What kind of production impacts might we expect in Western Canada in 2016? To gauge this we need to forecast 2016 drilling activity, compare that to 2015 drilling activity and measure the impacts that 2015 reduced drilling had on production. My drilling activity forecast for 2016 is 3909 wells. That would be a 41% reduction from 2015 drilling activity and a 73% reduction since 2014. (Note: the 2016 forecast used the same method as my 2015 drilling forecast, which was within 4% of actual drilling [Read more]
Forward Curves Are a Poor Predictor of Future Spot Prices
In building a price forecast, any single indicator, including forward curves, is usually a poor predictor of future spot prices. It is important to consider a wide variety of information when building a spot price forecast. In general, all price forecasts are wrong – the goal is to be less wrong more often and have a body of supporting information to justify each forecast. In the oil and gas industry, one of the primary uses of price forecasts is to provide a reasonable basis for the valuation [Read more]