Precision Drilling Trust’s (TSX:PD.UN) chief executive officer says Canada’s ailing natural gas drilling sector might start to see a rebound later this year.
“I’d say that the industry is starting to turn a little bit,” Kevin Neveu told reporters after his company’s annual general meeting.
“I think earlier this year the belief was it would take into 2010 across the industry. I think people are becoming a little bit more optimistic, certainly as the U.S. economy improves.”
Only about 10 per cent of Canada’s rigs are at work, as companies have little incentive to drill with natural gas prices well below $4 per 1,000 cubic feet.
The Petroleum Services Association of Canada predicted last week that 41 per cent fewer oil and gas wells will be drilled in Canada this year than in 2008.
But the halt in activity will eventually bite into the natural gas supply overhang that has depressed North American prices recently, Neveu said.
“With the number of rigs not drilling for gas for sure there will be a supply side stress happening. We think that becomes evident probably sometime in Q4, maybe sooner,” he said. “Whether the price leads that or follows that is a little tough to say.”
Neveu noted the optimism has already been reflected in the stock prices of oil and gas service stocks, which have been on the rise lately.