June 15, 2022
Canadian Oilfield Services Trend Tracker
WCSB rig count up 11 week-over-week to 158
Our view: This publication serves as an update to the sector themes we track, including commodity prices, WCSB activity trends, and E&P free cash flow magnitude and prioritization, all of which are inputs to our relative positioning and outlook for sector returns. Exhibits 16 and 17 highlight our valuation comparables, ratings, and price targets for the companies under coverage.
Canadian OFS stocks down 12% w/w, while oil moves 1% lower
Canadian stocks under coverage decreased 12% w/w, while WTI decreased 1%. The 2022 Henry Hub natural gas strip decreased 21% and remains 114% above last year. The top three performers were CFW (-4.0%), SCL (-6.1%), and SES (-9.9%). The bottom three performers were CEU (-14.3%), PD (-14.6%), and ESI (-15.8%). Our Canadian Oilfield Services coverage group is up 60.9% YTD vs the S&P/TSX Capped Energy index up 66.3% YTD. For additional details on North American rig activity, please see here for the latest edition of our US drilling rig report.
Rig count above historical levels; QTD avg of 114 vs. RBC estimate of 130
The WCSB rig count increased 11 w/w to 158 and the current rig count sits 40 above 2021 levels and 47 above the 5-year average. Activity in SE SK, Viking and Other regions drove the majority of the w/ w increase, as noted in Exhibit 10. PrivateCo rig counts increased 3 w/w, Junior E&Ps (<25 mboe/d) increased 2 rigs w/w, Intermediate E&Ps (25-75 mboe/d) increased 1 rig w/w, and Large E&Ps (>75 mboe/d) increased 5 rigs w/w, as noted in Exhibit 13.
Activity trends
Montney ↓ 2 rigs week-over-week, to 36. The most active Montney operators include ARC (8 rigs), CNRL (4 rigs), and Birchcliff (3 rigs). The most active drillers in the Montney include Precision (16 rigs, 44% of total), Ensign (11 rigs, 31% of total), and DC (2 rigs, 6% of total).
SE SK ↑ 4 rigs week-over-week, to 16. The most active SE SK operators include Crescent Point (3 rigs), Tundra (2 rigs), and Aldon (1 rig). The most active drillers in the SE SK include Stampede (6 rigs, 38% of total), Ensign (3 rigs, 19% of total), and Betts (2 rigs, 13% of total).
Heavy Oil ↓ 1 rig, week-over-week, to 29. The most active Heavy Oil operators include CNRL (6 rigs), Tamarack (4 rigs), and Perpetual (2 rigs). The most active drillers in Heavy Oil regions include Precision (10 rigs, 34% of total), Ensign (7 rigs, 24% of total), and Akita (3 rigs, 10% of total).
E&Ps continue to generate excess FCF
Our Canadian E&P analysts project stocks under coverage to generate $14.5 billion of post-dividend FCF in 2022 at the futures strip. Our E&P analysts' estimates imply that operators will reinvest 33% of cash flow in 2022 at futures pricing (40% at RBC’s price deck), well below the 5-year trailing average of 95%. Current estimates imply ~105% y/y cash flow growth with capital spending increasing 32% as shown in Exhibit 15.