For many oil and gas companies, operating in Alberta has become problematic to the point of them deciding to re-focus their operations in other jurisdictions. Whether it is the uncertainty created by the Alberta NDP, or the Alberta Energy Regulator, provinces such as Saskatchewan are increasingly being seen as a friendlier place to drill for oil and gas. Yet despite this trend, drilling activity for 2016 is down considerably from 2015 levels and has experienced sharper declines when compared to Alberta.
Screenshot of Saskatchewan well activity using filters on the BOE Report Well Map
In the first half of 2016, 518 total oil and gas wells were drilled in Saskatchewan. This is considerably down from the the first 6 months of 2015. At that time, 1,021 wells had been drilled; representing a decrease of 49.27%. And as 2015 progressed, so did drilling activity. In the last half of 2015, there was a total of 2,064 wells drilled. When compared to the activity that has taken place in 2016, clearly, drilling activity in the region has experienced a sharp decline.
For the first half of 2015, 1,986 wells were drilled in Alberta. But in the latter half of the year, there was a 24.67% decline in Alberta drilling activity with a total of 1,496 wells drilled. For 2016, the downward trend continued in Alberta. For the first six months of this year, a total of 1,155 wells were drilled. Comparing the first six months of 2015 to the same time frame of 2016, there has been a 41.84% decrease in Alberta drilling activity; only slightly better than the Saskatchewan numbers. And when looking at the second half of 2015 drilling numbers vs. the first half of 2016, Alberta’s drilling is down 22.79%. For the same time frame in Saskatchewan, there has been a whopping 74.9% decrease in drilling activity.
So far in 2016, the three most active drillers in Saskatchewan have been Teine Energy, Raging River Exploration, and Crescent Point Energy, respectively. Together they have drilled two-thirds of the wells drilled. The remaining third is fairly evenly distributed between a total of seven different companies. Each of Teine, Raging River, and Crescent Point are targeting the Viking. By far the most popular play in Saskatchewan is the Viking with total wells drilled amounting to 220 (representing close to half of 2016’s drilling activity). The Viking play, with its shallow, light sweet crude continues to attract more attention as 2016 rolls forward.
In late June, Teine announced the closing of a significant asset acquisition from Penn West Petroleum predominantly featuring assets in the Viking play. The deal, worth $975 million, also included producing assets in Saskatchewan’s Bakken formation.
Raging River was also active in acquiring more Viking production. At the end of May, the company announced the closure of a $109 million deal to acquire all outstanding shares of Rock Energy. The acquisition included 2,550 boe/d (95% oil) of production and approximately 25 net sections of highly prospective land targeting Viking light oil in the Kerrobert area of southwest Saskatchewan complementary to Raging River’s existing Viking assets.
Crescent Point Energy however has made it clear that it is steering clear of acquisitions greater than $200 million. “We’re being patient in this environment to position ourselves for when the economics turn, and we’re trying to stay within cash flow when we spend those acquisition dollars,” said Crescent Point’s Chief Executive Officer Scott Saxberg. Crescent Point is avoiding producing assets in favor of cheaper land that it can develop, and it has focused on paying down debt rather than expanding output, he said. “You’re not going to see us do a big equity funding to pay for a deal.”
The data used for this analysis was gathered from the BOE Report’s Well Activtiy Map.
