Oil Update – Edmonton Commercial

It may not feel like spring quite yet, but the drilling industry is in the midst of the annual “spring break-up”.  Around this time each year, the earth thaws and the ground becomes soft, muddy and generally harder to work in.  It is a period of considerable slow down, as evidenced by recent statistics showing roughly 3/4 of the rigs in western Canada are currently inactive.   Spring break-up follows the busiest drilling period of the year.  Trinidad Drilling notes that from October to mid-March “the cold temperatures freeze the ground enough for drilling companies to move rigs without damaging municipal roads.”

While drilling companies are undoubtedly still busy during the break-up, it does allow time to forecast, plan and strategize.  it’s likely of little surprise to hear that this often translates into increased activity in the industrial real estate market.  Anecdotally, we have been experiencing a brisk uptick across the board, which we would attribute to Alberta coming out of a recession, oil prices hovering in the mid $60’s / barrel, and – presumably – this so called spring-break-up-effect.

It also helps the economy is looking better than the past couple of years.  For example, in 2015 (which saw oil prices flirt with $30 / barrel prices), there was industry commentary that expected spring-break up to extend into the fall.

Fast forward to 2018 and the outlook is far more optimistic.  The Petroleum Services Association of Canada (PSAC) is forecasting there will be 7,600 wells drilled in Canada this year, with roughly half of those wells (3,807) expected to be drilled in Alberta.  What’s interesting, it that this forecast is based on oil prices of $55 / barrel (USD:WTI).  With oil prices currently ~18% higher, it’s conceivable there will be an upward adjustment in those numbers.

The contentious Trans Mountain Pipeline also had a win this week, with a federal court rejecting an appeal by BC over the National Energy Board’s approval in February.  Alberta Premier Rachel Notley is steadfastly pushing for the project, and signs look positive for Kinder Morgan to proceed.

Alberta has an economic incentive in seeing the pipeline proceed.  After all, Finance Minister Joe Ceci announced that the province’s budget forecasts are based on it’s success.  We’re looking at a $96 billion debt by 2024, it’s a sobering thought to imagine what that number would be without the pipeline.

So with oil in the mid $60’s / barrel (perhaps on their way to $70?) and reasons to believe the pipeline will help get Alberta oil to tidewater, there is undoubtedly a sense of optimism in the air.

While we are glass-half-full Albertans, it’s important that the glass isn’t half full of Kool-aid.  We only need to look to Bob Ascah, Fellow with the Institute for Public Economics at the University of Alberta who posed the following:

The NDP plan to build $96 billion in debt by 2024 sounds like a lot, but is it? Should Albertans be worried?

It is true that Alberta’s debt is still relatively small compared to its economy. But the growth in debt — leading to interest costs climbing to an estimated $3.7 billion annually in the final year of the balanced budget — plan are alarming.

The economy is indeed better.  The market doesn’t lie.

But this isn’t 2013.  There’s still work to do.

 


 

Disclaimer: information contained herein has been obtained from sources deemed reliable but is not warranted to be so.  View our full privacy policy and disclaimer here.

Our Team

CHAD GRIFFITHS

CHAD GRIFFITHS

Partner

Chad is a partner with NAI Commercial and has finished as a top 15 producer Canada-wide for the past three years. Chad owes his success largely to his commitment to uncompromising client representation, his active involvement in the real estate and business communities and a lifelong pursuit of continuous learning.

RYAN BROWN

RYAN BROWN

Partner

Ryan is a partner with NAI Commercial Real Estate in Edmonton. He is currently ranked nationally as one of NAI’s top advisors in Canada. Having completed his Bachelor of Commerce majoring in Finance, his eye for detail and great understanding of the numbers associated with any business decision makes him an asset to his clients while providing them the highest level of service.

DARCIE BOUTEILLER

DARCIE BOUTEILLER

Associate

Darcie began her career in Commercial Real Estate after completing her studies in Business Administration. Her personable nature coupled with a results-driven attitude is a perfect match for customers. Darcie understands the importance of delivering a custom, accountable solution for her clients.

Recent Posts

We Got 99 Problems But This Street Ain’t One
Articles

We Got 99 Problems But This Street Ain’t One

99th Street’s Impact on Edmonton’s Commercial and Industrial Real Estate Markets In 1870, private land ownership was introduced in Alberta,...
Read More
Getting Slapped in the Face by a Pipeline: A Short Story
Articles

Getting Slapped in the Face by a Pipeline: A Short Story

On October 3rd, 2017, oil prices closed at $49.98 / barrel.  Fast forward one full year, and prices have increased...
Read More
October will be an Important Month for Edmonton
Articles

October will be an Important Month for Edmonton

We like sharing positive news.  We also know people like reading positive news, as demonstrated by last week's post about...
Read More

About Us

EdmontonCommercial.com offers expert analysis and research in a weekly blog along with resources for landlords, tenants, sellers and buyers in the market. Seeking to buy or lease? We track every property available for sale and for lease in Greater Edmonton. Get the latest news and check the latest listings—anytime.

5 thoughts on “Oil Update – Edmonton Commercial

  • Good on you Chad. Writing articles of any kind can leave one open to trolling. That said, subject matters as broad as these have a way of effecting a lot of people’s purse strings, and that in itself can create some unrest.
    While the price of a barrel of oil has improved from its bottom, it seems quite flat when taking the CPI index into account. The cost of living just keeps going up, while the biggest job sector in Alberta limps.

    Thank for the article.

Leave a Reply

Your email address will not be published. Required fields are marked *