Canadian drillers expect lively spring; operations likely to continue past thaw

Soft natural gas prices and soft ground have yet to slow down Western Canada’s E&P sector, which is strongly ahead of last year’s first quarter pace and heading for a robust spring.

For March, 678 rigs were active, 60 percent ahead of a year earlier, while the rig utilization rate for the quarter was 92 percent, a level last seen in 1997 when the fleet was much smaller.

Well completions for the first three months were up 27 percent from a year earlier, and regulators approved a record 9,296 well permits for the January-March period, eclipsing the 2004 record of 7,411 and easily beating last year’s count of 6,913.

The industry obtained 2,514 permits in March, 19 percent ahead of the same month in 2005.

Surprising for analysts and drilling companies is talk that operations will extend through the spring thaw, when frozen ground turns mushy and governments introduce bans on the movement of heavy equipment between well sites.

To avoid that traditional downturn, drilling contractors are using special transporters to prevent road damage and handle the pent-up demand from junior E&Ps which are in a scramble to complete their winter programs.

Officials with Precision Drilling Trust, Nabors Canada and Akita Drilling said the outlook for spring appears very strong and could be one of the busiest on record.

So far, the contraction of natural gas prices, which dropped to half the record highs in December, has caused only a minor pullback in capital spending, although a prolonged slump in prices could have an impact, drilling company officials said.

—Gary Park