Vol. 25, No.48 Week of November 29, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Upstream uptick

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Canadian drillers forecast gain of 475 wells in 2021, would be 2nd worst total

Gary Park

for Petroleum News

Surviving is the operative word in Western Canada’s upstream sector these days. Forget thriving.

In its annual forecast for the upcoming year the Canadian Association of Oilwell Drilling Contractors was only able to assemble a shred of hope, forecasting 3,771 wells in 2021, an increase of 475 wells from this year’s expected count generating an additional 2,300 jobs.

That will make 2020 and 2021 the two worst years on record in the 73 years since Canada’s breakthrough to commercial production in central Alberta.

In 2014 when commodity prices started their sickening plunge the well total was 13,089. Over the past six years there has been only one short-lived stab at recovery in 2018 when the industry posted 7,428 completions.

Even the modest target for 2021 accompanied by hopes of a COVID-19 vaccine carries the risk of a red flag if the second wave of the virus exceeds current expectations.

CAODC President Mark Scholz candidly observed that the anticipated well increase next year represents only a “fragile recovery” that is the equivalent of grades for a school student struggling from F to D-minus.

Grasping at straws

Those grasping at straws did draw some added hope from a Conference Board of Canada projection that Alberta’s economy will grow by 6% in 2021 after posting a decline this year of 7.7%, the worst contraction among Canada’s 10 provinces.

Pedro Antunes, the board’s chief economist, said the recession this year was “not as deep as originally feared, with the third quarter recovery exceeding initial expectations.”

“The rebound will be pretty good. In fact, Alberta will lead the nation in terms of growth next year, but that’s off a very low base,” he said, warning that the outlook is “very precarious” for Canada’s energy stronghold because of the surge in COVID-19 cases.

However, the initial signs are encouraging for the peak winter drilling season, with CAODC estimating 110 drilling rigs are active in Western Canada, compared with a dismal 17 rigs in June, a number not seen since long before the 1947 discovery.

Scholz said the Canadian industry is also pinning its hopes that OPEC and its allies will continue on their disciplined path and keep their oil supply in balance with demand.

Duncan Au, chief executive officer of CWC Energy Services, which operates drilling and service rigs in Canada and the United States, said he is counting on a more robust industry in the latter half of 2021, adding “we are slowly, gradually climbing” out of its current hole.

Nu-Vista Energy has set a capital budget for 2021 of C$180 million to C$200 million so long as benchmark U.S. crude prices average about US$45 a barrel, but anything below US$40 will force it to drop spending below C$140 million.

COVID cases on rise

What hasn’t helped the outlook is word that COVID-19 cases are on the rise in Alberta’s oil sands, where outbreaks have occurred at six work sites, with leading operators - Canadian Natural Resources, Imperial Oil, Syncrude Canada and Suncor Energy - reporting about 258 cases.

A spokesman for Syncrude said there is a strong likelihood that his company’s positive cases were contracted in the nearby community and not at the workplace.

Scholz told CAODC members at a virtual event that a strategic review will soon disclose the evolution of efforts to reduce greenhouse gas emissions in the drilling sector.

“We know we must adapt, we know we have to change to a new reality, and our association is responding accordingly,” he said.

At the same time, Scholz said Canadian oil and gas will be require “for decades to come.”

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