Robust 2012 expected, despite modest drilling forecasts

Despite a modest rise in the forecast well count, analysts say 2012 would be a year of robust drilling activity, members of the Petroleum Services Association of Canada (PSAC) recently heard.

The prediction comes in response to the Canadian Drilling Activity Forecast, in which PSAC estimates Canada will see 15,100 wells drilled next year, up 10 per cent from the estimated 13,700 wells the association expects this year.

Next year’s figure is a far cry from the peak year of 2005, when the industry drilled nearly 25,000 wells. Yet the 2012 figure is well ahead of 2009, when about 8,405 wells were drilled Canada-wide.

While PSAC’s forecast well count does not represent a big jump, one analyst addressing the forecast event says there’s reason for optimism going forward. In particular, Jeff Martin of Peters & Co. Limited cites this year’s Crown land sales in Alberta as a good indicator of what’s to come, in terms of drilling and oilfield service activity.

While land sales don’t represent an “immediate push to the drill bit, they’re a pretty good indicator of future expectations,” he tells the group. “What’s most encouraging about the [$3-billion-plus figure] is the number of big companies that are coming back into the basin to spend money….”

Yet, from the oilfield service side, an even better reason for optimism is steepening decline rates in western Canada, he says. With the steady shift to resource plays, the change in production decline rates has been “huge,” he says, noting that, a decade ago, the average Canadian producer he covered might have had a base decline rate of about 22 per cent. Today, by contrast, the rate is closer to 30 per cent, he says.

Steepening declines are especially notable in some western Canadian natural gas plays, where the median first-year decline rate averages around 73 per cent, according to Peters & Co. figures. PSAC predicts the number of gas wells drilled in western Canada next year will drop by six per cent.

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