CAODC forecasts very slight increase in wells for 2018

Brian Zinchuk
Estevan Mercury
November 24, 2017

The Canadian Association of Oilwell Drilling Contractors (CAODC) is forecasting a very slight increase in the number of wells drilling in Canada for 2018, but also a decrease of the number of drilling rigs.

The organization’s forecast, released Nov. 21, projected 6,138 wells for the country, an increased of 107 from its 2017 number.

The number of rigs is expected to decline, however, from 634 to 615, a drop of 19 rigs. According to sister publication Rig Locator, in 2014 there were just over 800 drilling rigs in Canada.

One of the Canadian oil and gas industry’s biggest hurdles continues to be lack of market access and regulatory stability, according to the CAODC, which noted in a release that 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 has been delayed.

CAODC president, Mark Scholz, expresses his disappointment with the current approach of some policymakers: "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.”

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.

They forecast a slight increase in operating days, from 69,353 in 2017 to 70,587 in 2018.

“Right now our members are offering a premium product for discounted rates just to survive,” said 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, 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.”

John Bayko, vice president of communications for CAODC, said, we are seeing consolidation of the industry, and rigs coming off the books. The high-specification triples and doubles seem to be the busiest.

The demand is for bigger pumps, bigger circulation systems, higher pressures, and more horsepower.

Drillers are still price takers.

“You can take the best of the best and pretty much pick your price,” Bayko said. Their members are still seeing depressed day rates, now for several years.

Story: Estevan Mercury