Nobody was expecting good news to come out of the Petroleum Services Association of Canada’s mid-year drilling forecast update, which took place on Thursday in Calgary.
But some might have been taken aback by just how bad the news was.
The national trade association, which represents more than 230 service, supply and manufacturing companies in the upstream petroleum sector, has cut by nearly half its prediction of the number of wells that will be drilled in 2015.
It’s now projecting 5,320 — 47 per cent fewer than the 10,100 wells it was anticipating just six months ago, and a 53 per cent drop from the 11,255 wells that were actually drilled in 2014.
“Oil prices dropped from an average of US$84.40 in October 2014 to an average of US$47.83 in March 2015,” said PSAC president and CEO Mark Salkeld. “It’s no surprise that an almost 44 per cent drop in oil prices has led us to forecast a similar decline in drilling activity for the year, compared to our October 2014 forecast.”
Tumbling oil prices prompted PSAC to revise its 2015 forecast in January, when it adjusted the figure downward to what then seemed like a rock-bottom 7,650 wells.
The latest figure includes an anticipated 2,976 wells in Alberta. That’s a 48 per cent downgrade from PSAC’s original forecast of 5,740, and a 54 per cent drop from the 2014 tally of 6,512.
In Saskatchewan, the projected count for 2015 has fallen to 1,507 from 3,365. Last year, 3,570 wells were drilled there.
The figure for Manitoba is now 270 wells, down from the original 430 and the 464 that were drilled in 2014.
British Columbia is the exception to the downward trend. PSAC now expects it to produce 560 wells in 2015, as compared with the earlier projection of 555. Last year, 697 wells were drilled in B.C.
Although PSAC described the size of its latest adjustment as “astounding,” Salkeld pointed to a silver lining on the dark cloud over the oilpatch.
“The interesting outcome from this downturn will be the innovative actions taken by companies to lower costs and create efficiencies that will better position Canada in the world of energy services, extraction and production. When prices rebound, these companies will be more than ready — no doubt about it.”
PSAC’s latest forecast is based on an anticipated average price for West Texas intermediate crude of US$53 a barrel and for natural gas of C$2.50 per thousand cubic feet. The loonie is expected to be worth about 0.77 of a U.S. dollar.