CALGARY – Canada’s drilling industry is expected to post its worst year in more than three decades in 2016 with more layoffs and a record number of idled rigs.
“We are predicting one of the lowest utilization rates of our equipment since we started collecting this information in 1977,” Canadian Association of Oilwell Drilling Contractors president Mark Scholz said Wednesday.
Scholz said that drilling activity next year would be “the worst in a generation” with an average of only 159 rigs working, out of a total fleet of 722. He said the last time there was an average that low was in 1983, when the total fleet numbered about 450. That would make next year’s utilization rate the worst on record.
In its 2016 forecast, the CAODC estimated a total of 4,728 oil and gas wells will be drilled, a 14 per cent drop from the 5,531 wells expected to be drilled by the end of 2015.
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That is itself a 50 per cent drop from the 11,226 wells member companies drilled in 2014. “We’re already one year into this, and so what I would say is we’re going to see another year repeat,” Scholz said.
A further drop in active rigs will mean a decrease in the number of people needed to work on those rigs.
“There’s going to be hardship and desperation from trying to find quality work that’s going to help pay the bills and it’s not going to be accommodated by the oil and gas industry for a while,” Scholz said.
During the course of this year, companies including Trinidad Drilling Ltd. and Precision Drilling Corp. have cut thousands of salaried staff and hourly field positions.
The association is now expecting 28,485 people, directly and indirectly employed in the oilfield, to lose their jobs as a result of the commodity price downturn that began in 2014. Those figures are an update on the CAODC’s last prediction, in June, that 25,110 people would lose their jobs over the course of 2015.
“You’ve got these folks that have mortgage payments, car payments and mouths to feed,” Scholz said, adding some may need to leave the province to find work.
Oilfield activity has fallen sharply along with the collapse in oil prices. On Wednesday, the West Texas Intermediate benchmark oil price briefly dipped below US$40 per barrel before closing the day at US$40.75.
An increasing number of oil price forecasters expect these low prices to persist through 2016 and into 2017 meaning oilfield service providers can expect another bleak year.
Like the CAODC, the Petroleum Services Association of Canada, which represents fracking companies and other non-drilling oilfield companies, has predicted a further drop in oilfield activity in 2016.
“Low commodity prices, oversupply and low cash flows obviously impacted us significantly in 2015, resulting in an over 50 per cent loss of activity from previous year averages. With those same factors continuing we can’t expect anything better for 2016,” PSAC president and CEO Mark Salkeld said in a statement Nov. 3.