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Dundas spoke in an interview on the sidelines at a conference hosted by Bank of Montreal and the Canadian Association of Petroleum Producers in Toronto last week, where other executives echoed his view.
While producers in North America, including in the famed Permian Basin, have mostly been prioritizing shareholder returns over output growth, inflation in the oil patch has been part of the equation that’s prompted the production discipline. Everything from expensive steel pipes to shortages of frack pumps hampered growth. Now, the turnaround for costs could allow drillers to start thinking about output increases at a time when suppliers from OPEC+ are holding back.
Signs of stabilizing drilling activity point to a continued outlook for steady costs, Dundas said.
“With the gas rig count finally starting to come off a little bit and oil activity not changing very much, I would think we’re going to be in a relatively stable year,” he said.
Baytex Energy Corp. CEO Eric Greager said he expects “flat to slightly inclined” prices in regions that require more intensive fracking, though declining rig counts have helped bring other costs down elsewhere. Calgary-based Baytex operates in the Eagle Ford shale in Texas, as well as the Duvernay, Peace River, Viking and Lloydminster regions in Canada.
“Within the Duvernay and the Eagle Ford, we’re benefiting from availability of equipment, and that’s a feature that may last or it may not last, but right now we’re taking advantage of the flow of available resources,” Greager said on a panel discussion at the conference.
Paramount Resources Ltd. CEO Jim Riddell said in a fireside chat at the conference that services and other costs have started to decline, though they’re unlikely to tumble back to the lows reached during the early days of the Covid-19 pandemic. Even though a more recent rise in oil and gas prices could arrest those declines, “I think hopefully the increases are behind us,” said Riddell, whose company produces oil and gas from Alberta’s Montney and Duvernay.
“It does feel like we’ve seen peak inflation,” Riddell said.
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