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

Vol. 14, No. 44 Week of November 01, 2009

Rising from Canada’s upstream E&P ashes

2009 drilling heads for 17-year low; regulators see some turnaround in permit applications; CAPP expects modest upturn in spending

Gary Park

For Petroleum News

Amid the wreckage there are a few pieces of hope in Canada’s upstream, mostly pointing to a partial recovery in 2010.

With drilling currently headed for its lowest point in 17 years, regulators have seen a modest turnaround in new well permit applications and the Canadian Association of Petroleum Producers, the industry’s chief lobby organization, expects total oil and gas spending next year will nudge C$40 billion, up 15 percent from 2009.

But the best prognosis CAPP Vice President Greg Stringham will offer for 2010 investment is “cautious optimism of growth.”

And data from the first nine months shows how much the industry needs that shot of hope.

Well completions tallied 5,719, down a jaw-dropping 12,028 from the peak year of 2006 and 6,334 from 2008; government-issued new well licenses tumbled to 7,660 from 16,415 for the same period last year; and drilling contractors have reported a 38 percent drop in the number of operating days to 41,032.

CAPP expects conventional gas spending will rise C$4 billion after taking a C$12 billion setback this year, while the oil sands will increase C$2 billion after falling C$8 billion in 2009.

Number of wells down

In its preliminary forecasts, CAPP is counting on 8,000 wells this year and 9,500 in 2010, while the Canadian Association of Oilwell Drilling Contractors believes 2010 will be only the second year since 1998 that the industry has failed to top 10,000 wells.

However, CAODC President Don Herring believes next year will mark a turning point towards recovery, helped by the fact that operators are drilling a higher percentage of deeper, horizontal wells, which are stretching the average time taken to drill a well.

Drilling contractors reported an average 10.16 days to drill a well in Western Canada in the first nine months of 2009, up 20 percent from 2008 and the most in 17 years.

British Columbia reached a 20-year high of 26.88 days per well, up 29 percent from last year, as operators swung into action with horizontal wells in the Montney and Horn River plays; Saskatchewan wells edged up to 8.08 days from 6.9 days; and Alberta’s average rose to 8.9 days from 8.09 days.

Precision Drilling Trust led Canadian contractors in the first three quarters with 1,607 wells and 7.6 million feet drilled. Its major workload came from Canadian Natural Resources with 338 wells, EnCana 185 wells and Devon Canada 143 wells.

Ensign Drilling totaled 1,462 wells and 5.38 million feet of hole. It drilled 286 wells for EnCana, 244 wells for Canadian Natural and 101 wells for Enerplus Resources Fund.

Savanna Energy Services took third place at 1,142 wells and 3.58 million feet.

EnCana top operator

EnCana held top spot among operators at 1,196 wells (4.85 million feet), followed by Canadian Natural at 579 wells (2.15 million feet), Husky Energy 297 wells (836,389 feet) and Devon 235 wells.

The leading explorers, in order, were EnCana, Talisman Energy, Canadian Natural, ConocoPhillips and Royal Dutch Shell (which has made heavy commitments to tight and shale gas plays).

Although the majors took the knife to their 2009 programs in response to natural gas prices, a handful of companies increased their drilling activity, including StatoilHydro Canada (34 wells), Shelter Bay Energy (41 wells), Progress Energy Resources (34 wells) and Tourmaline Oil (12 wells).

Topping the lists of those securing new conventional oil well permits were Husky (191 wells) and Canadian Natural (185), which also led the bitumen list at 359 permits, followed by Devon at 108 permits. EnCana obtained 716 gas licenses, followed by Enerplus at 171 and ConocoPhillips Canada at 135.






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