An oil and gas industry group is expecting to see a drop in wells drilled in Canada next year due to a sense of uncertainty following the federal election.
The Petroleum Services Association of Canada released its 2020 Drilling Activity Forecast, with a total of 4,500 wells predicted. It’s a drop of 500 from the Association predicted 5,000 wells in their 2019 revised forecast.
PSAC is predicting year-over-year decreases in western provinces. Alberta will see 235 fewer wells with a total of 2,155 to be drilled this year. Saskatchewan will have 1,795 wells drilled which is 200 fewer than the year before.
The company bases its forecast on oil going for $58 U.S. a barrel, the average natural gas prices staying at $1.60 CAD per Mcf and the Canadian dollar at $0.76 U.S.
PSAC President and CEO Gary Mar says exploration and production companies are choosing to buy back under-valued shares, pay dividends and pay down debt instead of reinvesting in Canada.
“It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists. With the unrelenting focus on climate action during the recent federal election campaign and the resulting minority government that is expected to be supported by parties that have no interest in the global GHG reductions that Canada’s oil and gas industry can deliver nor the economic benefits that Canada’s most prolific industry and largest exporter provides, PSAC is forecasting a further five per cent decline in activity to 4,500 wells.”
Mar says a bright spot is companies are spending on production optimization, maintenance and repair work along with decommissioning and closure work which is keeping them afloat.