At a recent oil-well drillers conference, industry veteran Brian Krausert set the tone for his annual industry forecast with a bad joke: the best news today, he told his audience, would be that the caterers didn’t run out of scrambled eggs. The crowd’s silence continued as Krausert bombarded them with grim stats: the group had twice slashed last year’s forecast, and the outlook for 2016 is even lower–57 per cent fewer operating days for oil rigs than in 2014, based on oil prices averaging US$45 per barrel. Rig utilization levels will be the lowest since Krausert started tracking them in 1977. “It’s like I told them ‘You’re going to go get your head lopped off,’ ” Krausert, CEO of Beaver Drilling, recalls.
A grim read. (h/t peterj)
Nothing reduces a province’s reliance on oil & gas revenue better than $30 oil.
Rig utilization is at about 15%.
The old iron is being cut up for scrap and the newer stuff that is sitting idle is being sold off at bargain prices to U.S. buyers. The Jr’s are going broke.
The ndp are being exposed for what they are, a small thinking protest party that is completely incapable of governing. They have no ideas and are overwhelmed with what they have encountered.
Batten down the hatches folks Alberta and Canada is in for one hell of a ride.
The article mentions that oil & gas revenue represents 25% of Alberta’s economy. In fact, it’s much more. Consider a one industry town. The one industry never represents 100% of the town’s economy. Restaurants, hotels, government, building roads, generating electricity etc all contribute to the total economy, but they are supported by that one industry. Sudbury is a good example. People who live in Sudbury think they live in a highly integrated economy.
But what will happen when the mines close in Sudbury? After the mining companies, the next largest employers are the municipal, provincial, federal governments and the hospitals.
How do you keep the infrastructure going in a no-industry town? This is the problem I have with Notley’s view on Alberta. She see’s the infrastructure that has grown up around the oil & gas industry and she wants to grow that, in part by higher taxes. But she doesn’t get the oil & gas industry, the primary industry that paid for all that infrastructure.
But $30 oil will be a good educator.
I sense an opportune time for Saskatchewan to do something innovative…
The governments of the oil-producing provinces need to say, clearly, that we are in an economic war started by the King of Saudi Arabia.
Then fight back. How about Premier Wall announcing an immediate, 3 year oil royalty holiday? We’d still generate more revenue with employment and services than would be lost by a royalty holiday…
And the NDP is doing everything it can to make the matter worse….MUCH worse. The middle class in Alberta is going to get absolutely crucified. Even the property taxes demanded by Calgary and Edmonton will hit the middle class much harder as the value of the higher priced homes drops and the lower priced homes holds steady, the relative amount of property taxes will accumulate to the middle class. The perfect storm.
I sense an opportune time for Saskatchewan to do something innovative…
The governments of the oil-producing provinces need to say, clearly, that we are in an economic war started by the King of Saudi Arabia.
Then fight back. How about Premier Wall announcing an immediate, 3 year oil royalty holiday? We’d still generate more revenue with employment and services than would be lost by a royalty holiday…
war started by the King of Saudi Arabia.
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Our fearless leaders need to put an import tax on all the discounted oil coming in from the Saudi Arabs/middle east.
It will temporally drive up the price of oil, but the markets will adjust to our advantage.
They have declared war on our oil producers and we need to kick their ass…
Mad Mike and Fearless Leader, you both might just have something there that makes sense. Fighting back against the caliphate in one way at least.
olks, look at the bright side. Canada will be meetings its emissions reduction early. 🙁
Remember, the Saudis are selling at a price well below what they need to survive. Estimates are they will run out of savings in 3 to 5 years at best, then they’re broke and it’s all over. Lets speed that along!
If we still have a viable oil industry by then, we win.
I hate to be negative but not everyone is surprised by the latest goings on in the oil fields.The following link is to a Journal of Petroleum Technology column from July 2012 talking about a disruptive technology, of which this is only one example of many. There are numerous people around the world working on free energy devices as we speak. Do they all work? No, but some do. Does anyone want to admit that it is possible to have very cheap, low or zero cost power? If your in the government, oil or nuke business, no. The past number of years with high oil prices have been a great run for a huge number of folks. Will high prices return? Who knows? A couple of years ago I seen a story that was talking about a 50 billion dollar Rockefeller family trust fund that was divesting out of oil energy business, did the managers have an inkling that things were about to change? Maybe, maybe it was luck. If the oil business can produce fuel at really low prices, these new technologies will sit on the back burner for a while longer other wise I think they are coming.
http://www.mydigitalpublication.com//display_article.php?id=1104768
Pride goeth before a fall. Truck Nutz goeth before a recession.
I suspect the rig count will remain in the low 20% ultiization all 2016…..there is a consistent trickle of natural gas drilling in NE BC and NW Alberta that has kept the drilling end alive somewhat and has provided some work for veterans that want it. I’m in drilling service and have taken a 45% wage cut and work has been spotty but it has been there.
Steve from Rockwood >
Bingo, well said.
Wanna know where you can buy the cheapest crude in the world?
Right here:
World’s Cheapest Crude Hits Record Low as Oil Slump Deepens
http://www.bloomberg.com/news/articles/2016-01-06/world-s-cheapest-crude-hits-record-low-as-oil-slump-deepens
The thing is that Alberta will eventually prosper, too bad that so many people are loosing out at the present.
Never fear though, the agent orange will tax us and give the money to their favored fascists.
Finally!!
“The momentum has shifted. While 1,200 more Canadians still moved to the province than left it during the third quarter of 2015, that was the smallest gain since 2010—when the province was recovering from the 2009 oil price collapse—and less than half the average of the last 50 years.”
Ahem … excuse me eco-leftists … whatever happened to “Peak Oil” ? Hey Jimmy Carter ! Weren’t we supposed to have “run-out” by the year 2000 ?
Ohhhhhh … that was just another one of your scienci-sounding LIES to further your socialist one-world centralized government control over the entire human race. You leftist tools make me SICK … esp. when you preach science-FRAUD from the pulpits of the church of Global Warmism
Well said, Steve.
And I’ve lived in a few one-industry towns and have seen the consequences when the plant closes. Ugly and nasty only begins to describe it.
The (good?) news is that the NDP aren’t responsible for the price of Oil and Gas. The bad news is that they will make things worse through their statist doctrine. Alberta is in for a rough ride for a while.
Any possible economic gains from lower oil prices are quickly staunched out by statists. In ON, who should see this benefit their industries, their dear leader has snuffed that out with ridiculous electricity cost rises, new payroll taxes and $10b per year in debt servicing, with that growing alarmingly, meaning higher interest rates/debt &/or negative yield bonds for us all. In AB, at precisely the wrong time with slowing productive factors, their government appoints themselves sovereign, not just having won a protest vote, not only hikes producer carbon taxes (a doubling never mentioned in their platform), but also implements consumer carbon taxes, also not mentioned in their promises.
Another unmentioned move was to seemingly do everything in their power to destroy the family farm and ranch, with know nothing statists involving themselves in unneeded labour and safety changes for that industry. They seek to turn AB into an urban and farm collective wasteland – though environmentally unembarrassed – guaranteed to deliver significantly lower standards of living, there and elsewhere as their equalization contribution craters or disappears altogether. The coup de grace for the poorest will be their upcoming minimum wage hikes and already introduced income tax cash grab. Note to Notley: good luck with that one.
Will AB citizens follow their ON brethren into political surrender or will they stand up to the nonsense? When a AGW rent seeker spawns an NDP removal campaign, one can easily see how discontent is becoming widespread.
http://news.nationalpost.com/news/canada/canadian-politics/jen-gerson-anger-over-notley-government-leads-to-growing-fringe-protests-threats-of-violence
There is no legal way to get rid of Notley so a popular & peaceful uprising is the only alternative, combined with civil disobedience, to use moral suasion to get her to step aside or at least put her socialist claws back in. It will be a long and painful wait until the next election if either fails.
The elections of Wynne, Notley and Trudeau represented the last gasp of NA statist totalitarianism, where the progressives try to tell us all what to do by assuming we wish to be pushed further and further left into socialism while they secure their legacies and our treasure. They were the end, not the beginning of that movement, whose demise is already underway in the US with Donald Trump as the lightning rod for discontent with big government that doesn’t respond to real problems, preferring to chase political rainbows with irrational PC attacks on productivity, growth & freedom.
If our federal election were being held now instead of Oct/15, given what’s happened since then, Harper would win in a landslide. Trudeau’s victory was a fluke in time, even with the mediocracy fixing the message for him with his false narrative, but it still signals the need to bypass the mediocracy and their Laurentian elite cohorts, to be more than fiscal conservative, button down Grits hoping for a scandal to topple their progressive competitors, instead starting a conversation with the voters.
Let’s start now by asking Canadians what they aspire to and wish from their government, instead of being told what they want with a promise to be bigger and supposedly more compassionate (at wasting money), and a long form census in the mail. The upcoming US election will provide valuable insight into what needs to happen here if we are ever going to wean Canadians off big and thus irresponsible government.
Farmer Bill, all energy is free. The cost is in collecting and distributing it. That’s where fossil fuels have it over everything except nuclear. For each unit of energy expended in collection and distribution there has to be a greater amount available for work. Wind and solar are less than one and therefore cannot exist without government, read taxpayer, subsidies because they are so uneconomic.
I have lived in Alberta all my life and never worked in the oil industry and so never had the opportunity to make the silly money but have always had to pay the silly prices for real estate and the goods to live on. I have always felt that the industry has over-paid itself for what they provide and have always felt entitled to the huge wages and bonuses. Now times are changing, oil is finally priced at what’s it is worth and the wages will have to come down. Its just an unfair business and the conservatives got addicted to the royalties and now the NDP are trying to replace it with carbon taxes. It boils down to this, the average guy always gets screwed in the end, but the big difference now is the oil guys are paying the piper for their lavish lifestyles and only the ones that were wise and saw this coming will survive this adjustment in reality.
‘silly money’ ‘lavish lifstyle’….phhhfffft……so all them overpayed, entitled oilfield hotshots deserve it eh?
Maybe Iran will invade Saudi and get the folks out west back to work. Bonus with a mountain of dead troublemakers out in the Muslim holy lands.
Matt, the people you describe as “over-paid” are risk takers. They put up their money – billions of dollars per year – to test their theories. When they find oil they win and when they don’t find oil they lose. Right now, with oil at $33/bbl these people are not looking for oil.
Now is a good time for people like you (not in the oil & gas industry and not especially supportive of it) to make a decision. Do you want these risk takers in your economy?
The Alberta government owns the oil & gas rights. They auction these rights in an ongoing basis to risk takers who think they can find oil & gas. The government could easily decide it wants to explore for oil & gas itself. It could stop the land auctions and start exploring with its own money, using government hired geologists and geophysicists. Do you think this is a better model?
In the early 1960s Norway (and other countries) were able to acquire the oil & gas rights to potential off-shore deposits. Other than claiming the land they did nothing else. Then came the oil & gas companies, starting first with geological models and then with money and technology to drill offshore. They discovered large deposits of oil & gas. Countries like Norway, which owned much the land, benefited immediately. Norway soon formed a country-owned oil & gas company (Statoil) and over the past 40-50 years has made billions from the efforts of others. Norway is seen as a smart country because it benefited so greatly from its oil & gas revenue. But, if it wasn’t for the efforts of others, Norway would have nothing.
Fast forward to Alberta in 2016. Many people who live in the province and do not work directly for the oil & gas companies are eager to see them disappear, or at least suffer in the short term because they made too much money in the past. You want to punish the risk takers for being successful. So, if you could restructure the oil & gas industry in Alberta, how would you do it? Would you pay even higher taxes because your government is now in the business of oil & gas exploration, development and production?
I am constantly amazed that people who live in one of the world’s strongest economies somehow want the economy to crash. They have separated themselves from such a tragedy, happy that only those who they perceive to have benefited unfairly are now suffering fairly. They do not realize that they are linked to this economy. When the risk takers suffer they stop taking risks. This means no investment in the largest industry in your province. The people who do not work in this industry rejoice at that. If it were me, I would be worrying.
For years I was ranting, (my poor wife’s ears), about online posters, primarily on the G&M site, who strongly advocated shutting down the oil sands, etc, and under the delusion that removing a major component from an equation would leave the end result untouched, and that their jobs/lives would carry on unaffected.
Well, now we’re both ranting. My wife is out at yoga.
I was born and raised Albertan, third generation as a matter of fact. I’ve been through three recessions and I have a message for all these young newfies and maritimers that flooded in here to scoop up the easy money.
The good times end. They always do. Also – elections have consequences. You youngsters with your big mortgages, dirt bikes and boats and toys are going to learn a cruel lesson in the days ahead because it is you demographic that gets hit hardest when effin socialists come to power. People and corporations don’t get rich by standing around and letting liberals, socialists and other deadbeats mug them – they pack up and leave and take their money and jobs with them. When you young morons voted NDP – you got the gov’t you deserve. I guarantee you it will not be the one you want. Next time some mealy mouthed politician tells you that if elected, he will rob somebody else to pay you…? Keep in mind he probably has said that to someone else who figures that the politician is going to rob YOU to pay HIM.
The problem with all these easterners flooding in is that they smuggle their stupidity and voting habits in with them – and we have the gov’t to show for it thanks to them.
Steve, you are so correct, I know of an small oil executive who at one point owed the banks 343 million, what part of his debt, is some leftie loser or a media losers “fair share”? None of it, but when they struggled for 20 years, built the company up and sold it out for 470 million everyone wanted their fair share, well the Snotleys the Masons and Calgary heralds jackasses did get a share of that, its just that they are to stupid to look at the donor boards at any hospital or rink or whatever to see the names of the “rich”, the ones they hate. Well when I see the names of Don Braid or Dear leader Rach or better yet maybe their messiah Suzuki on a donor board then they have finally joined the evil rich. I believe in the tooth fairy also. These risk takers need to be thanked, who cares how much they make, a lot of them help the Universities Hospitals etc. The UofC has been given I think 691 million since Elizabeth Cannon took over I read, and still that honorable lady had to endure arts poofters calling for her resignation over the Enbridge deal, how pathetic the left are.
I doubt very much if an election were held now Harper would be back in. Ezra Levant is in the right of it so to speak – we need to build up grass roots conservative lobbying groups to counter the Tides Foundation and Soros backed leftist groups. I am donating to The Rebel and I hope others will too. Ezra goes over the top sometimes but he and Brian Lilley from Sun Media are one of the few media voices that have the audacity and the energy to fight this uphill struggle.
Here’s an example of the Alberta government is going to be spending our tax money on:
https://www.youtube.com/watch?v=KccRX33w8Vs
Here’s an example of what the Alberta provincial government will be spending my tax money on:
https://www.youtube.com/watch?v=KccRX33w8Vs
Matt, I am not sure what you mean when you say that industry “overpaid” itself. Market supply and demand is the prime factor in that arrangement. The “silly” money that you mention (most people that I’ve worked with call it “stupid” money, lol!) is paid to people like me who are willing to go to the rigs and do the work for the oil & gas companies. I am an expense to them for which they are willing to pay well, and they therefore keep less of the oil & gas revenues. It’s a very progressive arrangement because it is wealth redistribution as played out in the pure form of the free market.
Keep in mind that the actual work is not the sole reason for high pay in the sector. There is also the very real issue of working away from home in sometimes lousy conditions, and very often for long stretches characterized by high stress and fatigue. You would be amazed at how many people show up to a rig and leave after a few days or weeks because it’s not for them. The work and the lifestyle can be difficult, and no one does it for anything other than the silly/stupid money.
Currently the pay in the oil & gas sector – if you have any work – is heavily discounted due to low commodity prices. People are willing to work for much lower amounts right now because there’s less work everywhere, and because everyone is hoping that a rebound happens within a reasonable time frame. If it doesn’t, you’ll see a mass exodus of people from the industry. That is just simple free market supply & demand.
Matt, those who have more than you are in your eyes, unfair. But those who have less than you, see you as unfair. What you have is penis ($$$$$) envy. I see a lot of that. I deal with some very rich people who treat me, and those who are in the same $$$$ level as me, with respect, and I treat them the same way. Why should I be jealous of another person’s success? And that about sums up how you come across, jealous!!!
yes interesting article, I’ll reread it as I sit here and wait for the delivery of that 100 mile per gallon carburetor someone invented> I ordered it about 30 years ago!!!
Lavish lifestyle. I guess you consider 14 hour work days, a ten by eight room, sixteen hours of travel every seven days, working in temperatures anywhere from plus thirty to minus thirty (sometimes in the same day) a high risk work place, paying more taxes in a year than most people make, filling my car with gas at least three times a week, the risk of death on the highway because all I do is work, no vacation for the last four years, lavish. I earn every penny I am paid and it is thanks to me and others like me that this province has what it has. We don’t get crop insurance, or disaster assistance, or for that matter in many cases even two weeks notice. I have a few other words, but I will keep them to myself.
Well said once again. The sad part is that the vast majority of those that voted for Notley and have lost their jobs do not have sense enough to realize that voting for Notley has exacerbated the downturn.
Lets not kid ourselves, many investors will hold back on investment in anything in Alberta, including the oil and gas sector, until the fallout from the NDP policies is more apparent.
At the coffee shop this afternoon one fellow could not see that Notley’s election would escalate the layoffs due to her socialist policies.
Good for you. Hopefully you are still working.
I am Ken, thank you. I take it day by day. Notley, and the idiots that voted for her, are in for a rude awakening, as is the rest of Canada. This won’t be over this year or next. We are headed for hard times. The bailouts of ’08 were a mistake and the chickens are coming home to roost. There is no such thing as “too big to fail” and Canada and Alberta are going down the path of Greece. Good luck to you and yours.