CALGARY, A.B. – The Petroleum Services Association of Canada released the third update to its 2018 Canadian Drilling Activity Forecast, announcing that it was once again decreasing its forecasted number of wells to be drilled across Canada this year from 7,400 in April to 6,900 wells drilled.
PSAC based its updated forecast on average natural gas prices of $1.55 CDN/Million cubic feet, crude oil prices of US$65.00/barrel and a Canada-US exchange rate averaging 77 cents.
PSAC says that it is forecasting 36 percent fewer wells will be drilled in B.C. this year, down from 730 in its original forecast last fall to a revised forecast total of 464.
In Alberta, PSAC is forecasting that 3,735 wells will be drilled in that province, down from 3,998 wells 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 forecasted 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, PSAC says it expects meterage drilled to be flat or slightly up due to average well lengths increasing.
“While the number of active drilling rigs is currently up 3-5% 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 ‘18 in aggregate, we drilled 200 fewer wells than in the first half of ‘17 but at the same time, the average length per well increased by approximately 190 meters. 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. As we’ve said on previous occasions, this is not sustainable from a business continuity and competitiveness perspective. It’s also a compounding symptom of the sector’s lack of attractiveness for investment.”
“It’s great to see the WTI oil price continuing to trade in the mid $60’s USD but being the recipients of a $21 USD average differential between WTI and WCS pricing in the first half of this year means that exploration and production (E&P) companies and Canadians are missing out on approximately $15 billion annually,” added Whalen. “Ironically, in June, our ‘energy independent’ focused southern neighbour achieved a record-setting, 11 million barrels per day of domestic oil production, which in contrast to Canadian oil, is fetching world-based pricing.
In a reflection of the challenging natural gas market and continuing soft prices, for our latest Forecast, we tempered our AECO pricing down to $1.55 CDN/Mcf. Adding insult to injury, Canadian gas weighted E&P’s estimate they are losing up to $10 billion annually due to the disparity between AECO pricing and other markets.
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.”