Canada: Winter of discontent looms for gas drillers

Fears that pullback may extend into prime season

With $100-million in gas well-fracturing equipment sitting idle, Canyon Services Group Inc. is clinging to the old market cliche that the best fix for low prices is, in fact, low prices.

Still, the Alberta-based junior, which went public in May, 2006, at the height of the Western Canadian drilling boom and watched its stock nosedive since its initial public offering from $11 a share to $3.30 yesterday, remains –like many service companies in the oilpatch — nervous about activity levels in the coming months. It’s hoping that the decline in drilling caused by low natural gas prices will eventually spur a rise in prices as supplies diminish.

“We raised a lot of capital, built a lot of new equipment, and have proven a new technology,” Dennis Weinberger, Canyon chief executive, said outside a Peters & Co. energy conference in Toronto.

“We’re incredibly well-positioned as the turnaround comes to take bigger and bigger market share. What I dislike about the public markets and this whole episode is the short-sightedness on the next quarter. It doesn’t allow the industry to have a nice, long-term vision.”

With natural-gas prices too low to justify finding new deposits and producers signalling they will hold the line on conservative capital spending next year, the hard-hit oil and gas drilling and services sector may see the pullback stretch through the historically busy winter drilling season.

Financial Post