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Petroleum News: Weather clouds some Canadian regions

Mild winter in Western Canada, with early thaw, restricts access to northern Alberta well sites; drilling still at record levels
Gary Park
For Petroleum News
Capital budgets up, land sales up, operator ranks up, drilling predictions up — all the ingredients for another scorching year in Canada’s upstream, except for another mild winter in Western Canada that threatens to turn oil fields mushy.
Across some pockets of British Columbia, Alberta and Saskatchewan the peak drilling season is experiencing some setbacks.
An early thaw is restricting access to well sites in northern Alberta, where a deep freeze is vital to build ice bridges and carry the heavy rig loads.
However, a report by investment dealer Peters & Co. in January said the conditions have not yet caused “wholesale delays in E&P programs,” although weather is “rearing its ugly head” as it did when record spring and summer rains saw producers struggling ever since to meet production goals.
And the first reports on upstream activity show record drilling levels in Alberta, Saskatchewan and Manitoba, with only Northern Canada and British Columbia lagging.
Of the 722 rigs available across Canada a staggering 94 percent were at work during January, compared with 93 percent a year earlier.
Alberta had an average 537 rigs operating, rising to 543 in the final week of January, when 136 were at work in British Columbia and 51 in Saskatchewan.
Association sticks to prediction
Meanwhile, the Petroleum Services Association of Canada is sticking to its prediction of a record 25,295 well completions in 2006.
Peters & Co. is going one better, forecasting 25,500 wells this year and 27,500 in 2007, while the Canadian Association of Oilwell Drilling Contractors is betting on 26,000 wells in 2006.
Drilling contractors President Don Herring and petroleum services President Roger Soucy said the winter melt has yet to affect early-year operations, with active rigs climbing from 539 in the first week of January to 743 by late in the month.
Soucy said with the industry’s growing emphasis on spreading drilling more evenly through the year weather has less affect on operations.
Also contributing to a positive outlook is an increase in the number of operators to 572 in 2005, up 50 from 2004.
A total of eight companies increased their well completions last year by 100 or more wells than in 2004, including Canadian Natural Resources (up 570 wells), coalbed methane producer Trident Exploration (up 277), Apache Canada (up 264), Compton Petroleum (up 188), Nexen (up 156), Pioneer Natural Resources (up 122), Tundra Oil & Gas (up 107) and coalbed methane producer MGV Energy (up 101).
Those whose tally declined included EnCana (down 510), EOG Resources (down 377), Husky Energy (down 221) and Petro-Canada (down 184).
Capital budgets for 76 companies up 27%
Capital budgets for 76 companies stand at C$42 billion, 27 percent above 2005 for those same firms, with heavy spending earmarked for the oil sands.
Heading the list are Canadian Natural C$6.8 billion, EnCana C$6.75 billion, Talisman Energy C$4.4 billion, Suncor Energy C$3.5 billion, Petro-Canada C$3.4 billion, Nexen C$2.89 billion, Husky Energy C$2.85 billion and Shell Canada C$2.7 billion — all except Talisman and Husky heavily committed to the oil sands.
FirstEnergy Capital is predicting that just over C$2 billion will go to coalbed methane, more than C$600 million above 2005, which was affected by the heavy rains, and expects more aggressive coalbed development this year after 2005 saw only a modest increase of 175 million cubic feet per day of production after a net gain of 412 million cubic feet per day in 2004.
The scramble to accumulate exploration rights shows no signs of easing, with Alberta posting a new record C$378 million at the second sale of January when 583,257 hectares (1.44 million acres) at an average C$1,012 per hectare, including 209,152 hectares of oil sands leases that fetched C$217 million.
That has pushed the year-to-date returns to C$591 million, compared with C$108 million for January 2005.
British Columbia has been equally hot, collecting C$52 million from 59,235 hectares and its January auction, beating the comparable 2005 sale by C$24 million, with the per hectare average climbing to C$874 from C$578.
With many observers expecting the land buyers will waste no time moving ahead with their exploration programs, the momentum built up in the second half of 2005 should extend into 2006, weather and available rig hands permitting.
Boosted by the addition of new rigs, a drilling surge after mid-year resulted in 92.46 million feet of hole drilled by all contractors, up 17 percent from the same period of 2004.
For all of last year, the average well took 6.36 days to complete compared with 5.61 in 2004 – the first time in many years that drilling times increased, partly due to a 7 percent rise in average well depth to 3,779 feet.
The dominant contractors were Precision Drilling which posted 27.9 million feet of hole and Ensign Energy Services which tallied 20.4 million feet.
The other major contractors were Savanna Energy Services 8.1 million feet, Nabors Drilling 6.46 million feet, Trinidad Drilling 6.4 million feet and Akita Drilling, the leading contractor in Northern Canada, 4 million feet.

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