Outlook for 2020 drilling activity ‘even worse’: PSAC

Image: Precision Drilling

The Petroleum Services Association of Canada (PSAC) released a grim outlook for 2020 drilling activity on Thursday, citing ongoing market access issues and regulatory uncertainty.

PSAC is forecasting that 4,500 wells will be drilled in Canada next year, down from PSAC’s final forecast of 5,000 wells for this year.

“Following a very disappointing 2019 that saw activity plunge to 2015/2016 levels with about 2,000 fewer wells drilled than forecast, the outlook for 2020 is even worse, with exploration and production companies choosing to buy back their own under-valued shares, pay dividends and pay down debt rather than reinvest in Canada,” PSAC CEO Gary Mar said in a statement.

“It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists. With the unrelenting focus on climate action during the recent federal election campaign and the resulting minority government that is expected to be supported by parties that have no interest in the global GHG reductions that Canada’s oil and gas industry can deliver nor the economic benefits that Canada’s most prolific industry and largest exporter provides, PSAC is forecasting a further five per cent decline in activity to 4,500 wells.”

The 2020 forecast is based on average AECO natural gas prices of $1.60/mcf, WTI prices of US$58/barrel, and the Canadian dollar averaging US$0.76.

In 2020, PSAC estimates 2,155 wells will be drilled in Alberta, and 1,795 wells for Saskatchewan, representing year-over-year decreases of 235 and 200 wells, respectively.

At 190 wells, drilling activity in Manitoba is expected to drop by 20 wells year-over-year, while activity in British Columbia is projected to decrease from 390 wells in 2019 to 345 wells in 2020.

At 15 wells for both 2019 and 2020, activity in Eastern Canada is expected to remain flat year-over-year.

“The only bright spot for oilfield services companies is the spending on production optimization, maintenance and repair work (MRO) that continues along with new decommissioning and closure activity,” Mar said.

“With additional funding in place for the Alberta Orphan Well Association and the introduction of the Alberta Energy Regulator’s Area Based Closure program, work in these areas has increased. This MRO and closure work has helped some companies survive while sadly, others have been forced to relocate, however reluctantly, to the US or other international locations or close their doors entirely.”

Mar said it’s time for Canada to have a vision for energy “that could inspire Canadians to join together in support of our responsible energy development that benefits the lives of all Canadians.”

“We are reducing our environmental footprint and GHG emissions through new technologies. Let’s find a way to work together for Canada to be the global leader and producer of choice rather than let countries with lower human rights, environment, and regulatory standards meet the needs of growing populations and under-developed nations,” he said.

“Let’s stop penalizing ourselves while other countries reap the benefits that should be ours.”

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