted by the economy. This is important information as the Trust was designed to generate wealth for the community. The major assets of the Trust have sat idle for the past two years which provides a number of challenges.
Firstly, to make money, our Rigs need to go to work, however they are either too far away from drilling opportunities or the day rate for use is too low to generate income to cover operations and maintenance. Secondly, there is a global challenge with the price of oil and the oversupply of oil, there are many discussions on which direction the price will go. Much of the consensus is that it will not rise significantly anytime soon but over the long term. Lastly, the majority share of ownership of Savanna Energy Services Corp. was recently purchased by Total Energy Services Inc. The Trust is waiting to meet with the new management team and we look forward to an ongoing positive relationship.
In December 2016, the SESLP7 sold Rig 615 to Savanna Energy Services Corp. The Rig was due for re-certification and would have needed to be upgraded to meet industry demands. The investment required to upgrade Rig 615 was too high given the forecast. This decision was made as there is many rigs in the market so the timing was not right to go to open auction. Savanna decided to purchase the rig for Salvage.
As mentioned, SESLP7 is a major asset of the Trust Fund. Historically SESLP7 has provided substantial revenues, however due to the current economic climate there have been no revenues from this partnership over the last two years. The industry for drilling has improved to a small degree, but many professional opinions are cautious at estimating the short term growth for the Energy Sector. So again the price of Oil to recover as our Drilling rigs need to provide positive returns. For 2016 year end the revenue to the Trust to record is a $-923K which is primarily depreciation (non-cash item) of the assets. In 2015 the adjustment to depreciation was more signifcant and provided a larger account loss of -$3.1million.
The additional source of Revenue comes from the SLCN/NCSG Crane and Heavy Haul partnership, this partnership is based on a marketing agreement. 2016 was productive year for the partnership that amounted to $218K which lower than the 2015 year $277K. The decline is also related to the wrap up of many major projects in the Oil & Gas Industry.
Investments held by CIBC Wood Gundy, the Investment Fund and Long Term Growth Fund had caparable returns to the market indexes (S&P500, etc.), both funds made over 6% return which was similar to the average of all the benchmarks combined. Investment income totalled $45k.
Overall, the Onihcikiskowapowin Business Trust is reporting a loss of $-788K. what does this mean? The Trust makes distributions to the community based on Net Income, 10%-20% of the Net Income goes to the SLCN.
Unfortunately, with no positive income the Trust is unable to make a distribution to the SLCN. The Trustees are diligently looking for investment opportunities that will meet the long-term objectives of the Trust and provide sustainable income.
Fall 2016, the Trust hosted a community update. This update was followed by Disney’s Find Dory. The crowd was estimated to be 250 members, great job SLCN! As we move forward, education on our Trust Fund is going to be necessary so that together we can meet the objectives of a creating a self-sufficient community while being transparent and accountable to our membership. I look forward to seeing all again at our next community gathering!