South­west had no parcels of land avail­able in De­cem­ber oil and gas rights sale

The Southwest Booster - - OPINION - SOUTH­WEST BOOSTER

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.

SOUTH­WEST BOOSTER

The Swift Cur­rent Fra­ter­nal Or­der of Ea­gles #1728 made a se­ries of year end do­na­tions in sup­port of a num­ber of lo­cal char­i­ties and agen­cies. Swift Cur­rent Ea­gles Sec­re­tary Ken John­son pre­sented a $1,000 do­na­tion to Larry John­son, Pres­i­dent of the Swift Cur­rent SPCA.

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