Canadian drilling forecast revised down as ‘investment dollars flee’

Image: Precision Drilling

The Petroleum Services Association of Canada (PSAC) has revised down its drilling forecast for 2018 based on lower pricing expectations for natural gas and more importantly, according to CEO Mark Salkeld, the industry’s inability to reach new markets.

While PSAC’s 2018 price forecast for WTI has increased to US$55/bbl compared to US$53/bbl in October, its outlook for AECO natural gas has dropped to C$1.75/mcf from C$2.50/mcf.

PSAC now expects 7,600 wells to be drilled in Canada this year, down by 300 wells from its original forecast issued in October 2017.

“As long as our products are essentially land locked and restricted to just one customer, a full recovery for activity levels for the Canadian oil and gas industry will be negatively impacted. Investment dollars are fleeing Canada for regions of the world offering a more competitive environment for investment and where there is greater confidence in getting projects approved and completed,” Salkeld said in a statement on Wednesday.

“Even with steady and stable increases in industry activity levels over the low points in 2015 and 2016, any improvements will continue to fluctuate due to the ongoing discount Canada realizes for its oil and gas versus world prices.”

On a provincial basis for 2018, PSAC now estimates 3,807 wells to be drilled in Alberta, down from 3,998 wells in the original forecast. Approximately 29 percent less wells are expected to be drilled in British Columbia, with PSAC’s revised forecast now at 517 wells for the province down from 730 in the original forecast.

The revised forecast for Saskatchewan now sits at 2,998 wells compared to 2,931 wells in the original forecast, and Manitoba is forecasted to see 265 wells or an increase of 35 in well count for 2018.