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by mid-year to the third quarter. “It’s very much a company-by-company and location-by-location thing, so it’s going to take time
for people to fully understand what all of this means in their own
corporate situation.”
For Bilton, Jason Greene says he’s positive that by mid to late
fall or November they’ll have a good handle on it. “It’s a little early
yet to tell, but we’re already getting ideas on what budgets are
going to look like.”
For GenTex, Cupples figures just a little sooner: “I’m not
a weatherman or stock analyst, but I think another six or eight
months maybe.”
Soucy says by then companies will be in a position to create
more long-term definitive decisions related to the effects of the
new royalty regime.
But, he adds, the regime will continue to be only one element
of the equation. “And it’s one that arguably is of less importance
than the commodity prices themselves. Because if the commodity
prices are weak, then you’re not going to drill the well in the first
place. And it’s only those at the margins that will be affected by
the royalty regime, either positive or negative,” he says.
He figures the real push will come when and if natural gas
prices go to a higher level than they are now, with some good
degree of sustainability for a period of time for these companies
to get back to work.
In the meantime, Soucy thinks this slowdown will likely be
longer than the past two.
“The other downturns we had, in the late ’90s and then in
2002 or 2003, we had a slowdown for roughly a year,” he says.
“Those provided a respite because activity picked up again and
there were very few if any layoffs, so people consolidated their
training and those kinds of things, and got themselves ready for
the next uptick.”
But this one might be different. “If you want to look at it
on that basis, that kind of activity worked up until the end of
breakup last year. The people that were laid off at that time,
because it was anticipated that this downturn was going to be
longer than the previous couple, were by and large the ones
that wouldn’t have been hired in the first place if things hadn’t
been so superheated. You know, the warm body scenario kind
of people.”
But come this breakup, he figures, the layoffs this time around
will probably be people they’d just as soon hang on to.
The good news for those people is that the Alberta economy
remains robust.
“It shouldn’t affect the labour situation in Alberta in that these
people will be working,” he says. “The economy, primarily in
construction, the oilsands, and other areas of the economy have
absorbed a good portion of them. As one of my counterparts at
CAPP [Canadian Association of Petroleum Producers] said, it’s
the invisible downturn this time because the typical things you
measure, like unemployment, just haven’t changed relative to the
rest of the economy.”
ARC Financial’s Freel sees a silver lining for a slowing in the
oilfield manufacturing sector as well.
“I have not seen the same capacity enter the oilfield manufacturing industry as I have seen with the overall oilfield services
industry,” he says. “There has been a huge increase in the oilfield services industry, but the manufacturing part hasn’t seen the
same increase; there aren’t as many new competitors.”
That means that any overcapacity concerns that may be floating
around today are not going to weigh as heavily going forward.
“When one considers drilling capacity coming back in a year or
two, the manufacturing capacity should be okay relative to other
sectors that have too much capacity.”
