Petroleum drilling forecast for 2016 plunges 36% to 3,315 wells
'These are dire times for the Canadian oilfield service,' industry group warns
The forecast for oil and gas drilling activity this year plunged 36 per cent, according to a report by the Petroleum Services Association of Canada (PSAC) released Thursday.
PSAC now projects there will be 3,315 wells drilled across Canada in 2016, down from its initial forecast of 5,150 wells issued last November.
By comparison, there were 5,378 wells drilled in 2015 and 11,204 drilled in 2014, according to PSAC.
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"These are dire times for the Canadian oilfield service, supply and manufacturing sector, with no indicators for positive change in the near future," PSAC president Mark Salkeld said in a release.
The updated 2016 forecast is based on average natural gas prices of $1.60 per thousand cubic feet and West Texas Intermediate (WTI) oil prices of $35 US per barrel, with the Canada-U.S. exchange rate averaging $0.75.
"The last two drilling seasons were pretty much non-existent," Salkeld said.
"What a lot of people don't realize is when the oil and gas sector is not working, oilfield services companies are tools down and there is no cash flow. This is unlike our customers, the producers, who can still generate some revenue, however dismal, from production."
On a provincial basis, PSAC now estimates:
- 1,891 wells will be drilled in Alberta this year, down from 2,733 wells in the previous forecast
- 940 wells in Saskatchewan, down from 1,789
- 162 wells in Manitoba, down from 280
- 317 wells in British Columbia, down from 344
PSAC is a national trade association that represents the service, supply and manufacturing sectors of the upstream petroleum industry in Canada.