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Struggling drillers place bets on a winter rebound in gas activity Canada’s 42 contractors record a 23 percent decline in operations for first three quarters of 2002; Precision says most rigs booked for peak season Gary Park PNA Canadian Correspondent
In these tough times for Canada’s drilling contractors, who have experienced a 23 percent slump in activity for the first nine months of 2002, most are now pinning their hopes for a turnaround on the declining output of many North American natural gas producers.
Calgary-based Akita Drilling Ltd., Canada’s premier Arctic driller and currently clinging to third place among all Canadian contractors, said that with oil and gas prices close to their peaks for 2002 there should be sufficient cash flow to promote increased activity, especially in the upcoming winter season.
Depending on the state of the North American economy, Akita said Oct. 30 it is confident about the longer term prospects.
But for now, the company said the drilling downturn has had a negative impact on day rates for all sizes of rigs and has resulted in fewer opportunities for investment in new rigs, including a lack of “contract funded” rig construction for the Canadian North.
Akita reported that for the first nine months, its 36-rig fleet completed 944 wells and achieved 4,526 operating days, compared with 1,169 wells and 5,369 operating days for the same period of 2001. Over the comparative periods, its rig utilization rate dropped from 61 percent to 46 percent, with the bulk of the decline occurring in the second and third quarters.
Wells per rig down year to date Industry statistics show that Canada’s 42 drillers averaged 17 wells per rig to the end of September this year, off 23 percent from the 22 wells per rigs a year earlier, reflecting both an increase in the fleet to 672 rigs and tighter drilling budgets.
The 42 contractors who belong to Canadian Association of Oilwell Drilling Contractors completed 11,188 wells and 39.4 million feet of hole in the first nine months, compared with last year’s 14,220 wells and 50.5 million feet.
Precision Drilling Corp., the biggest oilfield services firm in Canada with 223 rigs, set the pace, completing 4,497 of the industry’s 18,835 wells.
But Precision reported that its third-quarter profit tumbled by 70 percent to C$12.25 million, confirming its earlier warning to investors to expect the reduced profits as E&P companies ignored sturdy commodity prices while holding the line on capital spending.
However, Precision chief executive officer Hank Swartout said Nov. 5 that the outlook is improving and he expects activity to recover in vital winter drilling season. Rigs booked for winter “Hopefully 2002 will be a trough year,” he told analysts in a conference call. “We’re seeing most of our rigs being booked for the winter ... which is a positive sign.”
Swartout also blamed the drilling downturn on the aftermath of an extended round of buyouts and mergers which he believes is nearly over and should allow companies to refocus on their core business.
“It usually takes a year for people to move out of that consolidation mode and go forward with their drilling,” he said.
But Precision expects traditionally strong activity levels in the first quarter of 2003 based largely on the fundamentals of natural gas supply and demand in North America. BJ Services counting on improved activity BJ Services Co. is counting on activity to improve through the winter to levels close to those of last year, chief executive officer Bill Stewart said in a conference call Nov. 5.
His projections got support from Canada’s rig count for the first week of November, which climbed to 307 active units, or 46 percent of the available fleet — the highest level since March.
Stewart said one of the factors contributing to the decline is the fact that some producers have already spent their capital budgets for 2002 and are waiting for January to ramp up investment.
That optimism was bolstered by the October well license count of 1,566, a gain of about 8 percent from a year ago and the third highest October tally since 1995.
The industry obtained 1,021 permits for gas wells in Alberta, British Columbia and Saskatchewan, compared with just 437 oil targets.
For the first 10 months of 2002, regulators licensed 13,896 new wells, 19 percent behind last year’s record-breaking pace.
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