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Hopes high for a good 2023 for energy industry

Energy contractors association predicts drilling to increase 15 per cent

Veteran oilpatch executive Alex Naumescu anticipates the energy industry will continue to improve in 2023 — unless a recession gets in the way.

“We’re optimistic for next year, unless there’s going to be a recession, ” said Naumescu, who is vice-president of operations for Big Guns Energy Services Inc., which has a branch in Red Deer where 25 of its 40 employees work. “A recession will most likely be driven by energy.”

If energy prices soar to the point they push companies’ production costs beyond profitability, companies will rein in spending, production will slump and a recession likely triggered.

“But unless that happens, we are expecting a better year next year.”

The Canadian Association of Energy Contractors (CAOEC) said earlier this week it was predicting a solid year in 2023. It is projecting about 6,400 wells will be drilled in Western Canada, a 15 per cent boost over this year, which was up 22 per cent over 2021.

That increase would create another 5,400 jobs in an industry where 42,350 are employed directly or indirectly by the drilling sector.

Big Guns is among those drilling-related companies. It specializes in various types of reservoir and caprock injection testing, data collection and analysis, as well as offering cased-hole logging and perforating services, technical consulting, and project management.

Rural Municipalities of Alberta president Paul McLauchlin said communities have welcomed the increased activity this year, which has provided more revenue and jobs for rural communities.

“Our members have talked a lot about the increase in oil activity. It’s very noticeable and they’re very supportive of that increased activity, for sure,” said McLauchlin, whose organization represents 69 counties and municipal districts.

“Rural municipalities are all one degree away from the oil and gas industry. We’re either involved with it personally or family is and many of us have oil and gas activity on our farmland or adjacent to it.

“We’re excited. We want to see people getting back to work and it’s a big boon to our rural economies.”

While Naumescu also hopes 2023 plays out as the CAOEC expects, he knows volatility remains a fact of life in the energy industry.

“The worst year we had was 2016. Then it came up, 2017-18 were a little bit better. It was better, then worse, then better, then worse.

“With services companies in the oil industry, you do have a problem in that there is no consistency.”

As an example, he points to last year. A good month was followed by a bad month, then another good month and so on.

“You can’t plan on anything. If you can’t plan on the money then everything starts costing more.”

While oil prices have been much higher this year, they dropped sharply by $10 a barrel on Wednesday after OPEC+ countries signalled they may increase production.

At the same time, there is rumbling China’s economy is going to slow and on Wednesday oil prices fell further after there were reports the EU was considering capping Russian oil prices at $65-$70 a barrel.

The CAOEC mentioned, as part of its forecast labour recruitment and retention remain a big industry challenge.

Naumescu agrees finding new employees has not been easy.

“Even now, we have two or three ads out. We did hire six guys in the last four months but we’ve had ads out for a year and a half.

“We had a couple of guys say yes to the job and then they didn’t show up. It’s hit and miss.”

Some of those looking for jobs in the industry have unrealistic expectations and seek guarantees of work and pay that are not financially practical, especially for smaller companies.

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