August 17, 2023
Canadian Oilfield Services Trend Tracker
WCSB rig count up 10 w/w to 195
Our view: This report serves as an update to the sector themes we track, including commodity prices, Western Canadian Sedimentary Basin (WCSB) activity trends, and E&P free cash flow and prioritization, all of which are inputs to our relative positioning and outlook for sector returns. Exhibits 15-16 highlight our valuation comparables, ratings, and price targets for the companies under coverage.
Canadian OFS stocks decreased 1.2% w/w, while WTI decreased 3% w/w
Canadian stocks under coverage decreased 1.2% w/w. The top three performers were CEU (+16.3%), CFW (+7.3%), and ESI (+1.0%). The bottom three performers were EFX (-25.1%), MATR (-5.0%), and STEP (-2.7%). Our Canadian Oilfield Services coverage group is up 1.8% YTD vs the S&P/TSX Capped Energy index up 5.4% YTD.
Rig count remains above long-term averages, though down 14 y/y
The WCSB rig count increased 10 w/w to 195, and is 14 below 2022 levels and 36 above the 5- year average. PrivateCo rig counts increased 4 w/w, Junior E&Ps (<25 mboe/d) decreased 1 rig w/w, Intermediate E&Ps (25-75 mboe/d) rig counts increased 4 w/w, Large E&Ps (>75 mboe/d) rig counts increased 2 w/w, and International rig counts increased 1 w/w.
Montney ↑ 2 rigs week-over-week, to 43. The most active Montney operators include ARC (5 rigs), Ovintiv (5 rigs), and Tourmaline (4 rigs). The most active drillers in the Montney include Precision (22 rigs, 51% of total), Ensign (10 rigs, 23% of total), and DC (2 rigs, 5% of total).
Duvernay flat week-over-week, at 8. The most active Duvernay operators include Paramount (2 rigs), Artis (1 rig), and Chevron (1 rig). The most active drillers in the Duvernay include Ensign (2 rigs, 25% of total), Fox (2 rigs, 25% of total), and Akita (1 rig, 13% of total).
SE SK ↑ 5 rigs week-over-week, to 15. The most active SE SK operators include Crescent Point (3 rigs), Whitecap (2 rigs), and Adonai (1 rig). The most active drillers in SE SK include Stampede (6 rigs, 40% of total), Ensign (3 rigs, 20% of total), and Betts (2 rigs, 13% of total).
Deep Basin ↑ 1 rig, week-over-week, to 17. The most active Deep Basin operators include Tourmaline (7 rigs), Peyto (3 rigs), and Cenovus (2 rigs). The most active drillers in the Deep Basin include Ensign (8 rigs, 47% of total), Precision (3 rigs, 18% of total), and Savanna (3 rigs, 18% of total).
Oil Sands ↑ 2 rigs week-over-week, to 10. The most active Oil Sands operators include Cenovus (4 rigs), Suncor (2 rigs), and CNOOC (1 rig). The most active drillers in the Oil Sands include Precision (4 rigs, 40% of total), Ensign (3 rigs, 30% of total), and Akita (2 rigs, 20% of total).
Heavy Oil flat week-over-week, at 37. The most active Heavy Oil operators include Spur (6 rigs), Tamarack (6 rigs), and CNRL (4 rigs). The most active drillers in Heavy Oil include Precision (15 rigs, 41% of total), Ensign (6 rigs, 16% of total), and Tempco (4 rigs, 11% of total).
Our Canadian E&P analysts project stocks under coverage to generate $4.4Bn/$7.1Bn of post-dividend FCF in 2023/24 at the futures strip. Estimates imply operators will reinvest 58% of cash flow in 2023 at futures pricing (61% at RBC’s price deck), below the 5-year trailing average of 72%. Current estimates imply a 12% increase in capital spending y/y, as shown in Exhibit 14.