PSAC lowers 2018 Canadian drilling activity forecast

Canadian Drilling Activity Forecast
Canadian Drilling Activity Forecast was released by the Petroleum Services Association of Canada on Wednesday.  Apache photo.

Canadian Drilling Activity Forecast was released by the Petroleum Services Association of Canada on Wednesday.  Apache photo.

Canadian Drilling Activity Forecast shows decline in Alberta, BC, Saskatchewan, increase in Manitoba

In its third update to its 2018 Canadian Drilling Activity Forecast, the Petroleum Services Association of Canada (PSAC), dropped the number of forecasted wells to be drilled in Canada for this year from 7,400 to 6,900 wells drilled.

PSAC says it based its updated 2018 forecast on average natural gas prices of $1.55 CDN/Mcf (AECO), WTI prices of US$65.00/barrel and the Canada-US exchange rate averaging $0.77.

“While the number of active drilling rigs is currently up 3-5 per cent over last year depending on the week, the rest of the oilfield services sector is marginally busier than it was last year at this time,” said PSAC president and CEO Tom Whalen.

“When we look at the first half of 2018 in aggregate, we drilled 200 less wells than in the first half of 2017 but at the same time, the average length per well increased by approximately 190 meters,” said Whalen

On a provincial basis for 2018, PSAC now projects 3,735 wells to be drilled in Alberta, down from 3,998 wells in the original forecast.

Approximately 36 per cent fewer wells are expected to be drilled in British Columbia, with PSAC’s revised forecast now at 464 wells, down from 730 in the original forecast.

The revised forecast for Saskatchewan now sits at 2,428 wells compared to 2,931 wells in the original forecast, and Manitoba is expected to see 260 wells or a jump of 30 in well count for 2018.

The total number wells drilled is projected to be approximately 200 less than in 2017, however we expect meterage drilled to be flat or slightly up due to average well lengths increasing.

Despite the drop in forecast wells to be drilled, Whelan says “in general terms, revenue numbers for our sector are up year over year but we note that several publicly traded Canadian service companies are reporting minimal improvement in the quality of bottom line earnings; many are sitting at near breakeven or are still in negative territory”.

Crude transportation bottlenecks continue to plague the Canadian oil industry, dropping the value of Canadian crude against its US rivals, he notes.

According to PSAC, because of the US$21 differential between WTI and Western Canadian Select, exploration and production companies along with Canadian taxpayers are missing out on about $15 billion annually.

“Obtaining access to tidewater continues to be mission critical for both our oil and gas weighted E&P customers and would mean an additional $25 billion for Canada.”

Looking to boost the oil industry in Alberta, the provincial government is actively pursuing value-added opportunities for its crude, including the Petrochemical Diversification Program.

Alberta Premier Rachel Notley tweeted on Tuesday that “The first round of our Petrochemical Diversification Program attracted 16 proposals worth $20 billion. We’re opening a second round to attract billions more & create thousands more jobs.”

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