Spring breakup could be easy for oil patch in 2012: CIBC
Every spring it happens – the frozen earth in Western Canada thaws, turning dirt roads and drill sites into soupy messes and rigs across the region stop operations and wait it out.
It’s called spring breakup and during April and May drilling activity in much of the Western Canadian Sedimentary Basin comes to a standstill due to mucky terrain, road bans and weight restrictions on heavy vehicles that normally transport drilling rigs and service equipment to work sites.
The time out can be a welcome break for rig hands who have been going full out during the busy winter drilling season. But what if breakup drags on far too long and hampers summer drilling plans?
That is what happened in 2011 when a wet spring and flooding across the southern prairies wreaked havoc and forced operators to change drilling plans on the fly.
But in a research note to clients this week, CIBC World Markets analyst Jeff Fetterly expects spring breakup to be less stressful for the industry in 2012.
If the prediction proves to be true, that’s good news for explorers and producers and the service companies that depend on them.
Fetterly’s no meteorologist, but by parsing the precipitation levels over the previous seven months in seven Western Canadian cities (Fort St. John, Whitecourt, Estevan, Grande Prairie, Lloydminster, Calgary, Medicine Hat, Red Deer and Fort McMurray), the data shows those levels have been below average. Fetterly’s assumption is precipitation levels will stay that way this spring.
Although there remains the potential for a wet spring that could extend breakup (similar to last year), if the current trend is maintained we would not be surprised to see a shortened breakup and an early increase in Q2/12 activity.
After a long, wet spring in 2011, the oil and gas industry will welcome a return to normalcy in 2012.