Canadian drilling companies continue moving deeper-capacity rigs to the busier U.S. market, but not because the units are sitting idle north of the border.
Analysts with Peters & Co. estimate that since the beginning of 2017, at least 23 rigs have been or are planned to be transferred from the Western Canada Sedimentary Basin (WCSB) to the U.S.
That’s an increase of 10 rigs or 77 percent compared to their estimate of 13 rigs moved as of last June.
The majority of the rigs have been transferred as existing contracts were completed or as more attractive opportunities became available, analysts wrote in a research note on Friday.
Including the transfers, they estimate that there are 68 deeper capacity AC rigs remaining in the WCSB, with all but two of these rigs seeing activity or being paid standby over the past year.
These higher-spec units have primarily been active recently in the Montney and Duvernay plays.
“Utilization for this group has averaged 63 percent since the beginning of 2018, which compares to 34 percent for the overall WCSB marketed fleet of drilling rigs, with the strongest demand for 1,500 HP AC triples,” analysts wrote.
Although utilization for these rigs in Canada remains strong, Peters & Co. estimates their annual EBITDA contribution per rig is approximately half the level currently generated by similar capability rigs in the U.S. as a result of higher day rates and more operating days per year.
“Should operators continue to show a willingness to underwrite move costs, either up-front or embedded within a contract, we expect additional larger horsepower AC electric rigs will be relocated to the U.S. However, with virtually all of these rigs in Canada being active, we believe the opportunity cost for WCSB rig contractors has increased, and that attractive contract terms are likely required in order to relocate additional rigs.”
The majority of deeper capacity rigs in Canada are owned by Precision Drilling, Ensign, and Akita Drilling, analysts noted.