Market Snapshot: Western Canadian drilling activity falls more than 75% from two years ago

Release date: 2016-10-25

Western Canadian rig activity typically peaks in the winter, when the ground is frozen and rigs can move into areas they normally cannot access during the rest of the year. Activity is lowest in the spring, when rigs are prevented from moving into new drilling locations due to the frozen ground melting and provinces enacting road bans.

Allowing for these seasonal fluctuations, low oil and natural gas prices have clearly caused western Canada’s rig activity to fall significantly over the past two years. During the summer of 2016, the number of rigs drilling wells had fallen 50% from 2015 summer levels, and over 60% from 2014 summer levels.

Source and Description

Source: JuneWarren-Nickles

Description: The stacked area chart illustrates drilling rig activity in western Canada from 2010 to 2016, broken down by horizontal or vertical drilling, and rigs targeting oil or natural gas. Rig activity in western Canada through the summer, fall, and winter from 2010 to 2014 varied seasonally between 300 and 425 rigs drilling at any time. In 2014, summer rig activity was about 350. In 2015, that fell more than 50% to about 150. In 2016, summer rig activity fell more than 60% from the 2014 figure to about 85. In the summer of 2016, more than 90% of all rigs were drilling horizontal wells.

In addition, the trend of rigs moving away from drilling vertical wells for conventional oil and gas development continued. In the summer of 2016, an average of four rigs a week drilled vertically compared to an average of 80 rigs a week drilling horizontally. After decades of development, western Canada’s conventional resources are already heavily drilled and many of the remaining prospects do not produce enough oil and gas to recover the cost of drilling them – especially with low prices. Drilling activity is now concentrated where operators have their most economic prospects, which is largely in core areas of tight gas and tight oil production. As a result, more than 90% of today’s western Canadian rigs are drilling horizontal wells.

 

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