Cold, harsh truth in numbers

It was Benjamin Disraeli, a British prime minister in the 19th century, who was credited with uttering the line: “There are three kinds of lies: lies, damned lies and statistics” and it was Mark Twain who popularized the saying in America.

But these days, in the upstream sector of Canada’s petroleum industry, the statistics are every bit as grim as the truth.

With the midpoint of 2009 drawing close, the harsh reality of the global recession and the impact of Alberta’s royalty changes are beyond dispute.

Government land sales across Western Canada have fallen off a precipice; well completions and permits paint a gloomy picture of drilling activity now and over the rest of the year; there is not enough confidence in the outlook for natural gas prices to cause any hope of an early rebound; and capital spending is in a deep swoon.

The land sales numbers tell the story of industry confidence in a couple of lines: Alberta has tumbled to C$80.13 million from the disposal of 1.57 million acres from C$353 million and 2.46 million acres over the same period last year, which, in itself, was a pretty dismal showing.

British Columbia, the only province to remain within reaching distance of last year’s drilling performance, has seen its land sales returns nosedive to C$68 million for 247,000 acres from last year’s C$759 million for 534,000 acres and Saskatchewan’s second sale of 2009 fetched C$11.68 million from 84,397 acres, compared with the April 2008 auction that raised C$266 million on 240,882 acres.

Completions off 42 percent

Alberta drilled 2,301 wells in the four-month period, a drop of 43 percent from a year earlier; Saskatchewan experienced a 52 percent plunge to 403 wells; and British Columbia posted a 15 percent decline to 334 wells.

The balance of wells were drilled in northern Canada, Manitoba and Atlantic Canada.

The industry’s mood was clearly captured in the number of new well approvals by regulators, which reached 3,883 wells in the first four months, a drop of 50 percent in a year, with the April count taking a 57 percent dive to 911.

And no sector was spared the pain, with oil-targeted licenses slumping to 1,081 from 2,111 and gas recording a 51 percent decline to 1,790.

Of the 93 Canadian producers who have released their 2009 capital budgets, spending is heading for a dramatic fall to C$35.3 billion in field activities, off C$20 billion from 2008, with oil sands projects sliding to C$12 billion from C$20 billion last year.

Combined capital and operating expenditures in the oil sands are now estimated by the Oil Sands Developers group at just under C$25 billion, less than half the original forecasts and, despite signs of some recovery, are predicted to fall short of C$30 billion in 2010, C$20 billion under the initial forecast.

—Gary Park