2016 likely to see continuation of slumped oilfield activity

FORT ST. JOHN, B.C. — It will likely be another week or two before we get revised New Year predictions on the anticipated number of wells to be drilled this year in Canada.

Both the Petroleum Services Association of Canada, and the Canadian Association of Oilwell Drilling Contractors published forecasts late last year suggesting 2016 would see a continuation in slumped activity.

In advance of the updates, the Financial Post has published a story suggesting this year could even be worse than last year.

It quoted an executive of Calgary-based Precision Drilling as suggesting his company would be lucky to have a little more than half the 120 rigs it had running in the first quarter of last year, running this year.

It also said he put the actual amount of cost-cutting by many exploration and production companies at about 50 per cent — 20 to 30 per cent more than originally budgeted.

The oilfield service companies were arguably hit the hardest last year in one of the worst years in a generation, and the story, citing AltaCorp Capital data, said as a group, they saw their share prices erode by 46 per cent on average.

AltaCorp predicts a year-over-year Western Canadian first quarter rig count decline of 40 per cent and its Managing Director of Institutional Research, Dana Benner, says, “It’s absolutely worse than last year.”

Benner expects more job losses in the oil patch this year, but he also says, “Banks are doing everything they can to keep off the auctions.”

He says financial institutions aren’t willing to crater the secondary resale market with abandoned rigs and equipment, but more small companies will be put out of business, and larger ones that make it, will be in rough shape on the other side.

In the meantime, the price of crude oil continues to tumble, slipping below $30 a barrel on Friday and still showing no signs of bottoming out.

That’s putting more pressure on the Canadian dollar which has tumbled below 69 cents U.S. and, although it’s still not nearly as apparent in this area as in many places in the country, the retail price in gasoline also continues a rapid decline.