Expectations for the number of new oil and gas wells to be drilled across Canada this year have once again been revised downward.
In its mid-year update to the 2019 Canadian Oilfield Services Activity Forecast, the Petroleum Services Association of Canada (PSAC) lowered, for a second time, its forecast.
It now predicts 5,300 wells — a drop of 1,300 or 20 per cent — from the original forecast of 6,600 in November 2018.
PSAC has based its updated forecast on an average AECO natural gas price of C$1.65/Mcf, West Texas Intermediate crude oil price of US$57/barrel, and a U.S.-Canada exchange rate averaging $0.75.
The association is the national trade association representing the service, supply and manufacturing sectors within the upstream petroleum industry.
While the price of oil has made gains since the early months of the year, it’s not having much positive impact on drilling, according to Duncan Au, PSAC chair and president and CEO of CWC Energy Services.
“Clearly, cash flow for our (exploration and production) customers has improved with higher WTI prices and narrower WCS differentials, but that has not translated to reinvestment in new crude oil production. Instead, (exploration and production) companies are reducing debt, paying dividends, buying back their own shares and investing elsewhere rather than reinvesting in this country,” he said.
Delays of critical pipeline infrastructure, along with regulatory uncertainty over bills C-69 and C-48 continue to dampen hopes of increased capital investment and a robust oil and gas industry this year, he said.
On a provincial basis for 2019, PSAC now estimates 2,685 wells to be drilled in Alberta, down from 3,532 wells in the original forecast.
British Columbia’s expected well count has been nominally lowered, from 382 wells to 375 wells.
The revised forecast for Saskatchewan now sits at 1,960 wells compared to 2,422 wells in the original forecast, and Manitoba is forecasted to see 260 wells or a jump of five in well count for 2019.
Eastern Canada’s well count has been raised from nine to 20 between forecast versions – one bright spot for increased activity in the country, notes the association.
This year, PSAC is also forecasting activity beyond drilling to include maintenance and repair work and site closure activity to cover a broader spectrum of activity that is undertaken by the sector.
Closure activity – decommissioning, remediation and reclamation activity has intensified, he said.
“With increased funding to the Orphan Well Association and the new Area Based Closure program introduced by the Alberta Energy Regulator, more well sites are being decommissioned providing additional work for service companies when they sorely need it.”
