The Canadian Association of Oilwell Drilling Contractors, which represents the majority of rig owners in Canada, predicts 13,609 wells will be drilled this year-down 21% from the 17,300 the CAODC estimates were punched down in 2001. "Right now the basket-case is the heavy-oil game, where our members have focused a lot of service and drilling rigs, and it's dead right now," says association president Don Herring. "It's the same thing with a lot of the shallow gas. Those are the two areas which are coming off and affecting the numbers a lot." Broken down by quarter, the CAODC expects 491 out of 655 rigs to be under contract in the first quarter, resulting in utilization of 75%. The numbers for the following three-month periods are less encouraging, with 127 rigs expected to work in the second quarter, 222 in the third and 326 in the fourth. Some 292on average rigs are expected to be in the field during the year, yielding a utilization rate of 45%. In contrast, active rigs in 2001 are forecast to number 405 or 64%. However, Herring describes the projections as "conservative," adding they could be revised if commodity values rebound, particularly for gas, in the fourth quarter. A Houston analyst specializing in service firms shares that view. Allen Brooks, with CIBC World Markets, in a recent research report says soft gas prices will cut drilling while high decline rates will reduce output, leading to a recovery in gas prices in the second half. "As the market improves in the third quarter of 2002, Canadian drilling activity will be accelerating right along with it," he writes. "The overall impact of the downturn in drilling activity may be muted in Canadian companies since the commodity cycle could line up with the region's seasonality." Despite the declines, 2002 would be a decent year by historical standards. Since 1994, the average number of active rigs has ranged between 272 and 419, with the latter coming in 1997 when the last drilling boom ended. Rig utilization during the same period has varied from 46% to 73%. Canadian producers contracted for roughly 13,300 wells annually between 1994-2001. Substantial investment in recent years to expand their fleets is the major reason why drillers are worried about 2002, Herring says. "It's going to be a tough year although we're anticipating a good winter with 75% utilization. Spring breakup is going to be relatively poor-similar to 1999-and then we go into summer and there is no joy in the summer ... (and) we've got a pretty weak fourth quarter." The CAODC's forecast is based on West Texas Intermediate oil averaging $21 per barrel, gas at the AECO-C trading hub in southeastern Alberta garnering C$3.40 per thousand cubic feet and each well taking 7.8 days to drill. The group's well count differed in number but not overall direction from one released by the Petroleum Services Association of Canada, which represents service firms. PSAC pegs the tally for 2002 at 14,396 wells, down 20% from the 18,207 expected to be drilled in 2001. PSAC estimates 10,952 wells will be drilled in Alberta, 723 in British Columbia and 2,648 in Saskatchewan, dropping 21%, 24% and 18%, respectively, from forecast 2001 totals. -Ian McKinnon