CALGARY – A pair of forecasts released Thursday see little in the way of good news for Canada’s ailing oil and gas sector.
The Petroleum Services Association of Canada predicts drilling activity will be 36 per cent lower than what it anticipated just six months ago, with only 3,315 wells drilled in 2016. It’s the second time the forecast has been revised downward since November.
“These are dire times for the Canadian oilfield service, supply and manufacturing sector, with no indicators for positive change in the near future,” PSAC CEO Mark Salkeld said in a release.
“The last two drilling seasons were pretty much non-existent. What a lot of people don’t realize is when the oil and gas sector is not working, oilfield services companies are tools down and there is no cash flow. This is unlike our customers, the producers, who can still generate some revenue, however dismal, from production.”
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Meanwhile, a new report from the Conference Board of Canada says the country’s oil and gas industry is expected to be in the red for the second year in a row.
But the pre-tax losses for 2016 aren’t expected to be as severe as last year and the sector is on track to return to profitability in 2017.
The Ottawa-based economic think-tank predicts Canadian oil producers will collectively lose more than $3 billion this year, an improvement from last year’s record $7 billion loss.
The price of West Texas Intermediate crude, the key U.S. benchmark, is projected to rise from US$39 a barrel this year to around $65 a barrel in 2020.
The natural gas extraction industry is expected to incur losses of $1 billion this year, a slight improvement from the $1.1 billion hole last year.
In 2017, the Conference Board sees oil producers turning a profit of $809 million and gas producers eking out $172 million in earnings.