Canadian Drilling – Rig Counts Stall Out at Midyear

For the week of June 20, Baker Hughes reported that the Western Canadian gas-directed rig count fell one to 46 (blue line and text in left hand chart below) and 11 less than one year ago. The oil-directed rig count increased two to 92 (red line and text in right hand chart), 14 less than a year ago, and remains within the five-year range. The slow pace of gas rig activity is likely being held back by persistently low gas prices in Western Canada (see our Analyst Insight of June 18), while the midyear stall in the advancement of the oil rig count may be a function of cooler and wetter weather in parts of Alberta and a reversal from conditions just a few weeks ago when wildfire threats were preventing the deployment of additional rigs, especially in the oil sands region of Alberta. Further increases in the rig count will be partly weather/wildfire dependent and reliant on a sustained improvement in crude oil and natural gas prices and the degree of caution exercised by some producers over capital spending.