Canadian drilling forecast rises on bump in commodity price expectations

The association representing oilfield service companies is boosting its 2021 drilling forecast by 29 per cent thanks to a stronger commodity price outlook.

The Petroleum Services Association of Canada says it now expects the number of wells drilled across Canada this year will total 3,350, up 750 over its original forecast in October of 2,600 and representing an increase from 2020 instead of a decline.

PSAC says it now expects average benchmark U.S. crude oil prices of about US$50 per barrel, up 19 per cent from the old forecasts, with Alberta natural gas prices of C$2.60 per thousand cubic feet and the Canadian dollar slightly stronger at 79 cents US.

The improved outlook is consistent with other recent signs of optimism in the gloomy oilpatch, with the Canadian Association of Petroleum Producers calling for capital spending to rise to about $27.3 billion this year, up $3.36 billion compared with 2020.

Neither forecast is particularly robust. Last year's actual well count of 2,992 was a 50-year low and CAPP's spending estimate is a far cry from 2014 when oilpatch investment reached $81 billion.

PSAC Interim CEO Elizabeth Aquin credited federal government programs such as the emergency wage subsidy and a $1.7-billion abandoned well cleanup program for helping oilfield services companies survive a prolonged downturn made worse by the COVID-19 pandemic's affect energy demand.

"The innovation and technology developed by this vital sector is needed to continue to lower carbon emissions and demonstrate continued progress on our ESG record for investment," she said.

"Increased investment will be required for opportunities to address the growing demand for natural gas for LNG and nascent blue hydrogen industry and to replace dwindling heavy oil volumes from Mexico and Venezuela to the U.S."