PSAC outlook for 2021 improves in third update of year

CALGARY, AB. – The Petroleum Services Association of Canada revised the number of wells drilled across Canada …

CALGARY, AB. – The Petroleum Services Association of Canada revised the number of wells drilled across Canada this year to 4,250.

The revised third update of the 2021 Canadian Oilfield Services Activity Forecast, released Thursday, shows an increase of 650 wells over the April Forecast of 3,600 wells.

This update is based on the PSAC expecting the price of crude oil to average US$64/barrel (WTI), natural gas to average CDN$3.35 MMBtu (AECO), and the Canadian dollar to improve to an average of US$0.81 in 2021.

“As global demand for oil has increased with economies reopening and record-high summer temperatures increasing demand for natural gas, WTI and AECO commodity prices have risen to levels not seen since 2018 and 2014, respectively. This has translated to better-than-expected cash flows for exploration and production (E&P) companies and the ability to drill new wells,” said PSAC President and CEO Gurpreet Lail.

“While strict fiscal discipline to pay down debt, buy back shares, and issue dividends is still the order of the day, we are seeing capex budgets being revised upwards for H2. We can’t be sure we’ve seen the end of lockdowns from the pandemic, but cautious optimism is definitely in the air.”

Lail says with activity returning to pre-pandemic levels, companies face another obstacle trying to recruit workers.

“While companies are eager to stand up equipment that has been sitting idle in order to meet demand, undermanned crews will constrain their ability to do so, already resulting in some work being turned down or postponed.”

Activity levels in the first 6 months of 2021 will only account for 45 per cent of the yearly total, compared with the same period last year when recovery from a prolonged downturn saw 64 per cent of all activity.

“Maintenance, repair, and operations (MRO) work is also robust as cash flow to increase production at today’s higher prices becomes a priority.” added Lail.

PSAC estimates 2,330 wells in Alberta and 1,290 in Saskatchewan, representing year-over-year increases of 890 and 213 wells, respectively.

In British Columbia, activity is projected to increase from 367 wells in 2020 to 510 wells in 2021.

“Any tempering of optimism for the future comes from increasing federal government climate goals. The most recent announcement of a ‘People-centred Just Transition’ portends the intention for a quickened pace to force transition to renewables through legislation. This, despite the fact that the domestic oil and gas industry has already made great strides in reducing emissions and is the largest spender on clean technology in Canada. While the world still needs oil and gas, Canada, with its responsible development, should be the supplier”, said Lail.

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