Deteriorating investor confidence “weighs heavily” on the drilling industry in Canada, according to the Petroleum Services Association of Canada (PSAC).
In the first update of its 2019 drilling forecast, the trade group lowered its forecast for wells drilled, which it measures as rigs released, to 5,600 from 6,600 in the November 2018 revision—a 15% decline.
Compared with its original forecast for 2019, PSAC has changed its projections for rigs released to 2,948 from 3,532 for Alberta and to 1,994 from 2,442 for Saskatchewan. British Columbia and Manitoba, meanwhile, remained unchanged at 382 and 255 wells, respectively.
The projection assumes average prices of $1.45/Mcf (Can.) in Alberta for natural gas and $57/bbl (US) for West Texas Intermediate crude oil, with the Canada-US exchange rate averaging 76¢.
Gary Mar, president and chief executive officer of PSAC, said, “Lack of access to markets beyond the US delayed again with the quashing of the approval of the Trans Mountain pipeline expansion project this year, uncertainty of any future projects being proposed should Bill C-69 be passed, and competitive issues, continue to weigh heavily on Canada’s ability to attract capital investment.”
Mar continued, “While we are excited about the final investment decision of LNG Canada for its Kitimat LNG project, development and production activity to supply the natural gas for the facility is still years away.”
He said, “On the oil side, Alberta’s decision to curtail production has caused more uncertainty for investors resulting in producers delaying their spending decisions or moving their capital to other markets.”
Meanwhile, said Mar, the services industry is laying off workers and “struggling to stay solvent” with active rig levels below 40%, down from more than 50% at the same time last year—the time of year when activity is normally at its peak.
