Rig Count Drops Dramatically in Canada -- A Third of Their Active Fleet -- PennEnergy

Update

July 1, 2011: Maybe it wasn't seasonal, and maybe my original comments were correct. Canada lost 27 rigs this week while the US increased rigs: Canada down 27; US up 25. 

Losing 27 rigs this week, Canada has 250 rigs actively drilling in the country, one of which is working offshore Newfoundland and Labrador. Alberta’s oil sands boast the most drilling activity with 166 active rigs. Drilling is also ongoing in Saskatchewan with 46 rigs and British Columbia with 37 rigs.

April 4, 2011: See comments. The dramatic drop in rigs is said to be season, not related to TransCanada's Keystone XL, the activity below the border, or other geo-political concerns. I was wrong. It's only seasonal.

Original Post

There's an interesting story / headline over at PennEnergy: Rig Count Drops Dramatically in Canada. There is no accompanying op-ed to suggest why.

According to the weekly rig report from oilfield services firm Baker Huges, the number of rotary drilling rigs actively working in North America dropped due to a major decrease in the number of rigs working in Canada this week, representing about a third of the active fleet.

In the US, the number of drilling rigs jumped by 38 this week to 1,776 active rigs drilling across the country – both onshore and offshore. An increase of 311 year over year, drilling activity continues to ramp up in the various shale plays across the nation. 

Perhaps it's seasonal. Perhaps it's an anomaly that will sort itself out a month from now.

But one has to wonder.

I find it incredible that a third of the Canadian fleet is not active -- think if a headline appeared saying that a third of the Bakken fleet stopped drilling -- and nothing was said. My immediate hunch: too much oil, not enough takeaway capacity. 

With the TransCanada Keystone XL on hold and a decision delayed for at least a year, could some Canadian operators also be moving their rigs south of the border?

There's a lot of competition for drilling on both sides of the border, and there has been a lot of interest stateside in the following: the Niobrara in D-J (Wyoming/Colorado); the Alberta Basin Bakken (north-central Montana); the Williston Basin Bakken (North Dakota); and the Eagle Ford (south Texas); and, most recently, the Spearfish formation (Bottineau County, North Dakota).

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Someone not too long ago suggested to me we could see $65 oil again. I can't see that, but on the other hand, I don't understand the price at $108 with supplies brimming in the US, and more production coming on line. Except for one thing: the weak dollar is getting weaker, and inflation is around the corner.