Updated August 2017
92 vertical wells were placed on production in 2016, a decrease of about 22 per cent from 2015, while the number of horizontal wells placed on production declined 40 per cent to 559 wells in 2016. The decrease in the total number of wells placed on production is largely attributed to lower capital expenditures for drilling as a result of low crude oil prices. In Alberta, most wells drilled are placed on production soon after being drilled, and there has been no shift in this trend, suggesting that there is not a significant inventory of drilled but uncompleted wells in the province.
Figure S4.5 [Tableau] displays the distribution of the wells placed on production in 2016, overlaid by PSAC area boundaries, and the Cardium, Mannville, and Viking Formations. Over 60 per cent of the wells placed on production in 2016 were in these formations.
In 2016, PSAC Area 5 had the most wells placed on production, as shown in Table S4.2 [HTML]. In addition, PSAC Area 5 and PSAC Area 4, saw an increase in the share of total wells placed on production between 2015 and 2016, which is supported by their lower supply costs relative to the other areas.
The Montney Formation in Alberta saw an increase in activity, up from about 3 per cent of the wells placed on production in 2010 to about 8 per cent in 2016. Wells placed on production in the Mannville Formation as a share of total wells has remained relatively stable at about 30 per cent since 2011.
The share of vertical wells is projected to decrease over the forecast period, despite an increase in 2016 due to economic conditions, from 11 per cent in 2017 to 10 per cent by the end of the forecast period, with the focus remaining on horizontal drilling. The percentage of horizontal wells completed using HMSF is projected to increase from about 72 per cent in 2016 to 79 per cent by the end of the forecast period as producers continue to drill these more productive wells.
The Cardium and Mannville Formations are expected to still be the main focus of producers. This focus, along with anticipated increases in activity in the Devonian and Viking Formations, supports that PSAC Area 5 will have the largest growth in wells placed on production over the forecast period. PSAC Area 2 is also expected to experience strong growth in the number of wells placed on production as producers develop the Montney and Upper Cretaceous Formations, in addition to continuing to target the Cardium and Devonian Formations. The number of wells placed on production in PSAC Areas 3 and 4 is also projected to grow, but not to the same extent.
Forecast higher crude oil prices are the main driver for the increase in total wells placed on production over the forecast period. In addition to higher prices, the share of investment in conventional crude oil is expected to increase compared with oil sands operations. The quicker payout period for conventional wells makes investment in this sector more attractive to investors. As a result, the total number of conventional oil wells placed on production is expected to reach 1725 by 2026.
Details about the methodology used to forecast the wells placed on production can be found in the methodology section.