Several positive trends for the oil patch in southeast Saskatchewan and other jurisdictions have given Warren Waldegger reasons for optimism in 2014.
Waldegger – the chair of the Saskatchewan Headquartered Oil Producers, the general manager at T-Bird Oil and the president of FireSky Energy – said there are many in the local oil patch who share his confidence for 2014.
Among the positive numbers are:
*The most recent sale of crown land last month generated about $13.9 million, compared to $11.5 million in December of 2012. The Estevan-Weyburn area accounted for $7.5 million last month, an increase from more than $5 million the previous year.
*The Canadian Association of Oilwell Drilling Contractors (CAODC) projects that the industry will drill 10,604 wells in 2014, which will generate 124,701 operating days for rig contractors. The well count is 45 fewer than the projected well count for 2013, but the association anticipates that rig activity will be slightly stronger in 2014, due to an increase in the average length of time needed to drill a well.
*The number of wells drilled in the first 10 months of 2013 was 2,777, compared with 2,691 the previous year. The number of horizontal wells drilled was at 1,992, which was more than 2011 or 2012.
*There were 93 active drilling rigs in Saskatchewan as of January 20, and 98 as of January 13 – the highest numbers in several months.
"I think there seems to be a significant focus on oil drilling versus gas drilling, and southeast Saskatchewan will obviously benefit from that," said Waldegger. "Most of the press releases that I'm seeing on capital budgets still seem to be suggesting that there will be some significant investment in southeast Saskatchewan."
There can be a number of reasons for the growing rig counts. In some cases, it's because new budgets come into play. In other cases, companies are trying to play catch-up following the Christmas break.
"It's still a strong price environment, and I guess it's just a sign that there is capital available to be invested into the province," Waldegger said.
The gradually sliding value of the Canadian dollar also carries benefits for producers. The dollar has usually hovered around parity with its U.S. counterpart in recent years, but it dropped below 91 cents U.S. on January 21.
Oil is sold in U.S. dollars, and most Canadian oil is shipped into the U.S. So when the dollar slides, it's good news for exporters.
A lower Canadian dollar also offsets some of the price differentials that oil producers are facing because of landlocked oil, he said.
Weather conditions have been a challenge in previous years, Waldegger said, and they could be an issue again in 2014.
"Our own internal planning at T-Bird and FireSky is to be a little less active in May, June and maybe even July compared to prior years, and that's simply a matter of following a trend," said Waldegger. "It's hard to get the work done if you know it's going to be quite wet. We're planning most of our budget for the middle to late summer and into the fall."
Waldegger suspects the recent uptick in activity could be connected to the unpredictably associated with road bans in recent years, and so people in the patch want to get work done during the winter months while they still can.