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Updated drilling forecast a sign of potential capital spending: expert

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The former president of the Grande Prairie Petroleum Association believes the updated drilling estimates for 2021 could be the start of momentum for the oil and gas sector. On Thursday, the Petroleum Services Association of Canada released its latest forecast, predicting 1,632 wells to be drilled in Alberta in 2021.

That represents a year-over-year increase of 184 from 2020. However, the new numbers are still almost half of what was expected during the pre-oil price plunge in 2015 when 2,839 wells were in the forecast.

The latest numbers are also up from the initial forecast released in October, which predicted 1,230 wells to be drilled. Rob Petrone says it’s definitely an indicator that there is capital money being invested in the sector, which means they see the need for continuous growth.

“The drilling that’s happening here now is a function kind of offsets the natural decline, and even some of the smaller companies trying to grow production,” he explains. “The most positive thing for it will provide job opportunities to get people back to work.”

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Petrone says, despite the positive forecast, it’s a bittersweet time for many in the industry. Cenovus Energy buying out Husky Energy has reportedly led to upward of 2,000 positions lost, which Petrone argues takes a lot of wind out of the sails of those in the sector. He adds, however, it’s par for the course for the majority of takeover efforts.

“Just free up more cash for reinvesting which turns into drilling more wells and developing resources,” he says. “As sad as it is for the people getting laid off, it does re-focus, re-structure, and puts cash back into capital investment which shows positive growth.”

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