Oilpatch drilling slows as oil and natural gas prices sink

Low oil and natural gas prices are taking a toll on the industry as drilling activity is falling in Western Canada and is expected to slide further in 2026.

North American oil prices remain below $60 US per barrel, after climbing to more than $80 in January.

As a result, oil and gas companies are cutting costs, and total capital spending is expected to decline by 5.6 per cent this year and a further 2.2 per cent in 2026, according to a state of the industry report released Wednesday by Calgary-based Enserva, which represents oilpatch service companies.

The total number of wells drilled in 2025 is expected to decrease by nine per cent compared to 2024, including a 16 per cent drop in British Columbia.

In Alberta, drilling activity is on pace to decline by seven per cent this year, while a 10 per cent drop is expected in Saskatchewan. Drilling is forecasted to fall by an additional four per cent in both provinces in 2026.

Canadian natural gas prices have struggled as well, including for a period of time in September when they plunged below zero and even turned negative. That forced some companies to shut-in production to avoid having to pay to give the gas away.

This year, Canada began exporting natural gas off the B.C. coast as LNG Canada started operations. A handful of other LNG projects are in development or under construction.

“Canada’s energy industry is navigating a period of adjustment, but the long-term fundamentals — especially for natural gas — remain encouraging,” said Gurpreet Lail, CEO of Enserva, in a statement.

“With LNG Canada ramping up, Canadian producers are positioned to benefit from sustained global pricing once near-term pressures ease moving into the new year.”

The Enserva report paints a gloomy picture for the oilpatch for several years ahead as it references how three major forecasting agencies (Sproule, GLJ and McDaniel) all do not expect oil prices to recover before 2029, relative to the prices in 2024.

Oil and gas service companies began cutting jobs in the spring of this year and “will continue through to the end of 2025, remaining flat over 2026,” according to the Enserva report.

On Thursday, Prime Minister Mark Carney and Alberta Premier Danielle Smith are expected to announce an agreement in Calgary that would give the province special exemptions from federal environmental laws and offer political support for a new oil pipeline to the B.C. coast.