From Calgary there are new reports profits at Canada’s oilfield service companies, such as drilling outfits, could plummet as much as 80 percent and lead to a wave of bankruptcy-protection filings.
The board of the Canadian Association of Oilwell Drilling Contractors’ decided yesterday to lower its rig-count utilization forecast for 2009, just three weeks into the year. President Don Herring, says the associaition now predicts an average of 39 percent of Canada’s rig fleet will be in action throughout the year, down from 40 percent last year.
He adds, to break even, the industry needs to use an average of 50 to 55 percent of the fleet throughout the year. Of the 858 rigs in the Canadian fleet an average of 390 or 44 percent have been used per week so far in January, compared with the association’s earlier prediction of 493, or 57 percent Because Canada’s drilling season is at its strongest during the winter. The current utilization rate is troubling and evidence the drilling industry is being hit hard by fallen energy prices, frozen debt markets, and in Alberta, the higher royalty burden.
With a startling number of rigs sitting idle in Canada and increasingly in the United States, analysts and insolvency experts say significant pain is about to sweep over the oilfield services sector.
However, pockets of the drilling industry are likely to be spared significant pain and the same analysts say companies operating in unconventional shale gas places such as the Horn River and the Montney here, in Northeast BC will be among them. The problem for the national economy is they don’t represent the Canadian drilling industries bread and butter.