The Petroleum Services Association of Canada (PSAC) has lowered its drilling forecast for this year by 500 wells as improving WTI oil pricing fails to sufficiently benefit producers in Canada compared to those in the U.S.
Producers are also increasingly shifting to drilling for oil instead of natural gas as prices remain low, which has particular impact on activity levels in British Columbia.
“The improved WTI price shift into the mid to high $60s is certainly a welcome sign for our industry. However, the disconnect and volatility of the differential between WTI and WCS pricing means that exploration and production companies and Canadians are not benefiting to the same level as our ‘energy independent’ focused southern neighbour,” PSAC CEO Tom Whalen said in a statement.
“It’s shameful that we continue to sell our oil to the U.S. at a steep discount to WTI, short-changing Canadians over $15 billion per year. The sooner we expand our customer base, the better off Canadians and quite frankly, the rest of the world will be.”
PSAC now estimates that 7,400 wells will be drilled across Canada this year, down from 7,900 forecast in October 2017. That’s comprised of 3,800 wells in Alberta (down from 4,000), 500 wells in B.C. (down from 730), and 2,840 wells in Saskatchewan (down from 2,930 wells). Manitoba on the other hand is forecasted to see 255 wells or a jump of 25 in well count for 2018.
PSAC based its updated forecast on an average natural gas price of $1.75 CDN/Mcf (AECO), crude oil price of US$61.45/barrel (WTI), and a Canada US exchange rate averaging $0.79.
“While our oilfield services sector is marginally busier than it was last year at this time, this hasn’t necessarily translated into financial bottom lines that signal business sustainability. In fact, we still have a number of services companies making staff reduction adjustments of 5-15 percent. This pales in comparison to the 40-60 percent staff reductions we saw mid-2015 to the end of 2016, but still a very telling sign that our services sector is far from healthy,” Whalen said.