Oil drilling activity in Saskatchewan for the rest of this year, will probably be about 40 per cent less than originally forecast.
That was the negative news delivered by the Petroleum Services Association of Canada (PSAC) during its second 2016 update, delivered on April 28.
The Canadian drilling activity forecast has been revised with a downward trend expected across Canada to 3,315 wells, representing a decrease of 1,835 wells and an approximate 36 per cent decline from PSAC’s original 2016 drilling forecast that was issued in early November of last year.
PSAC based its updated 2016 forecast on average natural gas prices of C$1.60, crude oil prices of US$35/barrel (WTI) and the exchange rate averaging C75 cents to the U.S. dollar.
PSAC president and CEO Mark Salkeld said, “These are dire times for the Canadian oilfield service, supply and manufacturing sector, with no indicators for positive change in the near future. The last two drilling seasons were pretty much nonexistent. What a lot of people don’t realize is when the oil and gas sector is not working, oilfield services companies are tools down and there is no cash flow. This is unlike our customers, the producers, who can still generate some revenue, however dismal, from production.”
Salkeld then added, “that’s why almost all our member companies are suffering in these desperate times and are drastically cutting costs and staff, trying to be as efficient as possible. In spite of all that, some oil and gas services companies already have, or are in danger of, closing their doors forever, and tens of thousands of workers have lost their jobs and families are suffering as a result, in rural communities across Western Canada near oil and gas fields.”
The latest PSAC estimates suggest there will be just 1,891 wells drilled in Alberta now, down significantly from the 2,733 predicted in the original forecast.
In Saskatchewan, the new well count is now predicted to sink below 1,000, with 940 being the new estimate compared with the original forecast of 1,789 wells.
B.C., which has already undergone a major downward shift, will see a further erosion of drilling activity with just 317 wells predicted there now, down eight per cent from the original forecast of 344.
Over in Manitoba, the forecast is also gloomy with just 162 wells expected to be drilled there in 2016, a decline of 118 from the original expectation.
“The lack of progress on gaining access to tidewater for our oil and gas products is hindering Canada’s growth and position on the world stage as a responsible energy developer,” said Salkeld. “Canada can help other countries reduce their use of higher greenhouse gas emitting energy sources, and help clean up the environment globally and raise the quality of life around the globe to a standard we enjoy and take for granted here at home.”
The PSAC CEO then added, “The oilfield services sector is a technology and innovation leader even in tough times, because we have to be, in order to compete. We are resilient and we’re extremely good at what we do and when we come out of this slump, we will be even better. It’s just right now we are in danger of losing all of the intellectural capital and people we need to put the oil and gas services sector back to work when the economy turns around. PSAC continues to advocate for infrastructure projects like major pipelines, and for well decommissioning that will benefit the environment and put oilfield services back on the job. We need to retain the exceptional talent we have and keep all the supporting services in areas of activity across the Western Canadian sedimentary basin for the benefit of rural communities and cities.”
