Oilwell drilling activity to decline in Canada, says CAODC

The Canadian Association of Oilwell Drilling Contractors (CAODC) forecasts a -10% decline in activity in 2015. A major factor in the predicted decline is uncertainty regarding pipeline construction. The Canadian industry’s inability to access foreign markets is undermining economic activity.

President of the CAODC, Mark Scholz, said:

“The B.C. government is weighing decisions that will have a significant impact on industry activity. The current uncertainty has been factored into this forecast. If a direction is established regarding pipeline construction or LNG terminals, then we will definitely revisit these projections.”

Mr. Scholz added that if crude oil prices continue falling, and if there is a negative response from the LNG industry, the forecast will need to be adjusted downward.

Mr. Sholz warned “Let’s not kid ourselves. If we don’t get pipeline infrastructure built in this country, we are going to be in a lot of trouble.”

Quarterly breakdown for 2015

The CAODC says the drilling sector follows a specific annual cycle as far as activity is concerned. Rig utilization and operating days are higher in the first quarter than the other three. Because of the spring break-up, activity declines in the second quarter.

Things pick up again in the third quarter, and even more in Q4 as “cold weather opens more opportunity.”

Rig utilization is predicted to reach about 61% in the first quarter, falling to 19% in Q2, then 41% in Q3 and 46% in the fourth quarter of 2015.

The CAODC registered fleet will start the year (2015) with 809 rigs, and will reach 813 by the end of 2015.

CAODC is a trade association representing the contract drilling and service rig industry across the country. Members include 44 land based drilling contractors, 83 service rig contractors, 2 offshore drilling contractors, and 217 associate members.

Since their $115 per barrel peak in June 2014, oil prices have declined by more than 30%. Fortunately, so far, the industry has not panicked and has kept its capital expenditure outlook for next year virtually intact.