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Drillers, land buyers keep low profile in Western Canada First quarter returns on land auctions plunge 55 percent; new well permits dive 33 percent, reflecting sharp cuts in capital spending budgets Gary Park PNA Canadian Correspondent
The latest blip in oil and natural gas prices has failed to register on land buying and drilling across Western Canada. Exploration land, with the single exception of northeastern British Columbia, is selling at its lowest price in three years and governments are bearing the cost.
Auctions of publicly owned rights fetched C$207.8 million in the first quarter, a huge 55 percent plunge from a year earlier when payments reached C$464 million.
At total of 2.49 million acres was sold, down 22 percent from the 3.21 million acres a year earlier.
The average price per acre slumped 22 percent to C$83 from C$188 in the first three months of 2001. Alberta sales down Alberta’s five land sales fetched C$113 million, down from C$238 million a year earlier, with only the foothills area of the Canadian Rockies bucking the downward trend, where average prices jumped to C$152 an acre from C$123.
In northern Alberta, average per acre prices dropped the most to C$49 from C$119, while the Plains area fell to C$56 from C$85.
Northeast British Columbia continued to set the pace for all of Canada, with by far the priciest land. The first quarter average was C$193, short of last year’s average C$208, but a strong gain from the C$145 in the final quarter of 2001. The pace quickened again in the province’s last sale of the quarter, with British Columbia averaging C$209 an acre compared with only C$80 in Alberta’s latest sale.
The focus of most British Columbia speculation is an area about 40 miles southwest of the prolific Ladyfern discovery, where Calgary-based brokerage Peters & Co. Ltd. said in a recent research note that Canadian Natural Resources Ltd. may have made a “major successful” discovery. CNR, which has four wells in various stages of completion, has refused to comment until its winter drilling program is completed.
But so far this year, buyers have spent C$14 million acquiring exploration properties near Ladyfern, including a staggering C$1.65 million by Canadian Coastal Resources Ltd. for 700 acres of deeper rights. Less than 50 percent of rigs working Utilization of Canada’s drilling fleet has dropped sharply before spring break-up, with less than 50 percent of the rigs at work for the first time this year.
In the latest survey of drilling contractors, 309 rigs were reported to be at work, down 111 from a year ago.
The first quarter had an average 443 rigs employed or 67 percent of the available fleet of 663 — the lowest three-month count since 1999 and down 22 percent from the January-March 2001 total of 572 rigs, or 91 percent fleet utilization.
The busiest rigs this year have been those with depth capacities greater than 15,000 feet, with 22 of 39 units active at the end of March.
Sharply reduced capital budgets this year are expected to show up even more dramatically in drilling programs in the spring and summer.
The Canadian Association of Oilwell Drilling Contractors said the spring thaw will likely see rig utilization drop to 20 percent, compared with the usual 40 percent at this time of year. Permits down Operators in Alberta, British Columbia and Saskatchewan have already signaled their intentions to back off by reducing their demand for new well permits by 33 percent in the first quarter — a 28 percent drop for gas-targeted well and 47 percent for oil targets.
Regulators authorized 4,298 new wells during the quarter, down from 6,381 in the same period last year and the lowest since 1999, although not far from the seven-year average of 4,343.
A total of 2,872 gas permits were issued, while oil licenses tumbled to 977.
Development and exploratory drilling were both down by about one-third, with development authorizations at 2,665 and exploration licenses at 1,310.
Leading the pact of most active operators is EnCana Corp., with a combined 937 permits issued to Alberta Energy Co. Ltd. and PanCanadian Energy Corp. before they merged.
Next were Husky Energy Inc. 227, Canadian Natural Resources Ltd. 204 and Burlington Resources Canada Energy Ltd. 163. The most active explorers were PanCanadian 148, Husky 121 and Burlington 105.
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