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BC Land Sale

By Richard Macedo

The first land sale of 2017 in BC produced $39.62 million in bonus bids, driven by a $35.13-million license in northeast BC prospective for the Montney.

This upbeat start is in contrast to the brutal 2016, which set a new record yearly low for bonus bids of $15.19 million. For 2015, the province took in $18.19 million, which means BC has already surpassed in one sale what it took in for the previous two years combined.

The high priced-parcel, a 2,331-hectare license picked up by Plunkett Resources Ltd., produced an average price of $15,071.88.

Also at the sale, Basm Land & Resources Ltd. picked up a 257-hectare license for $2.5 million at an average price of $9,741.70.

Source: CanOils Assets

The lands are lightly drilled, and are located within the Montney play fairway between two well-established developments: Swan Lake to the south and Dawson to the north.

2017
Sale Date Hectares Bonus ($) Average Price / Hectare
January 2017 7 764 $39,621,805 $5,103
2017 Total 7 764 $39,621,805 $5,103

 

Land Sale Annual History
Year Hectares Bonus ($) Average Price / Hectare
2007 595 559 $1.05 billion $1,758
2008 756 752 $2.66 billion $3,518
2009 389 664 $892.9 million $2,291
2010 381 132 $844.4 million $2,215
2011 191 529 $222.68 million $1,162.66
2012 136 521 $139.26 million $1,020.08
2013 119 095 $224.68 million $1,886.60
2014 148 705 $382.79 million $2,574.17
2015 62 197 $18.36 million $295.13
2016 96 617 $15.19 million $157.22
JuneWarren-Nickle's Energy Group

Alberta Land Sales

By Stephen Marsters and Richard Macedo

The Alberta government's first land sale of 2017 produced $12.73 million, as industry purchased 66,088 hectares at an average price of $192.55.

At the first sale in 2016, industry purchased 40,302 hectares for just under $2.4 million at an average price of $59.43 per hectare.

Sale highlights

Lexterra Land Ltd. purchased a 256-hectare lease for $1.38 million. This parcel produced the per-hectare high for the sale, at $5,389.96 per hectare.

Britt Resources Ltd. purchased a 512-hectare license for $1.29 million. The parcel produced an average price of $2,511.57.

Another parcel was purchased by Cougar Creek Land Ltd. for $656,327.68, or $2,563.78 per hectare.

Oilsands bonus

This sale also included the sale of 512 hectares of Crown oilsands rights in the Cold Lake area.

Windfall Resources Ltd. picked up the only parcel for $326,533.12, or $637.76 per hectare.

The Alberta land sale of January 25th brought $5.22 million into provincial coffers, powered by a single parcel in northwest Alberta.

Industry purchased 22,717 hectares at an average price of $229.64.

One parcel, which attracted a bid of over $3 million, accounted for most of the spending as it was located in the Montney fairway, although a couple of tracts in the parcel excluded the Montney.  After two sales so far this year, the provincial government has collected $17.94 million on 88,805 hectares at an average price of $202.04.

Mammoth Land Services Ltd. picked up a 1,280-hectare license for $3.09 million at an average price of $2,416.37.

2017
Sale Date Hectares Bonus ($) Average Price / Hectare
January 11, 2017 66 088 $12,725,037 $192.55
January 25, 2017 22 717 $5,216,812 $229.64
2017 Total

88 805

$17,941,849 $202.04

 

Land Sale Annual History
Year Hectares Bonus ($) Average Price / Hectare
2006 4 231 290 $3,433,708,927.04 $811.50
2007 3 006 658 $1,360,413,583.19 $452.47
2008 3 682 798 $1,228,520,837.80 $333.58
2009 1 842 058 $741,673,011.95 $402.63
2010 3 983 622 $2,414,581,311.83 $606.13
2011 4 606 952 $3,641,012,381.26 $790.33
2012 3 158 488 $1,120,780,950.83 $354.85
2013 2 277 948 $698,321,632.93 $306.56
2014 1 089 453 $494,025,614.35 $453.46
2015 1 615 398 $298,739,730.19 $184.93
2016 996 577 $148,563,229.17 $149.07
JuneWarren-Nickle's Energy Group

Weak Year for Land Sales In Western Canada

After land spending plunged by 65 per cent in 2015 to $375.78 million, producers tightened their wallets further in 2016, spending $217.51 million in bonus bids in Western Canada for the year.

Industry tied up 1.21 million hectares at an average price of $180.07. For 2015, the provinces sold 1.81 million hectares at an average price of $207.23.

Most of the spending in Alberta

For 2016, industry paid $148.56 million on 996,577 hectares at an average price of $149.07 per hectare in Alberta, where most of the land spending occurred. That's 50 per cent below the previous year's tally.

For 2015, industry paid $298.74 million on 1.62 million hectares at an average price of $184.93.

For 2014, the government collected $494.03 million for 1.09 million hectares at an average of $453.46.

BC 2016 land sale revenue sets record low

The BC government closed the year with $15.19 million in total bonus bids, the lowest annual total over a time period from 1978-2016.The province sold 96,617 hectares for 2016 at an average of $157.22.

The annual bonus total for 2016 was below the previous nadir of $16.72 million set in 1982, when industry picked up 166,441 hectares at an average of $100.48.

The heyday for land buying in northeast BC occurred in the late 2000s, when companies scooped up acreage prospective for unconventional natural gas in the Horn River and Montney. The peak of this land rush came in 2008, when industry paid $2.66 billion for 756,752 hectares. In 2007, the government collected $1.05 billion in bonus bids.

More robust land prices in BC await a strong resurgence in gas prices and demand, which likely means LNG approvals.

Saskatchewan spending off slightly

In Saskatchewan, the Crown petroleum and natural gas rights public offering in December raised $14.24 million for the province, bringing the yearly total to $53.49 million, down slightly from $56.47 million the previous year

Manitoba spending down

The province ended the year with bonus bids of $262,189 on 2,981.62 hectares at an average price of $87.94, figures that are well off from the past few years.

Work bids

In Saskatchewan at the August sale, four petroleum and natural gas special exploratory permits were included in the offering and were acquired by Scott Land & Lease Ltd. with a combined work commitment bid of $245,920.

In November, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) announced the results of Call for Bids NL16-CFB01 in the Eastern Newfoundland Region and Call for Bids NL16-CFB02 in the Jeanne d'Arc Region, both located in the Canada-Newfoundland and Labrador Offshore Area.

The total value of both Calls for Bids was $757,989,794 in work commitments.

JuneWarren-Nickle's Energy Group

AltaGas To Proceed With Ridley Island Propane Export Project

Following approval by federal regulators, AltaGas Ltd. says it anticipates beginning construction early in the first quarter on what is expected to be the first propane export facility on Canada's West Coast, the Ridley export terminal.

AltaGas has executed long-term agreements securing land tenure along with rail and marine infrastructure on the site near Prince Rupert on a section of land leased by Ridley Terminals Inc. from the Prince Rupert Port Authority.

The terminal will be designed to export 1.2 million tonnes of propane per year (roughly 40,000 bbls per day) by the first quarter of 2019.

The estimated cost of the project is approximately $450 million to $500 million. Along with the positive final investment decision, AltaGas will be offering a third party the option to take an equity position of up to 30 per cent in the terminal.

The Ridley Island terminal has the advantage of short shipping distances to Asian markets which translate into a 10-day shipping time compared to 25 days from the United States Gulf Coast. The brownfield site also benefits from excellent railway access and a world class marine jetty with deep water access to the Pacific Ocean, said AltaGas.

The Ridley Export Terminal will support long-term economic stability in the region through the diversification of products at Ridley Terminals, and employment opportunities for area residents and First Nations. It is estimated that 200 to 250 construction workers will be hired during the construction phase and 40 to 50 permanent jobs will be created once the facility is operational.

JuneWarren-Nickle's Energy Group

Scott Land The Top Crown Buyer

Scott Land & Lease Ltd. was the top buyer of Crown land for 2016, spending $89.27 million, with $63.26 million doled out for acreage in Alberta.

The broker acquired 409,595 hectares on behalf of its clients for the 12-month period at an average price of $217.94. Scott Land picked up 306,854 hectares in Alberta from January-December 2016.

The second most active Crown buyer in 2016 was Synergy Land Services Ltd. which acquired 43,955 hectares for $12.99 million at an average price of $295.45. 

JuneWarren-Nickle's Energy Group

Crew Energy

Crew Energy Inc. will spend $200 million in 2017 on Greater Septimus drilling and completions and West Septimus facility expansion, predominantly, while also maximizing key service costs through to the end of the year.

With three drilling rigs running in the first half of 2017 to complete a 28-well Montney program, the company also intends to complete and tie-in 11-net previously-drilled wells that further contribute to volume growth.

Crew will invest $140 million into Montney drilling and completions, as well as equip and tie-in activities such as the planned drilling of the above-mentioned 28 (26.3 net) wells and completion of 39 (37.3 net) Montney wells through the year.

Key infrastructure projects that include West Septimus facility expansion to 120 mmcf per day of gas processing capacity in aggregate with Septimus and Tower will receive $40 million of 2017 capital and provide Crew with 45,000 boe per day of processing capacity for Montney gas and liquids production.

Pipeline construction will also begin providing physical access to the TransCanada PipeLines Limited (TCPL) system by Q2 2018, further diversifying Crew's marketing strategy and supporting a three-year growth plan to more than 60,000 boe per day.

Budget overview

Receiving roughly 64 per cent of 2017 capital spending, West Septimus activities include drilling 23 (21.3 net) wells at an average $3.8 million total estimated drill, complete, equip and tie-in cost per well. During the year, crews will complete an additional five wells drilled in Q4 2016.

The drilling program includes about 10 development and delineation wells situated in the ultra liquids-rich window.

Further, Crew intends to expand by Q4 2017 its West Septimus gas plant processing capacity to 120 mmcf per day. In concert, management budgeted about $20 million to start construction of a pipeline connecting West Septimus infrastructure into the TCPL Saturn meter station, which should be in service by early 2018. The Groundbirch facility intersection should be in service by late 2018.

With approximately 12 per cent of 2017 capital spending at Septimus, crews will drill one well at a total drill, complete, equip and tie-in cost of $3.6 million. The company intends to bring five wells on production during the year from this area, including four previously-drilled wells carried forward from 2016.

The company also intends to spend about $10 million for a pipeline expansion accommodating production volumes from the West Septimus plant expansion and de-bottlenecking projects at Septimus.

As for Tower, Crew will spend about 15 per cent of its 2017 budget to complete two remaining 2014 drilling program wells in the first quarter, as well as complete in-field facilities projects and drill four new wells to maintain production levels at the Tower facility. Management estimates the total drill, complete, equip and tie-in costs for these wells to be $5.4 million per well.

Equipment procurement is well underway for the planned expansion of Crew's West Septimus facility, scheduled to be in service in Q4 2017.

JuneWarren-Nickle's Energy Group

Pembina Pipeline

Pembina Pipeline Corporation has received regulatory approval for and initiated construction on its previously announced $235 million expansion of its pipeline infrastructure in northeast British Columbia.

The project entails the construction of approximately 145 kilometres of 12-inch diameter pipeline with a base design capacity of up to 75,000 bbls per day that will parallel much of the existing Blueberry pipeline system northwest of Taylor, BC to the Highway/Blair Creek area of BC.

The NEBC expansion will provide a conduit for natural gas liquids and condensate produced in the liquids-rich Montney resource play to access the company's downstream pipeline systems that feed into markets in the Edmonton and Fort Saskatchewan, Alberta area. Pembina anticipates bringing the NEBC Expansion onstream in late 2017.

JuneWarren-Nickle's Energy Group

Trans Mountain

By Elsie Ross

Increased access to Asian markets for Alberta oilsands production moved a step closer with the BC government announcement that the Trans Mountain pipeline expansion has met the five conditions set by the province to secure coastal protection and economic benefits for its residents.

The BC segment of Kinder Morgan Canada Inc.'s project also has received a provincial environmental assessment certificate, subject to 37 conditions to further protect wetlands, wildlife habitat and caribou and grizzly populations. The conditions are in addition to and designed to supplement the 157 conditions required by the National Energy Board and included in the earlier federal approval.

The next steps include a final investment decision by Kinder Morgan's board of directors. Trans Mountain said it is planning to begin construction in September 2017, with an in-service date for the twinned pipeline system expected in late 2019.

JuneWarren-Nickle's Energy Group

License Count Tally At 24-Year Low

Despite an uptick in well permitting at the end of 2016, total well authorizations across Canada slumped 22 per cent last year to 6,448 licenses, down from 8,235 permits in 2015.

The 12-month license count hasn't been this low since 1992, when 5,283 wells were authorized across the country.

In December, industry licensed 960 new wells, up from 930 well authorizations in December 2015. That was the second month in a row that saw an increase in permitting compared to the prior-year period.

Operators in Alberta licensed 3,523 wells in 2016 compared to 4,660 wells the prior year (down 24 per cent).

Saskatchewan recorded the smallest year-over-year percentage decrease in permits. The permit count declined five per cent to 2,395 licenses in 2016 compared to 2,526 licenses in 2015.

There were 1,450 oil and bitumen wells were permitted in Alberta last year compared to 2,046 in 2015, while 2,205 oil wells were authorized in Saskatchewan, off slightly from 2,320 the prior year.

In BC, the province assigned 394 new licenses last year versus 806 in 2015 (down about 51 per cent).

Manitoba saw its license count decline 46 per cent to 126 wells in 2016 from 235 the previous year.

Across Western Canada, the 2016 license count included 3,782 permits to drill for oil or bitumen, down from 4,642 the prior year.

Gas well permitting (gas and CBM) during 2016 in the three most western provinces decreased to 1,440 from 2,165 the prior year. In 2004 and 2005, more than 20,000 gas wells were licensed per year.

The 2016 total included 4,841 horizontal wells (excluding experimental wells), or about 85 per cent of the total, compared to 5,831 horizontal wells in 2015 (again, excluding experimental wells), or 80 per cent of the total.

Industry licensed 657 oilsands evaluation wells in 2016, a decrease of 25 per cent from 878 licenses in 2015. The final month of 2016 saw 113 oilsands evaluation wells permitted.

Top licensees

The top licensee of new wells in 2016, including experimental wells, was Crescent Point Energy Corp. (821 permits).

Other top licensees included: Cenovus Energy Inc. (483), Raging River Exploration Inc. (355), Canadian Natural Resources Limited (291) and Teine Energy Ltd. (256).

JuneWarren-Nickle's Energy Group

Montney Potential Continues To Grow

By Paul Wells

In a presentation on Western Canada's Montney formation to a gathering of United States investors, TD Securities Inc.'s Juan Jarrah pulled few punches in his assessment of the play's future viability and growth potential.

“It's big, it's thick and there's a lot of it,” he told the Oil and Gas Conference hosted by Enercon in Denver, Colo.

“I think [the Montney] is the most important resource play in Canada, definitely, and could be one of the most important in North America, in my opinion,” said Jarrah. “It's pretty clear that the Montney can challenge every other play in North America. It is one of the most economic ... [and] it's been a significant source of production and reserves additions and [there has been] a decrease in operating costs for anyone who is actually focused in the play.”

  Wells rig released with Montney as an objective Total wells rig released
2015 781 6,206
2016 580 4,647

The play, which is found in northeastern British Columbia and northwestern Alberta, has an areal footprint of about 50,000-square miles: 350 miles from north to south and about 130 or 140 miles from east to west. Given its massive size, all areas of the Montney are, obviously, not created equal when it comes to potential resource endowment.

Industry began experimenting with horizontal drilling in the play only in early 2006 and at the time of the 2013 NEB study there was a relative lack of accurate well control data. But that's not the case anymore, as of 2016 more than 5,600 wells had been punched into the Montney in British Columbia and Alberta.

Mike McAllister, chief operating officer for Encana Corporation, oversees the company's total net position in the play, which approaches 600,000 acres and includes large contiguous core land positions in the most proven regions of the fairway in both BC and Alberta.

After about a decade of activity in the play, the company is making major strides in unlocking the true value and potential of its Montney holdings, he said.

Encana expected to drill and complete an additional four wells at Pipestone to the end of 2016.

During the first half of 2016, the majority of Encana's Montney drilling was focused on Tower in northeastern BC

Glen Nevokshonoff, senior vice-president, operations, for Seven Generations Energy Ltd., said the company continues to make "strong and efficient progress" in drilling and completions operations and production from its Montney assets.

With a focus on its Kakwa River project in the Alberta Montney, 7G has 804 net Montney sections of land with approximately 3,300 potential undeveloped locations, 117 million boe (54 per cent liquids) of proved developed producing (PDP) reserves, 623 million boe (51 per cent liquids) of proved reserves and 1.15 billion boe (52 per cent liquids) of proved plus probable reserves.

Murphy Oil Corporation's Tupper Montney asset on the BC side of the play produced about 119 mmcf per day of gas during the third quarter and the company continues to be pleased with the performance of its recent extended lateral high sand concentration wells that were brought online in the second quarter.

The company is pleased with the performance of its longer lateral, high sand concentration wells at Tupper that were brought on production in the second quarter.

Four wells were drilled in the third quarter at Placid and eight were planned for late 2016 or early 2017. These 12 wells were to be completed over the course of the fourth quarter of 2016 and the first quarter of 2017.

ARC Resources Ltd.'s $665 million 2017 capital program will focus on the continued development of the company's ample stable of Montney assets.

The 2017 capital program features ARC's next major phase for growth with the commissioning of the Dawson Phase III gas processing and liquids-handling facility in late 2017.

The company also will advance strategic initiatives at Parkland/Tower, Ante Creek and Pembina, including infrastructure spending for the Parkland/Tower gas processing and liquids-handling facility expansion expected to come onstream in late 2018 or early 2019.

Painted Pony Petroleum Ltd. also is making great strides with the first quarter of 2017 expected to be its busiest since it became a pure play Montney operator, according to a new report from GMP FirstEnergy.

The producer currently has three drilling rigs actively drilling with a fourth drilling rig expected to begin drilling by mid-January. It anticipates drilling 22 net wells and completing 12 net wells with estimated capital spending of $87 million during the first quarter of 2017.

But the Montney is not just the domain of larger entities. Smaller players such as Crew Energy Inc. are also fine-tuning operations and growing output in the play.

In early January, Montney-focused Crew announced that it planned to spend $200 million in 2017 to increase Montney production by greater than 40 per cent to more than 30,000 boe per day in the fourth quarter of 2017.

With more than 300,000 net acres of Montney rights and more than 110 tcf equivalent of total petroleum initially in place, the company says it has "access to a massive resource for development and significant long-term growth potential."

To date, Crew has focused on the Upper Montney at its Septimus and West Septimus areas (Greater Septimus) and continued development at its Tower light oil area.

Crew plans to invest $140 million into Montney drilling, completions, equipping and tie-in activities, including the planned drilling of 28 (26.3 net) wells and the completion of 39 (37.3 net) Montney wells through the year.

The company will also direct $40 million of capital into key infrastructure projects including expansion of its West Septimus facility to 120 mmcf per day that along with Septimus and Tower will provide 45,000 boe per day of processing capacity for Montney gas and liquids production.

Pipeline construction also will begin to provide physical access to the TransCanada Pipelines Limited system by the second quarter of 2018, further diversifying Crew's marketing strategy and supporting its three-year growth plan to more than 60,000 boe per day.

Consolidation activity likely to ramp up

Ownership of assets in the Montney, to say the least, is fragmented. Following a land buying spree between 2009-2012, there are now more than 40 operators in the play.

In 2016, there were a number of high-profile deals in the Montney, including the July acquisition by Seven Generations of Montney production and lands from Paramount Resources Ltd. for $1.9 billion. In October, Tourmaline Oil Corp. scooped up Montney assets in BC and Alberta from Shell Canada Ltd. for just under $1.4 billion, while in June Birchcliff Energy Ltd. paid $625 million for Encana's wells and leases in the Gordondale area of Alberta. The assets (65 per cent gas weighted) are located in the Peace River Arch region and the target formations are the Montney and Doig resource plays.

JuneWarren-Nickle's Energy Group

Rigs Released

Operators across Canada drilled 4,072 wells in 2016, excluding experimental holes, off about 24 per cent from 5,359 wells rig released the prior year.

There were 11,174 wells rig released in 2014.

On a metres-drilled basis, operators rig released 11.07 million metres of hole in 2016 (excluding experimental wells), down about 21 per cent from 13.93 million metres in 2015.

In December, however, operators rig released 526 wells, up 50 per cent compared to 350 in December 2015. The number of wells drilled in November also saw an increase compared to the prior-year period.

By province, operators in Alberta rig released 2,005 wells in 2016, off 28 per cent from 2,799 wells drilled in 2015. By metres drilled, the province rig released 6.17 million metres compared to 7.93 million metres the previous year, a decrease of 22 per cent. There were 1,081 wells drilled with a target of oil or bitumen (off from 1,427 the prior year), while 732 wells had gas or coalbed methane as an objective (compared to 1,051 the previous year).

In Saskatchewan, operators drilled 1,632 wells during 2016, down about 10 per cent from 1,804 wells the prior year. Metres drilled declined just six per cent to 3.26 million metres from 3.48 million metres in 2015. There were 1,548 wells drilled with oil as an objective compared to 1,698 in 2015.

Operators in British Columbia drilled 342 wells during 2016, a decrease of 37 per cent from 539 wells rig released the previous year. Metres drilled declined 32 per cent to 1.45 million metres from 2.12 million metres in 2015.

Manitoba operators drilled 81 wells last year, down 61 per cent from 207 in 2015. Metres drilled declined 59 per cent to 143,851 metres in 2016 from 349,692 metres the previous year.

Many of the wells drilled last year are still under confidential status, but 69.05 per cent were listed as oil or bitumen wells. That compared to 62.04 per cent listed as oil or bitumen wells in 2015.

Meanwhile, 22.18 per cent of the wells with a reporting status were listed as gas wells, down from 27.30 per cent in 2015.

In Western and Northern Canada, the average depth/length per well was a record 2,674 metres last year compared to 2,525 metres in 2015.

Development drilling in Western and Northern Canada declined to 10.23 million metres in 2016 compared to 12.51 million the prior year, while exploratory metres drilled decreased to 804,702 metres from 1.38 million metres in 2015. Overall, industry drilled 254 exploratory wells in Western and Northern Canada in 2016 compared to 431 the prior year, while the number of development wells rig released declined to 3,827 from 4,955 in 2015.

Rig release counts, including experimental wells

Operators drilled 4,639 wells during 2016, including experimental wells, a decrease of 25 per cent from 6,206 wells rig released in 2015.

In the final month of 2016, however, 549 wells were drilled, up 38 per cent from 399 wells drilled in December 2015.

JuneWarren-Nickle's Energy Group

Crescent Point Top Operator

Crescent Point Energy Corp. was the top operator in 2016, excluding experimental/test wells -- drilling the most wells and rig releasing the most metres.

The company drilled 1.65 million metres last year -- the only company to drill over a million metres of hole -- and rig released 637 wells.

In terms of metres drilled, second-place finisher Tourmaline Oil Corp. rig released 600,708 metres.

Peyto Exploration & Development Corp. drilled 543,011 metres in 2016, while Royal Dutch Shell plc rig released 477,233 metres. Encana Corporation finished in fifth spot with 440,256 metres drilled.

Positions six through 10 were held by Raging River Exploration Inc. (440,148 metres), Cenovus Energy Inc. (384,444 metres), Teine Energy Ltd. (340,597 metres), Seven Generations Energy Ltd. (293,527 metres) and ARC Resources Ltd. (256,265 metres).

The top explorers in Canada over the first nine months of the year, ranked by metres drilled, were Crescent Point  (84,978 metres), Royal Dutch Shell (77,859 metres) and Athabasca Oil Corporation (53,229 metres).

Including both exploratory and development metres, Crescent Point was the top operator in Saskatchewan with a total of 1.56 million metres drilled. Peyto led in Alberta with a total of 543,011 metres, ARC was the top finisher in BC (203,292 metres) and Tundra Oil & Gas Partnership led in Manitoba (69,413 metres).

Ranking the operators by metres drilled, including test/experimental metres, the top operators were: Crescent Point (1.66 million metres), Tourmaline (600,708 metres), Peyto (543,011 metres), Royal Dutch Shell (477,233 metres) and Cenovus (463,659 metres).

Top operator based on rig releases

Ranked by wells rig released, excluding experimental/test wells, top operator Crescent Point (637) was followed by Raging River (268), Cenovus (249), Teine (215) and Canadian Natural Resources Limited (203).

In Alberta, the top five operators during 2016, based on wells drilled, were Cenovus (230 wells), Canadian Natural (183 wells), Peyto (130 wells), Tourmaline (101 wells) and Sinoenergy Investment Corp. (74).

Saskatchewan's busiest operators were Crescent Point (608 wells), Raging River (245), Teine (215), Whitecap Resources Inc. (68) and Husky Energy Inc. (61).

ARC led the pack in BC with 50 wells, followed by Progress Energy Canada Ltd. (47), Royal Dutch Shell and Painted Pony Petroleum Ltd. with 36 each, and Tourmaline (34).

In Manitoba, Tundra rig released 37 wells, while Crescent Point drilled 15 wells and Corex Resources Ltd. rig released seven wells.

Ranked by wells drilled, the top three explorers were Crescent Point with 31 wells, Royal Dutch Shell with 15 and Athabasca with 10.

Based on the rig release count, and including test/experimental wells, the top five operators in 2016 were: Crescent Point (640), Cenovus (414), Raging River (269), Teine (217) and Canadian Natural (212).

JuneWarren-Nickle's Energy Group

Contractors' Operating Days

Members of the Canadian Association of Oilwell Drilling Contractors (CAODC) booked 40,924 operating days in 2016, down 29 per cent from 57,468 in 2015, according to Rig Locator records.

The association's members drilled a total of 11.24 million metres last year compared to 13.6 million metres in 2015, while wells averaged 2,428 metres during 2016 versus 2,553 metres the prior year.

It took CAODC members an average 8.8 days to drill a well during the 12-month period compared to 10.8 days in 2015.

Based on wells rig released, Precision Drilling Corporation was the top contractor during 2016. Including oilsands evaluation holes and experimental wells, the contractor drilled 1,074 wells and rig released 2.73 million metres.

The company's main customer during the year was Cenovus Energy Inc., which accounted for 186 of its wells (17.3 per cent). The next top customer for Precision was Canadian Natural Resources Limited (110 wells), followed by Crescent Point Energy Corp. (88 wells).

Second-place finisher Savanna Energy Services Corp. rig released 831 wells in 2016 and drilled 1.49 million metres of hole.

Raging River Exploration Inc. was the main customer for Savanna (208 wells, or 25.2 per cent of the total), closely followed by Crescent Point (206 wells; 24.8 per cent of the total). Cenovus was the third-ranked customer for Savanna (91 wells).

Savanna's rig #441 drilled 96 wells over the 12-month period, the highest count for a rig.

Ensign Drilling Inc. was the third-ranked contractor based on rig releases in 2016, drilling 613 wells, although with 1.19 million metres drilled it ranked fourth by metres rig released. The company's main customers were Teine Energy Ltd. (178 wells, or 29.0 per cent of the total), Cenovus (85 wells) and Suncor Energy Inc. (66 wells).

Trinidad Drilling Ltd. placed fourth with 368 wells drilled during the year, but ranked third based on metres rig released with 1.31 million metres. Its main customers were Peyto Exploration & Development Corp. (68 wells, or 18.4 per cent of the total), followed by Crescent Point (53 wells) and Torc Oil & Gas Ltd. (36 wells).

Western Energy Services Corp. ranked fifth based on wells rig released (235) and metres drilled (790,823 metres of hole). Western's main customers were Crescent Point (72 wells, or 30.6 per cent of the total), followed by ISH Energy Ltd. (15 wells) and Advantage Oil & Gas Ltd. (13 wells).

Precision was the top contractor for horizontal wells during the year with 738 wells rig released and 2.44 million metres (excluding test/experimental or DSW wells), followed by Savanna with 622 horizontal wells rig released and 1.35 million metres.

Excluding test wells, Precision's share of the market declined to 23.72 per cent from 24.33 per cent in 2015. Savanna's market share increased to 17.08 per cent in 2016 from 11.66 per cent the prior year. Ensign's share of the market, excluding test wells, lifted to 12.02 per cent in 2016 from 10.85 per cent in 2015.

Rig utilization during the year for CAODC members was 15.42 per cent, down from 20.59 per cent per cent during 2015. Utilization did rise in the final quarter, however, lifting to 24.79 per cent in Q4 2016 compared to 18.36 per cent in Q4 2015.

Excluding experimental and Eastern Canada wells, DC Drilling Inc.'s average of two rigs during the year had a 51.37 per cent utilization rate. Vortex Drilling Ltd's average of three rigs recorded a 48.18 per cent utilization rate, while D2 Drilling Inc.'s one rig had a 38.80 per cent utilization rate.

Vortex ranked first in average metres drilled per rig (62,163 metres), followed by Bonanza Drilling Inc. (48,779 metres) and Twilight Drilling Ltd. (36,860 metres).

JuneWarren-Nickle's Energy Group

PSAC's 2017 Drilling Expectations

The Petroleum Services Association of Canada (PSAC) has bumped up its 2017 Canadian drilling activity forecast, now estimating industry will drill (rig release) 5,150 wells this year, up 23 per cent or 975 wells from its original estimate made in early November 2016.

PSAC is definitely seeing positive signals through the first quarter, including parts of the Canadian oilfield service, supply and manufacturing sector realizing some uptick in activity as oil prices recover.

PSAC now estimates 2,706 wells will be drilled in Alberta, up from 1,900 wells in the original forecast.

About 31 per cent more wells are expected to be drilled in British Columbia: 367 wells instead of 280 in the original forecast.

The revised forecast for Saskatchewan now sits at 1,985 wells compared to 1,940 wells in the original estimate, and Manitoba is expected to see 73 wells or an increase of 23 in its well count for 2017.

JuneWarren-Nickle's Energy Group