We understand the specialized markets in which you operate and provide tailored solutions to meet your unique business needs.
Our comprehensive suite of business services combines industry expertise, market knowledge and professional insights.
MNP is a leading national accounting, tax and business consulting firm in Canada.
Suite 2000, 330 5th Ave. S.W.
MNP careers are Different by Design. As an entrepreneurial firm, we truly believe there are no limits to where your career can go.
Canadian oilfield services have become masters at re-evaluating their operations to make them ever-more efficient and effective since the oil prices route of 2014. One highlight of the extended drop has been a jump in productivity gains, driven by technology and increased knowledge of the plays. Older rigs have been retired or cannibalized, and higher-tech rigs drilling in more precise parameters are producing more oil, faster and cheaper.
Oil prices that appear to have stabilized above the US$50 per barrel point have also injected a bit of optimism into the oil patch, says Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors. But the most telling factor will be if and when producers show they have stable cash flow and are redeploying capital in a consistent manner. He tells MNP it will take until the second half of 2017 to determine if the increase in rig utilization and activity has been sustainable.
Activity certainly has increased since OPEC said in December it would be cutting its production targets. Weekly rig utilization in western Canada reached 49 per cent the last week of January, the highest season rate since 2014 when utilization hit 73 per cent. In contrast, rig utilization was 29 per cent during the same period in 2016 and 51 per cent in the year prior.
Our bi-weekly information bulletin can be delivered directly to your email and is available on MNP.ca.
The following dashboard provides information on some of the leading indicators of future oil and gas activity, including capital spending, drilling forecasts, trends for licensing and rig releases, as well as rig activity rates.
Total Canadian capital spending in 2017 could see more of an upswing than anticipated, with major producers announcing increased budgets in the New Year. Topping the list was Husky Energy bumping up its capital spending to a $2.6 billion to $2.7 billion range, from approximately $2.billion in 2016.
Crescent Point Energy moved up its capex to $1.45 billion from $1.1 billion last year, while Cenovus Energy said it plans to invest between $1.2 billion and $1.4 billion this year, a 24 per cent jump from last year’s expected capital spending. MEG Energy upped its spending budget for 2017 almost fivefold, to $590 million, while Penn West almost doubled its budget to $180 million from $95 million in 2016.
The numbers announced in January will pull up the Canadian Association of Petroleum Producers’ forecast, issued last November, of about $37 billion in 2017, compared to an estimated $36 billion in 2016 (an updated outlook could be released later this quarter). According to that initial forecast, in Western Canada, conventional oil and gas investment is expected to increase sharply in 2017 to $22.1 billion from only $17.5 billion in 2016, a 26 per cent improvement.
“I know it is coming from a very low point, but the reality of it is a [26 per cent] increase in capex is certainly welcome,” says Ben Brunnen, manager of fiscal and economic policy at CAPP.
One reason for the conventional spending uptick in the upstream sector, notes Brunnen, is the removal of certain regulatory distortions and disincentives for certain plays in Alberta as a result of the new oil and gas royalty framework, details of which were released earlier in 2016.
In January 2017, the Petroleum Services Association of Canada (PSAC) bumped up its 2017 Canadian drilling activity forecast, now estimating industry will drill (rig release) 5,150 wells this year, up 23 per cent or 975 wells from its original estimate made in early November 2016.
PSAC is definitely seeing positive signals through the first quarter, including parts of the Canadian oilfield service, supply and manufacturing sector realizing an uptick in activity as oil prices recover, said Mark Salkeld, president and chief executive officer.
PSAC now estimates 2,706 wells will be drilled in Alberta, up from 1,900 wells in the original forecast.
About 31 per cent more wells are expected to be drilled in British Columbia: 367 wells instead of 280 in the original forecast.
The revised forecast for Saskatchewan now sits at 1,985 wells compared to 1,940 wells in the original estimate, and Manitoba is expected to see 73 wells or an increase of 23 in its well count for 2017.
The number of new well permits issued continued to climb in January, with close to 1,000 wells permitted across Canada in the first month of 2017. The trend followed November and December when an average of 1,000 new wells were licensed, 50 per cent in Alberta.
While stronger pricing for crude starting in November drove part of the increase, provincial support also played a hand. Based on feedback from industry, the Alberta government allowed the early adoption of the Modernized Royalty Framework (MRF), beginning on July 12, 2016, for wells that otherwise would not have been drilled this year. The amended royalty program helps reduce costs for producers based on certain application criteria.
Rig Release Counts
The rig release count also increased significantly in January 2017. Preliminary numbers indicate 966 wells were drilled, up 35 per cent from 714 in January 2016, and the highest monthly tally since February 2015.
During the final two months of 2016, producers drilled significantly more wells than the prior-year periods. In November 2016, operators rig released 567 wells across Canada (including experimental/test wells) compared to 421 a year ago (up 35 per cent).
In December, producers drilled 553 wells versus 399 in the year-prior period (an increase of 38 per cent).
Rig utilization hit a two-year high in January, rising to 49 per cent of the active fleet. Approximately 314 rigs were drilling during the month, 223 of them in Alberta. The total Canadian fleet, as of the end of January, was 641 land-based drilling rigs, two off-shore rigs and 979 service rigs.
Drilling rig activity plummeted to historic lows in May 2016, sinking to five percent, compared to almost 11 per cent the year before and substantially lower than the 20 per cent utilization rate in 2014.
A year ago January the Canadian fleet numbered 748 drilling and 1015 service rigs, already down from 804 drilling and 1108 service rigs in January 2015. Improved technology resulting in drilling efficiencies and retirement of older rigs played a large part in the trimming of Canada’s rig fleet.
MNP understands the oilfield services industry – its drivers, challenges and opportunities. We are proud to provide insight into the latest industry news and trends in our newsletter, issued in association with JuneWarren-Nickle’s Energy Group. For more information on MNP’s OFS services, contact Tom Minogue, CPA, CA, CF, at 780.832.4298 or
Client Groups:Oilfield Services
Suite 2000, 330 5th Ave. S.W.
Find an office near me