On November 1st, the Petroleum Services Association of Canada (PSAC) released the 2011 Canadian drilling activity forecast. PSAC is forecasting a total of 12,250 wells drilled across Canada in 2011. That’s 900 more wells than the expected final tally of 11,350 for 2010 but very far from the 25,000 wells drilled back in 2005.
Based on strong oil price predictions for 2011, drilling in oil areas is forecasted to increase substantially. However, with the industry focusing on shale gas drilling and as a result of deteriorating natural gas prices with no turn around seen in sight for 2011, conventional shallow gas drilling is forecasted to drop by 11%.
PSAC Estimates on a provincial basis for 2011:
| Province | Wells Forecasted | Increase from 2010 |
| Alberta | 7,915 | +5% |
| British Columbia | 700 | +1% |
| Saskatchewan | 3,050 | +16% |
| Manitoba | 550 | +10% |
Not long ago, investment brokerage UBS issued a higher forecast of 13,000 oil and gas wells which will be drilled in Canada in 2011. A sustained global economic recovery in 2011 would support strong oil prices which would increase the profitability of drilling activity and beat current drilling forecasts.
What’s in it for me?
The association is forecasting natural gas prices will average $4 per thousand cubic feet in 2011, with oil prices coming in at $80 US per barrel. Obviously, if you are looking to profit from the strength of oil prices you need to focus on light weighted producers and not natural gas weighted ones. There are plenty of solid Canadian junior oil producers with usually a number of them residing in my portfolio.
Energy Sector – Oil & Gas Drilling Industry
Another way to get exposed to the energy sector without carrying the drilling risk is to buy into drilling or equipment and services companies. The following list contains Canadian listed oil & gas drilling companies operating all over North America and particularly in Western Canada (closing price as of Nov 19 2010):
| Company | Industry | Symbol | Market Cap | Price | Dividend Yield |
| Precision Drilling | Oil & Gas Drilling | TSE:PD | $2.3B | $8.48 | NA |
| Trinidad Drilling | Oil & Gas Drilling | TSE:TDG | $0.610B | $5.13 | 3.97% |
| Savanna Energy Services | Oil & Gas Drilling | TSE:SVY | $0.456B | $5.79 | NA |
| Akita Drilling | Oil & Gas Drilling | TSE:AKT.A | $0.152B | $8.55 | 3.26% |
| Pure Energy Services | Oil & Gas Drilling | TSE:PSV | $0.100B | $4.20 | NA |
| Stoneham Drilling | Oil & Gas Drilling | TSE:SDG.UN | $0.075B | $9.20 | NA |
Energy Sector – Oil & Gas Equipment & Services Industry
The Oil and Gas Equipment & Services companies provide a wide array of products, equipments and services used during the exploration and development of oil and gas reserves. The package of services includes fracturing, coiled tubing and cementing services, rental oilfield instrumentation systems that are designed and manufactured for use on land-based drilling and service rigs, data acquisition, wellsite reporting software and remote communications.
| Company | Industry | Symbol | Market Cap | Price | Dividend Yield |
| Trican Well Service | Oil & Gas Equipment & Services | TSE:TCW | $2.9B | $20.30 | 0.50% |
| Toromont Industries | Industrial Distribution | TSE:TIH | $2.3B | $29.87 | 2.13% |
| ShawCor | Oil & Gas Equipment & Services | TSE:SCL.A | $2.2B | $30.91 | 0.97% |
| Ensign Resource Services | Oil & Gas Equipment & Services | TSE:ESI | $1.9B | $12.55 | 3.035% |
| Calfrac Well Services | Oil & Gas Equipment & Services | TSE:CFW | $1.3B | $30.48 | 0.33% |
| Mullen Group Income Fund | Oil & Gas Equipment & Services | TSE:MTL | $1.2B | $15.46 | 3.20% |
| Pason Systems Inc. | Oil & Gas Equipment & Services | TSE:PSI | $1.1B | $13.57 | 2.59% |
| Flint Energy Services | Oil & Gas Equipment & Services | TSE:FES | $0.725B | $15.90 | NA |
| Canyon Services Group | Oil & Gas Equipment & Services | TSE:FRC | $0.574B | $9.55 | NA |
| Canadian Energy Services & Technolgy | Oil & Gas Equipment & Services | TSE:CEU | $0.472B | $25.84 | 4.64% |
| GASFRAC Energy Services | Oil & Gas Equipment & Services | TSE:GFS | $0.375B | $8.30 | NA |
| Black Diamond Group | Rental & Leasing Services | TSE:BDI | $0.312B | $19.20 | 5.71% |
| Essential Energy Services | Oil & Gas Equipment & Services | TSE:ESN | $0.111B | $1.56 | NA |
The list might not be exhaustive but it should give you a base to start your due diligence. On a side note, another indirect and safer way of getting exposure to the energy sector is to invest in pipeline and midstream companies.
Good luck with your research!
