Quote:
Originally Posted by JD
Being in the service industry myself, I can attest to the fact that whatever boom was taking place is no longer a part of the oilpatch. Our utilization rates are low, in fact, much lower than predicted. Q1 revenue was about half of what was predicted. Layoffs have happened twice in the past 3 months in my company. Office staff too (engineers, sales), not just field workers. Salaries have been frozen and bonuses aren't being awarded.
Our sales dept has been working hard to find out what the operators' price point is... they all want lower costs as fotze points out, but we're trying to figure out how low we need to be, it's murky right now! Certainly an environment of tough competition among the service companies has been created... night and day from 2 years ago.
However, construction is still booming in Calgary, and that sucks for us because we're competing with that industry for supplies such as cement and related chemicals.
Calgary's still a really strong economy, but things are starting to show a bit of a slowdown for all.
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I think Oil services took advantage of almost overnight higher commodity prices in 2005 and jacked up rig rates. They started to go like gangbusters hiring crews and building rigs at break-neck paces. In the US rig rates have been much more stable and American companies that have operations on both sides of the border have limited their prospects in Canada due to these rates. There is a more competitive rig market in the US and it keeps prices at least somewhat stable. Expect this level of competition to come to Canada because even at $70 oil and $8 gas the rates that are being charged are not able to make a lot of wells predictably profitable. CBM especially.