First oil

What a difference a year makes—last year, at this time, we were wondering just how low things could go, in terms of the level of basic upstream activity, and now the U.S. and Canada are wondering how much better things might get to be.

In the U.S., confidence grows that the worst is over, and that profitability is around the corner. Operators point to various factors for their optimism, including the oil price showing stability at a higher level; oil supply coming closer to balance with demand; the incredible performance numbers coming out of the Permian basin, plus the SCOOP and STACK plays of Oklahoma; and the improving regulatory climate in Washington.

There certainly is plenty of room for activity growth. Last year, activity was down 49%, as operators drilled just 14,632 wells. This year, our forecast of 18,552 wells in the U.S. may be conservative. As we look at the company spending plans coming out since late January, with their increasingly higher numbers for 2017, I am convinced that our forecast number could be exceeded—it could easily top 19,000 wells and might even hit 20,000. Time will tell.

Meanwhile, the psychological impact of President Donald Trump’s win last November—and the ramifications for U.S. energy policy—cannot be overstated. Back in October, many professionals in Houston thought that a good chunk of the industry might disappear, if Hillary Clinton were to be elected. Now, a day doesn’t go by without this editor hearing comments like “we’re finally unchained,” or “now this industry can really flourish.” And Trump’s campaign promises, and early actions to fulfill them—such as putting the Dakota Access and Keystone XL pipelines back on track, or overturning punitive EPA regulations—are giving the industry some hope. Of course, we must wait and see whether the administration actually fulfills its potential.

Canada sees brighter days ahead. “Brutal” was the word that this editor heard most frequently from our Canadian neighbors, as they described the last two years of their industry. Early this month, our publisher, Andy McDowell, and I traveled up to Calgary to deliver this year’s activity forecast, and the mood was 180^o different from last year. The consensus opinion seems to be that with higher commodity prices, activity will pick up noticeably across a wide spectrum, although oil sands development will lag for a while.

Indeed, the associations—CAPP, PSAC and CAODC—already had called for drilling gains of 20% to 30% at the end of the year, But in early February, CAPP and PSAC revised their forecasts upward by 1,200 and 975 wells, respectively. Their enthusiasm seems justified, given that the Baker Hughes rig count for Canada on Feb. 10 was 352, which is 58.6%, or 130 units, higher than a year earlier.

Some internal changes. As you will discover by reading his final column inside the back cover, our intrepid managing editor, Roger Jordan, is departing the World Oil staff but not leaving our company, Gulf Publishing. Instead, he has moved over to become director of marketing for the entire company. We will miss working with him, but he will still be close by, within our Houston offices. In his 3 ½ years on our staff, Roger has been a literal jack-of-all-trades, tackling a variety of editorial challenges, solving many nettlesome problems, and spooning out his view of the industry within the back cover, all with his own brand of steadiness and aplomb. I know that he will do well in his new position.

Effective Feb. 1, Emily Querubin has been promoted to associate editor. Emily has carved out her own niche on our staff, handling a wide scope of chores, ranging from online work to her well-composed regional reports. And Technical Editor Craig Fleming will split some of Roger’s former duties with Emily, while he helps me to ensure that World Oil maintains the high level of quality in its content. We will gain a new staff member at the end of February, and make a proper introduction of this individual in our March issue. 

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com