Canadian conventional crude output declines as rig count dwindles

By Nia Williams
CALGARY, Alberta, Jan 12 (Reuters) - Oil companies reeling
from the collapse in global crude prices have slammed the brakes
on conventional crude production in Canada, with the Western
Canadian active oil rig count halving from last year, data
showed on Tuesday.
Further declines in output are expected to follow,
suggesting producer group OPEC is winning its battle for global
market share in at least one small corner of the Canadian oil
patch.
Data from RBC Capital Markets showed there were 228 rigs
active in the Western Canadian Sedimentary Basin, home to the
world's third largest crude reserves, in the week of Jan. 11 -
down 50 percent from 455 rigs during the same week last year,
and 62 percent below the five-year average of 593 rigs.
Winter is typically the busiest time of year for drilling in
Western Canada as the frozen ground allows companies to move
heavy equipment around easily.
This week last year was the high point of activity for the
whole of 2015 and the slow start in 2016 will likely heap added
strain on companies such as Precision Drilling PD.TO and
Western Energy Services WRG.TO .
"Barring some sort of second half of year recovery in oil
prices it's going to be a very rough year in the patch," said
Raymond James analyst Chris Cox said.
Conventional crude production in Canada is dwarfed by output
from northern Alberta's vast oil sands, where tarry bitumen is
mined or steamed out of the ground, but still amounted to around
1.5 million barrels per day (bpd) in 2015, research firm Raymond
James said. In 2014, it was just under 1.6 million bpd.
Given the sharp decline of crude prices by 20 percent this
year, Cox said output was expected to drop by 100,000 bpd in
2016.
Oil sands production is set to rise to around 3.1 million
bpd by 2020 despite the crude price rout as new projects already
under construction start up.
Oilfield services companies have been forced to accept rate
cuts of up to 30 percent by oil producers, who have sharply
curtailed conventional crude drilling activity even as they
plough on with long-term oil sands investments.
Canadian Natural Resources Ltd's CNQ.TO third quarter 2015
conventional production was down 8 percent versus a year earlier
at 265,000 bpd as a result of a 84 percent decrease in drilling
activity and the decision to shut-in 5,700 bpd of uneconomic
heavy oil production.
Husky Energy HSE.TO saw overall production decline 2
percent over the same period to 333,000 bpd, in part because of
lower production in Western Canada. It completed five wells in
the first nine months of 2015 versus 24 during the same period a
year earlier.