The Petroleum Service Association of Canada (PSAC) lowered its annual drilling forecast for 2012. PSAC estimates 13,150 wells drilled this year, down 200 from the initial forecast in November. The numbers are still higher than last year’s tally at 12,850 wells drilled so it’s not that bad. However, the market was already pricing these in Q1 as investor sentiment was cooling for oilfield services stocks. PSAC is a bit late on the cuts and might have to review its numbers lower next quarter on the back of persistent weakness in natural gas prices. Furthermore, there’s always the potential for a capitulation in natural gas prices on the back of full storage late this summer which would result in more budget cuts by producers. This is when investors would capitulate selling oilfield service stocks indiscriminately and this is when the best opportunities emerge to buy the best at bargain basement prices. Remember, natural gas prices won’t be staying low forever.
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Enjoy Your Weekend!