The Petroleum Services Association of Canada has cut its 2019 drilling forecast by 300 wells, just three months after slashing 1,000 wells off its original expectations for the year.
Overall, PSAC expects 5,300 wells to be drilled across Canada in 2019, a drop of 1,300 wells or 20 percent from its forecast in November 2018.
While higher WTI prices and narrower WCS differentials have improved cash flow for explorers and producers, it’s not translating into re-investment in oil production, PSAC said.
“Instead, E&P companies are reducing debt, paying dividends, buying back their own shares and investing elsewhere rather than re-investing in this country. As a result, we have seen oilfield service companies laying off employees this past winter season in what traditionally is the busiest time of year,” PSAC chair Duncan Au, CEO of CWC Energy Services, said in a statement.
“It is unconscionable that we continue to thwart our own prosperity, driving capital investment that creates good middle-class jobs and economic benefits for all Canadians to other countries while we make no dent whatsoever in global GHG emissions for our loss,” PSAC CEO Gary Mar added.
“Delays of critical pipeline infrastructure for oil – Line 3, Trans Mountain Expansion, and for natural gas – Coastal GasLink for LNG, and regulatory uncertainty with the impending passage of federal government Bills C-69 and C-48 however, continue to dampen hopes of increased capital investment and a robust oil and gas industry this year. Opportunity is at our door. We must find ways to communicate our responsible energy development to all Canadians to foster support for this vital industry that provides jobs and economic benefits to Canadians from coast to coast.”
The updated forecast is based on an average natural gas price of C$1.65/mcf (AECO), WTI price of US$57.00/bbl, and a U.S.-Canada exchange rate averaging $0.75.
On a positive note, Mar added that closure activity - decommissioning, remediation and reclamation activity — has intensified.
“With increased funding to the Orphan Well Association and the new Area Based Closure program introduced by the Alberta Energy Regulator, more well sites are being decommissioned providing additional work for services companies when they sorely need it,” he said.