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Drilling, service sector reaching new highs Canadian fleet tops 1,000 service rigs, 743 drilling rigs active; service firm capital on track to beat C$2.24B spent in 2004 Gary Park Petroleum News Canadian Correspondent
The energy services industry seems on the verge of reaping handsome rewards from the upstream boom.
In response to soaring activity that shows no signs of easing in the foreseeable future, the Canadian fleet is on an expansion path, topping 1,000 service rigs in July and 743 drilling rigs, up 155 in the past five years.
Capital spending by the publicly traded service firms climbed to C$2.24 billion in 2004, C$700 million ahead of 2003, and is on track for a new benchmark this year, reaching C$427 million in the first quarter.
Precision Drilling, the largest contractor, is counting on the nation-wide fleet increasing by another 60 drilling rigs over the balance of 2005.
Trinidad Energy Services Income Trust, Canada’s No. 4 driller, said it May it is building 16 new rigs at a cost of C$172 million, 10 of which are supported by five-year take-or-pay contracts from two leading North American producers.
Trinidad Chief Executive Officer Michael Heier said the industry fundamentals are the strongest in history, prompting his own company to make 25 corporate takeovers in the past two years. Reserve quality establishment creates wireline rig need Among the brightest prospects is the need by oil sands producers to establish the quality of their bitumen reserves, which has stepped up demand for truck-mounted wireline rigs which can remove high-density core samples.
Deep drilling is also hot because of rig utilization rates and high margins.
As it moves into the United States, Trinidad has negotiated three-year contracts for six new rigs rated for depths of close to 20,000 feet.
Nabors Industries has given its own vote of confidence to Canada, including 25 new rigs in its accelerated capital spending plans of more than US$1.5 billion this year.
“The outlook for our business has never been stronger, with rig demand showing no signs of abating in both North America and internationally,” said Nabors Chairman and Chief Executive Officer Gene Isenberg on July 28.
Spil Kousinioris, vice president of oilfield services for investment banker Ernst & Young Orenda, noted last spring that publicly-traded firms were priced at multiples ranging from seven to 12 times cash flow, compared with only three 18 months earlier.
Despite a second-quarter slowdown caused by heavy rains, the Canadian outlook is strong, with the Petroleum Services Association of Canada sticking with its prediction of a record 23,825 well completions this year, including 18,464 in Alberta, 3924 in Saskatchewan and 1,235 in British Columbia.
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