North America may have gone through a bad recession, but Saskatchewan is doing just fine, thanks. Right now the oil and gas industry is firing on all cylinders.
In December, we saw a record petroleum rights land sale for that month. Curiously, the Swift Current region led the sale.
Saskatchewan Energy and Resources divides the province into four areas - Lloydminster, Kindersley, Swift Current and Estevan-Weyburn. In recent years, the Estevan-Weyburn area has led the province almost every single time, and by a large margin. But the December sale saw $25.2 million spent in the Swift Current area, a little under half of the $56.6 million total. The Lower Shaunavon oil play is the big winner this time around.
With natural gas prices still in the tank, that area could use more drilling. Much of the southwest's drilling activity is gas-related, and gas drilling this year has been flat lined.
For the first half of December, Saskatchewan's drilling rig count floated between 101 and 90, then back to 101 again by Dec. 13. This is the highest level since October, 2008. More importantly, by mid-December, drilling usually begins to cut back substantially in anticipation of Christmas holidays, when much of the industry takes a week-long break. So far, they are still going hard, much harder than the same time in 2008 or 2009.
Drilling is a key economic indicator for the industry. It drives much of the industry, including service rigs doing completions, frac crews, flow lines and facility construction. Saskatchewan's service rig count is also at a high water mark, with 156 of 199 rigs at work.
I'm hearing of labour force pressures, particularly with service rigs. It's a tough job, especially in the cold, so it's hard to attract workers. One company told me they're promoting workers up through the ranks sooner than they normally would, simply because they have to. If you're young, strong, and willing to work in bone-chilling weather, there's plenty of work to be had on the service rigs.
This again is driving demand for accommodations. I may sound like a broken record on this, but it is a huge issue in southeast Saskatchewan. Substantial camps have now been set up in Estevan and Weyburn, but camp life is not for everyone. Nor is staying in one, or a hotel for that matter, cheap
With this in mind, it was surprising and refreshing to run into a Moose Jaw man building a new motel in Midale. Midale's a small place on Highway 39 midway between Estevan and Weyburn. He's putting in 18 rooms to start, with plans for a lounge and another 20 rooms to follow shortly after if the first phase fills quickly.
But more remarkably, he was talking about building several multi-family units behind the motel. And, shockingly, he plans to rent them out, not sell them as condos. That's extremely rare. Very few new rental accommodations are built in this province these days, because condos are typically much easier on the developers. You build a condo, you sell it, you build more.
The general manager of the Midale Credit Union told me about all the young families in his town, a strong indicator for any community.
Saskatchewan's oilpatch is going full bore, and will be until spring breakup. That should make for a Merry Christmas for the province.
Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net
