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Texas billionaire brothers bet big on Canadian fracking

Pumpjacks at work on a well pad outside of Fox Creek, Alberta on Thursday, July 2, 2015.

Amber Bracken/The Globe and Mail

Texas billionaire brothers known for success in the fracking business and for funding U.S. conservative causes are betting on the Canadian oil-field-service industry returning to better times.

Wilks Brothers LLC, owned by Farris and Dan Wilks, has increased its stake in Calfrac Well Services Ltd., the Calgary-based hydraulic fracturing, or pressure-pumping, company that has seen its share price climb by a third since the start of July.

This week, the Wilks firm revealed it acquired another 754,300 shares, pushing the its total interest to 19.8 million shares, or almost 14.5 per cent. The purchase followed one in July. The position makes it Calfrac's second-largest shareholder after Matco Investments Ltd., led by Calgary businessman Ron Mathison, one of Calfrac's founders.

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Wilks Brothers already had a holding in Canadian pressure pumping through a stake in Calfrac's rival, Trican Well Service Ltd. Early this year, it reduced its position, but it remains a large investor.

The interests have raised some eyebrows in Canada's oil patch, as some wonder if the firm could push for major strategic changes. However, analysts, including Jon Morrison of Canadian Imperial Bank of Commerce, say they believe the brothers are taking advantage of a down market in hopes of selling when it recovers.

The energy sector as a whole, and oil-field services in particular, is still grappling with oil-price uncertainty. Pressure pumping is seen as a bright spot as producers target high-return shale plays. Fracking companies have been steadily demanding more lucrative contracts.

"It's definitely a tight market," said Ben Owens, an Austin, Tex.-based analyst for Royal Bank of Canada.

The United States has more than 60 active pressure-pumping firms, but Canada has only six main competitors, he said. Calfrac and Trican make up more than half the available capacity, and analysts see prices for services improving.

Mr. Owens said there's no reason to believe that the investment in Calfrac is anything but passive. At the same time, he added, "we definitely have a positive view on Canadian pressure pumping, and I think this particular investor probably does as well."

The Wilks investment firm sold down its interest in Trican two months before the company announced a $637-million acquisition of rival Canyon Services Group Inc. in March. Trican's shares have fallen more than 30 per cent this year.

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The Texas brothers, who began as bricklayers, started Frac Tech Services in 2002 and sold their interest in the successful business in 2011 to a consortium led by Singapore's sovereign-wealth fund for $3.5 billion (U.S.). Asked what their firm aims to do with its investments in Canada, a spokesman said it doesn't comment on its investment strategy.

Farris and Dan Wilks are known as much for their support of socially conservative causes as their business dealings, most of which capitalize in some way on the hydraulic-fracturing technology that has revolutionized oil and gas production for more than a decade.

According to Bloomberg data, Wilks Brothers LLC investments also include interests in Approach Resources Inc., a producer focused on the Permian shale oil play in West Texas; Carbo Ceramics Inc., which counts fracking technology among its industrial businesses; Twin Disc Inc., a manufacturer of power transmissions; and Oklahoma shale explorer and producer Gastar Exploration Inc.

A 2015 Reuters profile of the Wilks brothers described their conservative political causes, which included pushing the U.S. Congress to end financial support for Planned Parenthood, the women's health organization that offers abortions and other medical services, and supporting a legal non-profit that assisted a Kentucky county clerk who had been jailed for refusing to issue marriage licences to gay couples.

At the time, they were among the largest donors to the presidential campaign of Texas Republican Senator Ted Cruz. The Wilkses donated $15-million (U.S.) to the super PAC backing Mr. Cruz's unsuccessful 2016 White House bid.

They are also generous philanthropists in their small central Texas home base of Cisco, population about 3,800, according to the profile.

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About the Authors

Jeffrey Jones is a veteran journalist specializing in energy, finance and environment for The Globe and Mail’s Report on Business, based in Calgary. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general  topics. More

Alberta reporter



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