A diamond in the oil patch.

Although the typical oil and gas story in Saskatchewan seems to invariably involve an Alberta company expanding into the province, Diamond Energy Services Inc. (DES) is demonstrating that the reverse can be true as well.

The Swift Current-based company specializes in oil and natural gas well servicing and has increased its operations in Saskatchewan and expanded into Alberta.

On the oil side of its operations, the Diamond Sage Well Services division operates 16 service rigs: 13 out of Swift Current and three out of Red Deer, Alberta, where it has a new office and shop facility.

"That side of the business is primarily focused on servicing oil wells," explains Mick MacBean, CEO of DES. Once an oil well has been drilled, MacBean says DES is responsible for the majority of the work that follows--from repairs and maintenance to re-completion work done over the lifetime of the well. Diamond coiled tubing is another division in the company. It operates four coiled tubing units, which work primarily on natural gas wells. "The head of this division is in Medicine Hat, Alberta, but we operate an equal amount of equipment in both Medicine Hat and Swift Current," says MacBean. "We are currently building a fifth unit in Swift Current in one of our shop facilities."

Diamond Energy Services was formed in 1996. MacBean and Butch Gering, company president, started with one service rig from the purchase of a company out of Brooks, Alberta. The pair moved the company to their hometown of Swift Current that same year.

"We had good contacts in the local oil business and saw the opportunity to get one service rig going in the Swift Current area," remembers MacBean. "Over the next six years, we built our service rig division lip to five rigs and started the coiled tubing division in 2000. By 2002 we had three units working in the coiled tubing division."

In September 2002, the company made a strategic move by purchasing Sage Well Services, which had been its major competitor in the Swift Current area. That acquisition increased the number of rigs in its service division to 16.

"I had a close relationship with the owner, who was the former mayor of Swift Current, Len Stein," says MacBean. "Ever since coming back to Swift Current, I had been talking to him regularly, trying to convince him that if he was to retire and sell the business, he should sell it to a Saskatchewan boy. It was either that or sell to an Alberta company. We offered him a good price, and since he wanted to keep the business in Saskatchewan, the price was accepted."

There was a collective sigh of relief in Swift Current when a Saskatchewan company purchased Sage Well Services, says MacBean. "An Alberta business might have considered moving a lot of the equipment out of the province.

Now, the head office will stay here, as will a majority of the employees and the profits."

MacBean says that Sage Well Services' inventory totalled 11 rigs, but only half of the fleet was working in the field. Since the acquisition, DES has utilized much of Sage's equipment, thanks in part to its expansion into Red Deer and continued expansion of its Swift Current operations.

One of the major factors in the decision to purchase Sage Well Services was simply the benefit of economies of scale. "As you get larger, it brings your overhead costs down per unit," says MacBean. "You have the same amount of overhead operating more equipment. This helps you become more competitive." Expanding the company has also allowed DES to operate its own manufacturing facility for construction, maintenance and repairs of its equipment.

Purchasing Sage Well Services was a good fit in the company's efforts to expand and diversify. "In the beginning, we had a great core of business in Swift Current but we didn't have much geographical or commodity diversity," explains MacBean. "We were primarily working on oil wells in one geographical area. So when we started to grow the business we thought it would be prudent to have shop facilities in Medicine Hat and Red Deer, because it gave us geographical diversity. Then when we expanded into coiled tubing it added another commodity, which is natural gas."

With the addition of Sage Well Services, DES employee numbers have increased from 45 to more than 100. "We've well exceeded our expectations in our first year since the acquisition, primarily because we were able to expand into some new areas and because it's been a bull market for oil and gas," says MacBean. "West Texas oil is consistently over $30/barrel U.S. and the natural gas market is very strong. "We are an aggressive, young Saskatchewan company, and we're going to be around for a while," continues MacBean. "We're distinct in the oil and gas industry in that we're based in Saskatchewan and have expanded into Alberta. Most of the other oil and gas servicing companies do it the other way around base themselves out of Alberta and expand into Saskatchewan."

MacBean expects that there will be a lot of good news coming out of the Swift Current area. "The natural gas discoveries are significant and are going to provide a big benefit to this province. Oil and gas is a bright spot in Saskatchewan right now."