Ensign expects Canadian day rates to rise

ADR drilling rig. Image: Ensign Energy Services

Ensign Energy Services says the move of oilfield service equipment to the U.S. due to concerns with pricing and utilization in Canada and has started to create a shortage of certain types of drilling rigs in the Canadian market.

“This shortage is now allowing drilling rig operators to increase both the day rates and term of contracts for their equipment as customers are looking to secure drilling rigs for the upcoming winter drilling season,” the company said.

Ensign also believes that business fundamentals will improve.

The company noted the purchase of the Trans Mountain pipeline by the Canadian government has created some certainty that the pipeline will be completed. In addition, support for LNG Canada should also create more future demand for drilling rigs adding to the scarcity of certain high spec drilling rigs, it said.

As of Aug. 2, Ensign had 29 drilling and coring rigs under contract in Canada, with 14 under contract that have a remaining term longer than six months (25 per cent of the marketed fleet).

U.S. activity

Bottlenecks and takeaway capacity are generating some concerns for the Permian basin, Ensign said.

“Rig counts have been flat, and until some of these constraints are dealt with, the rig count is expected to remain flat. However, resource basins in California and Colorado are still seeing increases in demand,” the company noted.

“The overall consensus is that the United States will remain flat to a modest increase in drilling rigs for the remainder of 2018 with growth expected to continue into the 2019. The growth in rig count should allow for additional pricing increases, as recent capital expenditure programs for oilfield service companies have thus far limited the construction of new drilling rigs which constrains the supply of high spec equipment.”

Of Ensign’s 67 marketed United States rigs, 44 drilling rigs are currently under contracts with 19 under contract that have a remaining term longer than six months (28 per cent of the marketed fleet).