Drilling outlook brightens in Canada

GARY PARK

For Petroleum News

Encouraged by “stabilizing” crude oil prices, Canada’s oil services industry has given a sharp boost to its drilling forecast for 2017, targeting 5,150 wells, up 975 wells from its original prediction only three months ago.

The Petroleum Services Association of Canada said crude oil and natural gas liquids will account for 80 percent of its new goal, with natural gas covering the remaining 20 percent.

If the revised total is achieved, Canada will tally 1,200 more wells than last year.

PSAC President Mark Salkeld said that with West Texas Intermediate prices settling over US$50 per barrel so far this year conventional producers in Alberta and Saskatchewan “will be spending more dollars in drilling and are already hiring rigs.”

He said activity will be concentrated in the Cardium and Duvernay plays in the Western Canada Sedimentary basin, dominated by the Rocky Mountain House, Wapiti and Sundre areas of western Alberta.

Salkeld said an average 355 rigs were active during January, normally the peak drilling season, compared with 250 rigs in the same month of 2016.

PSAC said its forecast assumed WTI prices will average US$52.50 in 2017, while AECO trading hub prices will average C$3 per million British thermal units.

Alberta is expected to lead the provincial totals at 2,706 wells (up 806 wells from the November forecast), followed by Saskatchewan at 1,985 (up 45 wells), British Columbia at 367 (up 87 wells) and Manitoba at 73 (down one well). The remaining 19 wells will be drilled in Eastern Canada.

Salkeld noted that challenges related to the two-year industry downturn “took their toll on the oilfield services sector with the effect rippling across all the supporting industries.”

“It took us many years to recover from a similar but less impactful downturn in the early 1980s and it will be the same again now.”

He said the cost savings squeezed from the services sector since 2014 “are not sustainable, but that will be corrected as activity and the demand for people and equipment increases.”

Salkeld said that despite an equipment sell-off and payroll cuts there is still an oversupply that acts as a drag on the service sector.

He said that even though producers are working “they’re making money on their margins and we’re not getting our rates back up as we’d like to.”

Although it’s a year since the Alberta government revised oil and gas royalties and introduced a simplified regime designed to encourage producers to cut costs and become more efficient, Dave Mowat, chief executive officer of ATB Financial, said he now hopes the government will “get out of the way,” leaving the industry to rehire and work on innovations.