The chilly start to 2005 is warming the hearts of Canada's drilling and service companies, as activity levels reach near-record highs for the traditionally busy season.

"I think it's going to be an extremely robust year for the service sector, and I think you're going to see record earnings," says Miles Lich, oilfield services analyst with Peters & Co. Ltd.

Few in the industry will argue with that assessment, least of all Precision Drilling. With a fleet of 229 rigs, Precision is the Canadian drilling industry's heavy hitter, and so far the company has been going almost full out.

"Today we're running 216 (rigs) out of 229; it'd be near peak, and that's about as good as it can get."

Larry MacDougal, Business Edge
Activity on Trinidad Energy Services rigs was boosted by the bitterly cold snap in early January that froze the ground solid.

January has historically been Precision's most active month, and this year is no exception. Tremblay says that by mid-month, the company had an average rig utilization of 94 per cent. Tremblay doesn't expect that rate to continue, but he predicts that by month's end it will have beaten last year's average of 75 per cent - one the driller's best Januarys on record.

With its diversity - Precision has rigs of every size and shape - the driller is active in most parts of Western Canada.

This includes shallow gas- and coalbed methane-bearing regions - Precision owns about half of Canada's coiled-tube drilling units, which are big money-makers, as they can drill one to two wells a day when things are hopping.

It's not just drillers that are scrambling to keep up with demand. Service providers, such as Edmonton-based PTI Group Inc., are running flat out.

"We provide the lodging and food services - not just to the drilling industry, but certainly that's our big business this time of year, and it's pretty hectic out there this year," says PTI president Sandy Slator, who adds that first-quarter drilling activity accounts for about 50 per cent of the company's business.

"We budgeted very aggressively this year, but it's been better than we'd thought."

The Canadian Association of Oilwell Drilling Contractors (CAODC) reports that its average weekly rig counts are blowing away records on an ongoing basis. The association had forecast an average weekly count of 613 for the first quarter, but president Don Herring now says it could be nine per cent higher.

Herring says it is too early to revise the CAODC 2005 forecast, made this past fall, of 24,205 rigs drilled.

The Petroleum Services Association of Canada (PSAC) has upped its 2005 drilling forecast slightly. PSAC is now calling for a total of 24,075 wells drilled in 2005, just 40 wells more than its October 2004 prediction.

"This year's expected record activity will be the result of continued strong commodity prices, an ongoing emphasis on natural gas drilling and a growing focus on coalbed methane activity," PSAC president Roger Soucy said in a news release.

Trinidad Energy Services Income Trust, a medium-sized driller with 52 rigs, is also going great guns this winter. President Michael Heier says the "juicy" weather has created perfect conditions.

One of the keys, he says, was an arctic front that drifted into northern B.C. and Alberta, unaccompanied by snow, which allowed the ground to freeze.

"Industry as a whole was getting a bit concerned (waiting for the cold weather) and then Mother Nature kind of helped us out and brought in the ol' arctic high," Heier says. "(A lack of snow) puts the frost in quite deep and quite fast. Last year, we got hit with a bunch of snow before the cold weather came; the snow acts as an insulation barrier."

Even the geophysical sector is basking in the frigid winter weather. Mike Doyle, president of the Canadian Association of Geophysical Contractors (CAGC), says despite an overall decline in seismic activity in recent years - due to the fact that most of the Western Canadian Sedimentary Basin has been shot and re-shot - contractors are enjoying a robust first quarter.

"Over the years, we've seen a downward trend," Doyle says. "But having said that, I'd say this winter, like last winter, is very good and we expect things to remain very steady."

Geophysical companies have been particularly active in northeastern British Columbia and northwestern Alberta, in addition to the Northwest Territories - considered the new frontier for seismic work.

Peters & Co.'s Lich says he's sticking to his aggressive prediction of 24,500 wells for 2005. He bases that number on an average oil price of $40 US per barrel and a gas price of $6 US per thousand cubic feet. He says the stronger Canadian dollar has had little effect on activity levels north of the 49th parallel and he doesn't expect that to change.

"The thought was that it would slow down for the U.S. players in Canada ... but it really hasn't slowed things down that much."

He adds that many large explorers and producers have actually increased their budgets to take advantage of high commodity prices.

Precision's Tremblay believes even the spring break-up period could be busier than in past years. He notes a wet summer last year put the kibosh on much of the industry's drilling, and many don't wish to take a chance in 2005.

"Some of our customers are just not taking that risk this year, and they anticipate making the call to work through break-up in the areas where they can.

"Any time we can do that it helps us to maintain our crews and stability on the services side," he says, adding that Precision can employ as many as 4,600 rig hands during peak months.

PTI has about 3,000 working its camps and Slator says the company could probably employ more, if it could find qualified workers.

"Getting the right people has been one of the pressing and challenging issues that we've faced. We face it all the time, but this year it's even a little tighter," Slator says.

(John Ludwick can be reached at ludwick@businessedge.ca)