Southwest had no parcels of land available in December oil and gas rights sale
For the second time in 17 sales dating back to April 2016, there were no Southwest parcels posted among the offerings during the December sale of public offering of petroleum and natural gas dispositions.
That stalls out the 2018 calendar year activity in the Southwest at $1,157,789, pushing the region below the quiet $1.54 million recorded during the six sales during 2017.
The Southwest’s best sale during 2018 was in April when $630,096 in interest was shown in the region. However, the next four sales were all below $100,000 (June - $61,090; August- $93,333; October - $15,596; December - zero).
Province wide, the $20.1 million in activity in December was the best sale dating back to June 2017. It ranks as the top sale of the 2018 calendar year by outdistancing the $15.6 million in interest shown during the June sale. For the six sales of 2018, Saskatchewan realized $50.6 million in interest.
The Lloydminster region led the province with $15.5 million in interest, with 25 of 40 posted bids picked up at a cost of just over $2 million, plus three available exploration licences were picked up for $13.5 million ($1,315 per hectare). The top price paid for a single licence was $9.1 million for a 5,568 hectare block located 15 kilometres north of the Reford Mclaren Sand Oil Pool, east of Wilkie.
The Estevan region generated $3 million in activity through the sale of 26 of 34 posted bids. Third in the province was Kindersley and area with 20 of 21 bids purchased along with three exploration licences. The top price paid for a single licence in the Kindersley/kerrobert area was $290,794 by Elk Run Resources Ltd. for a 1,036 hectare block located six kilometres north of the Elrose Viking Sand Oil Pool, two kilometres north of Elrose.
The Lloydminster region attracted a strong $1,012 per hectare in the sale, well ahead of the $465 average hectare price in the Estevan area, and $214 in the Kindersley region. The provincial average was $696 per hectare.
In the recent Petroleum Services Association of Canada’s 2019 Canadian Drilling Activity Forecast, a total of 6,600 wells are expected to be drilled across the country next year. This total is below PSAC’S revised forecast of 6,980 wells drilled during 2018.
“While we’ve recovered from the very dark days of 2015 and 2016, there really isn’t any cause for celebration in the near term, as drilling activity is in its third year of a plateau, averaging around 6,900 wells per year. The unprecedented, wide heavy oil price differentials caused by our chronic pipeline constraints is nothing short of a crisis for Canada. At current differentials, it exceeds a $100 million cost to the industry and Canada. Today, the only near-term line of sight to added pipeline capacity is Enbridge’s Line 3 replacement which isn’t projected to be in service until at least the third quarter of 2019,” PSAC President and CEO, Tom Whalen, commented in the drilling activity forecast.
“Based on recent industry analysts’ reports, we currently have approximately 165,000 – 225,000 barrels/day of excess oil supply for the existing egress system. Consequently, we project slightly softer drilling activity in the first half of 2019 than we had in 2018. We’ve seen crude by rail volumes increase to over 200,000 barrels/day in recent months and we know there is more rail capacity building in progress. However, we only see rail providing some limited relief to those operators like Cenovus who are willing to step out and commit to longer-term contracts.”
Saskatchewan is forecasted to drill 3,532 in 2019, a drop of 110 wells from 2018. Alberta’s drilling activity is expected to drop by 221 wells to 3,532.
PSAC notes the projected total yearover-year decrease of 380 wells on the prairie provinces equates to approximately $1.5 to $1.8 billion less in capital spending by exploration and production companies.