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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2009

vol. 14, No. 34 Week of August 23, 2009

MAPLE LEAFS: Upstream headed for tough times

Canada’s upstream oil and gas sector is headed in one clear direction – down.

Government land sales, well completions and new well permits are posting significant declines.

For the first half of August, land sales fell off a cliff, with no indication that bottom is in sight.

The Alberta government auction fetched C$22.9 million, its best performance from bimonthly sales this year – small comfort considering that a year ago the industry spent C$43.1 million on exploration rights, which itself was one of the early pointers to an alarming trend.

To date this year, Alberta has collected C$151.2 million, compared with C$744.6 million over the same period of 2008.

It is a similar story in British Columbia, Saskatchewan and Manitoba, where successful bids this year have totaled C$377.5 million – a staggering drop from C$2.93 billion a year earlier.

British Columbia, which set a red-hot pace last year, has a year-to-date return of C$321.8 million from its auctions. In contrast, its August sale alone in 2008 pumped C$501.8 million into government coffers.

Saskatchewan’s August auction attracted C$14.8 million, compared with C$242.7 million in August 2008.

The province’s Energy Minister Bill Boyd tried to paint the most cheerful picture.

He said the industry “continues to show a steady, sustained interest in our oil patch,” despite a year of lower, but recovering oil prices.

“While land sale activity is admittedly not at the exceptional, record-breaking level of 2008, this latest sale provides a fine example of the strength and diversity of our oil and gas resources,” he said.

Boyd noted that the Bakken oil formation received the strongest bidding, while three other oil producing areas “generated excellent bonus bids.”

Manitoba has fetched C$4.9 million from three sales, only slightly more than a year ago, but its average per-acre prices have dropped by 53 percent.

The number of new well permits issued by regulators across Canada tumbled to 696 in July, the lowest count for the month in 17 years and off 1,184 licenses from July 2008.

The total for the first seven months of 2009 was just short of 6,000, less than half the January-July count of 12,606 last year. The record year of 2006 topped the 17,000 mark.

The only positive in July was the highest monthly permit total for oil-targeted drilling, including 189 in Alberta, 122 in Saskatchewan and 42 in Manitoba.

But the oil permits outpaced the 320 licenses awarded for gas wells, a rare event in the gas-prone Western Canada Sedimentary Basin.

To the end of July, operators obtained 2,815 gas permits, off 55% from last year and only 25 percent of the activity levels in the 2004-2008 period.

Alberta approved 4,444 licenses in the first seven months, off 4,514; Saskatchewan 980, off 1,843; and British Columbia 357, off 204.

Well completions reported to industry and government agencies totaled 478 in July, raising the year-to-date tally to 6,425 wells, off 31 percent, with only 20.4 percent classified as exploratory. Alberta and Saskatchewan had their poorest showings in a decade.

—Gary Park






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