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Canada’s drillers raise bar
Canada’s upstream sector is entering a recovery phase, with the Canadian Association of Oilwell Drilling Contractors boosting its well completion target for 2008 by 29 percent as drilling activity moves ahead of last year’s pace and new well permits gather strength.
In a revised forecast, CAODC estimates 18,000 wells will be completed this year, 4,000 more than its original projection.
It said activity in the unconventional oil and gas resource plays of British Columbia and Saskatchewan are driving the recovery.
A month ago, the Petroleum Services Association of Canada revised its 2008 forecast to 16,500 wells, up 14 percent from its initial prediction, but still 11 percent behind last year’s final count.
CAODC Chairman Don Herring said his organization’s new numbers will keep an average of 372 rigs or 40 percent of the fleet active through 2008.
Given the outlook for commodity prices he said that is significantly less than it should be.
However, he said plans by several producers to hike spending as they become more confident in oil and gas prices are pointing to a stronger second half than what was anticipated entering 2008.
Completions trail 2007 Industry and government figures show 6,562 well completions in the first four months, trailing 2007 by 13 percent and the lowest point in five years, but total footage drilled dropped only 2 percent.
Exploratory wells totaled 6.69 million feet, off 19 percent from last year, while development wells tallied 17 million feet, down just 2 percent.
Evidence that the drilling sector is pulling out of its prolonged slump was reflected in April numbers, when industry drilled 1.5 million feet, slightly ahead of April 2007, with the number of well spuds rising to 196 from 178.
Improvements in oil completions in Alberta and Saskatchewan lifted April well completions to 1,584, up 8 percent from the same month last year. Saskatchewan rose to 110 oil completions from 36 and Alberta increased to 309 from 268.
For the January-April period, 328 oil discoveries were reported, 10 ahead of 2007, but gas discoveries slumped to 707 from 1,208 a year ago and a record 1,622 in 2006.
Permits issued by regulators for the four months totaled 7,865, 2.2 percent behind a year earlier, but the gap had narrowed by mid-May to 1.5 percent.
Oil-targeted licenses in Western Canada tallied 2,111 at the end of April, just 71 short of the comparable 2007 count and gas-hunting permits were 3,676, down 92 from last year.
For April alone, regulators granted 911 new licenses, 83 more than the same month last year.
Alberta behind 2005 pace Alberta is trailing far behind its record pace in 2005, issuing 2,421 gas well permits, compared with 5,048, but coalbed methane approvals recovered some lost ground over the past year at 500, compared with 423 in the first four months of 2007.
Saskatchewan’s new popularity is reflected in its license count of 1,494, 18 percent more than last year.
In its annual analysis of finding, development and acquisition costs, Calgary-based investment dealer FirstEnergy Capital said the rising demand for oilfield equipment and services could see those numbers increase 5 percent to 10 percent this year to C$20-$22 per barrel of oil equivalent, excluding the oil sands.
Andrew Boland, research head at Peters & Co., said he expects FD&A costs to be flat this year given a slight decline in first-quarter spending when the 40 percent of Canada’s FD&A costs are usually incurred.
He said acquisitions costs may rise, but not enough to cancel out spending caution in the January-March period.
—Gary Park
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