PSAC Forecasts A Decrease in Drilling Activity for 2002
from psac.ca
(Calgary, AB) --- The Petroleum Services Association of Canada (PSAC) today released its forecast for the balance 2002. PSAC is anticipating a western Canada oil and gas well count of 13,386. This forecast represents a decrease of 4,638 wells from 2001 actual well counts.
This total projected count includes approximately; 3,836 oil wells, 8,189 gas wells, 1,181 dry wells, and 179 service wells. Gas drilling represents 48% of total wells for 2002, which remains unchanged from 2001 actual gas wells.
"The oilfield service sector is not anticipating mass layoffs despite the reduction in drilling," said PSAC President, Roger Soucy. "They are trying to ride out the downswing with as little change to staff as possible due to the recruiting challenges faced in the past two years." he continues.
In Alberta 10,309 wells are forecast, down 26% from the 2001 count of 13,887. Southeastern and northwestern Alberta will account for a significant portion of the activity with 4,722 and 1,409 wells respectively.
British Columbia is expected to reach 674 wells drilled in 2002, a 28 percent decrease over last year.
PSAC is predicting Saskatchewan activity to also decrease. A total of 2,323 wells are to be drilled in 2002, versus the 3,089 drilled in 2001, a 25 percent reduction.
"The decrease in drilling activity is a direct result of the lower commodity prices," says Soucy. "We anticipate commodity prices will rise in the second half of the year."
The Petroleum Services Association of Canada is the national trade association representing the service, supply and manufacturing sectors within the upstream petroleum industry. PSAC represents a diverse range of over 260 member companies, contracted almost exclusively to oil and gas exploration and production companies.
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theglobeandmail.com
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Oil well drilling forecast slashed
By DAVID PARKINSON
From Thursday's Globe and Mail
Wednesday, January 16 – Online Edition, Posted at 9:59 PM EST
Calgary — A major oil and gas organization is forecasting a sharp 26-per-cent drop in Western Canadian well drilling activity this year, blaming a downturn in prices for crude oil and natural gas.
The Petroleum Services Association of Canada, which represents more than 260 companies in the oil field services sector, predicted the industry will drill 13,386 wells this year, down from a record 18,024 wells in 2001. The group revised its 2002 forecast down from the 14,396 wells it predicted in its previous industry outlook released in October.
Roger Soucy, president of PSAC, said drilling activity in the first quarter — the busiest season for the sector — will be "down somewhere between 25 and 30 per cent" from last year's levels.
The numbers reflect a significant slowdown in the industry, after two high-flying years in which soaring prices fuelled an unprecedented frenzy of exploration and development. With natural gas prices down about 75 per cent and crude oil prices off about 40 per cent from a year ago, many Canadian oil and gas producers have decided to scale back their capital spending plans in the face of an expected sharp drop in cash flow.
The revised forecast is about in line with analysts' expectations, as the capital budgets that have been announced to date suggest a much more constrained year for oil and gas exploration and development. Analysts expect companies to limit their spending to match cash flow levels, which are expected to fall as much as 50 per cent from last year.
Still, analysts cautioned not to hit the panic button, saying that both prices and forecast drilling activity remain relatively strong on a historical basis.
"We're moving into what is still an extremely good year in 2002, but on a relative basis with the last two, it's not as great," said Miles Lich, oil field services analyst with Peters & Co. in Calgary.
Mr. Soucy said the level of drilling activity should still be high enough to avoid widespread layoffs among drilling companies.
He said they will try to "ride out the downswing" rather than let staff go, after many companies struggled to find and keep good workers during the labour crunch that hit Alberta during the recent energy boom.
"They're going to do everything they can to hold on to people," he said.
Mr. Soucy said the volatility in oil and gas prices in recent months has made drilling activity for 2002 difficult to forecast, as many big producers have delayed finalizing their budgets well into the new year, as much as two months later than normal.
"It's probably one of the worst years to try to forecast that I've seen in a long time," he said at a news conference.
"Many of the oil companies are still putting their budgets together, when they should be going full tilt. From the service industry standpoint, if you don't know what you're customer is doing or if he's not telling you, all you're doing is guessing."
Analysts expect to see a significant seasonal dropoff in drilling after the spring breakup, when softer ground makes drilling access impossible in many northern oil and gas areas.
They believe activity could pick up again in the fall, assuming oil and gas prices are expected to begin to recover along with the global economy.
"But that's a pretty big 'if,' " according to Jason Konzuk, an analyst at FirstEnergy Capital Corp. in Calgary.
The slowdown in activity could open the door for consolidation in the industry, which has attracted large numbers of privately owned operators in recent years.
With some of the heat off company valuations, analysts said many Canadian drilling companies — both public and private — could look good as takeover prospects, especially to U.S. buyers.
"In the second half of the year, you're going to see some activity," Mr. Lich said.
"I'd expect we'll see some [consolidation]," Mr. Soucy agreed. "We're due." |
