Canadian Drilling – Breaking Free from the Bottom of Spring Break Up

As of May 10, Baker Hughes reported that the Western Canadian gas directed drilling rig count fell by four to 56 (blue line in left hand chart below) and one lower than a year ago. For the oil directed drilling rig count, it was unchanged at 58 (red line in right hand chart) and 23 higher than a year ago. These latest changes appear to suggest that the seasonal downturn in activity that takes place around this time of year, referred to as spring break up, may have bottomed out for the oil rig count. Break up is a seasonal slowdown in drilling activity, usually spanning early March to late April, and is associated with the end of winter when ground conditions begin to thaw and can slow or prevent the movement of large heavy equipment such as drilling rigs in certain regions. These latest changes appear to partly confirm our suspicions last week that activity may have reached the bottom, at least for oil rigs, and should start to gradually trend higher in the weeks ahead.