Copyright of the Daily Oil Bulletin 2018
CAODC Predicts Increased Drilling For 2018
The Canadian Association of Oilwell Drilling Contractors (CAODC) is projecting that 2018 wells drilled will total 6,138, an increase of 107 from 2017 (6,031).
Projected 2018 operating days are 70,587 — an increase of 1,234 from 2017 (69,353), the industry group said in its annual forecast. The rig fleet is expected to decrease by 19 (634 drilling rigs in 2017 to 615 drilling rigs in 2018).
The CAODC is hosting an outlook session this morning.
One of the Canadian oil and gas industry’s biggest hurdles continues to be lack of market access and regulatory stability. Two major energy infrastructure projects — the Pacific NorthWest LNG plant and the Energy East pipeline — have been cancelled in the past six months and the federally-approved Trans Mountain pipeline to the west coast could be delayed.
“The cancellations of key energy infrastructure projects, and further delays to those already approved, send a message to potential investors that Canada’s rules and regulations around these projects are subject to continuous change at a moment’s notice,” said Mark Scholz, the CAODC president.
The CAODC forecast focuses on operating days as a key economic indicator of the health of the sector. While there are signs that the drilling and service rig market has bottomed out, meaningful upward movement of day rates remains a struggle.
“Right now our members are offering a premium product for discounted rates just to survive,” added Scholz. “The combination of low commodity pricing and the cumulative costs of government policy have been detrimental to say the least.” After a sustained period of low to no cash flow and an exodus of investment from the WCSB, drilling and service contractors are challenged with finding the capital to adequately maintain equipment and reinvest back into their businesses. As such, industry conditions remain fragile.
In 2018, the CAODC is hopeful that some stability — albeit, a “muted stability” — may return for member companies.
“What we need most is the optimism a strong investment climate will create,” said Scholz. “Market access and a predictable regulatory environment are the most significant factors in creating an environment that will allow our industry to deliver stronger results in the coming years.”