The Petroleum Services Association of Canada (PSAC) is now calling for a reduction in the number of wells to be drilled in Canada from its original 2018 forecast.
PSAC released its midyear update to the 2018 Canadian Drilling Activity Forecast on Thursday, and lowered the forecast for the number of wells drilled (rig released) across Canada for 2018 to 7,400 wells, a drop of 500 or six per cent from the original forecast of 7,900 made last October.听
PSAC has based its updated forecast on an average natural gas price of C$1.75 per thousand cubic feet (Alberta Energy Company), a crude oil price of US$61.45/barrel (west Texas inventory [WTI]), and a Canada-U.S. exchange rate averaging $0.79.
鈥淲hile our oilfield services sector is marginally busier than it was last year at this time, this hasn鈥檛 necessarily translated into financial bottom lines that signal business sustainability,鈥� said Tom Whalen, the interim president and CEO of PSAC. 鈥淚n fact, we still have a number of services companies making staff reduction adjustments of five to 15 per cent.
鈥淭his pales in comparison to the 40-60 per cent staff reductions we saw mid-2015 to the end of 2016, but still a very telling sign that our services sector is far from healthy.鈥�
Whalen added: 鈥淭he improved WTI price shift into the mid to high $60s is certainly a welcome sign for our industry. However, the disconnect and volatility of the differential between WTI and WCS (western Canadian select) pricing means that exploration and production (E&P) companies and Canadians are not benefiting to the same level as our 鈥榚nergy independent鈥� focused southern neighbour.
鈥淚t鈥檚 shameful that we continue to sell our oil to the U.S. at a steep discount to WTI, short-changing Canadians over $15 billion per year. The sooner we expand our customer base, the better off Canadians and quite frankly, the rest of the world will be.鈥�
On a provincial basis for 2018, PSAC now estimates 2,840 wells will be drilled in Saskatchewan this year, compared to 2,930 wells in the original forecast.
A total of 3,800 wells will be drilled in Alberta, down from 4,000 wells. PSAC also calls for 500 wells to be drilled in B.C., down from 730 in the original forecast.
Manitoba is forecasted to see 255 wells, or a jump of 25 in well count for 2018.
鈥淥n reflection of our adjusted forecast for 2018, we can鈥檛 help but note there is a continued shift by the E&P鈥檚 from gas to oil well drilling. That shift to oil is easily supported by the 鈥榣ower for longer鈥� price outlook for Canadian natural gas,鈥� said Whalen.
鈥淲e鈥檙e also seeing a geographic shift, forecasting 110 less wells to be drilled in B.C. than in 2017. While this doesn鈥檛 seem like a large number, one needs to keep in mind that these are some of the most complex and service intensive wells 小蓝视频 drilled in North America today.
鈥淲e estimate these 110 wells represent over $850 million in capital that won鈥檛 be spent in B.C. this year.鈥�
While PSAC has reduced its forecast for the number of wells to be drilled in Saskatchewan, Whalen said it鈥檚 still about 300 more than what was drilled in the province last year.
鈥淲e estimate the capital cost to drill those wells is approximately $400 million. When you add those two scenarios together, we鈥檙e conservatively looking at approximately $450 million less capital 小蓝视频 deployed in Canada than our earlier forecasted numbers suggested,鈥� said Whalen.
PSAC said it is essential that Canada gets access to tidewater for its oil and natural gas resources. Completion of the Kinder Morgan Trans Mountain Pipeline Expansion is but one key imperative to restoring investor confidence in Canada.
Equally important is the need for Canada to communicate its energy story internationally, proudly speaking about resource development that鈥檚 responsible, safe, ethical and to the highest environmental standards in the world.
鈥淭he International Energy Agency (IEA) recently projected that global demand for energy will increase 31 per cent by 2040,鈥� said Whalen. 鈥淭his increase includes a 49 per cent increase in demand for natural gas and a 12 per cent increase in demand for oil.
鈥淐anada must be an active contributor in providing affordable, reliable natural resources to energy constrained developing nations to help lift them out of energy poverty so they too can enjoy the standard of living and quality of life that we Canadians enjoy.鈥�
听
