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Oh, Canada: North America Rigs Plummet

A 46-unit drop in the Canadian rig count helped drive the North American tally down by 59 in the latest count by Baker Hughes Inc. The start of an early spring break-up contributed to declines in Canada.

"Typically, the first few months of the year are the busiest part of the year. However, to date in 2016 activity levels have remained well below seasonal norms, and warm weather combined with weak customer demand appeared to be leading to an early spring break-up," Lyle Whitmarsh, CEO of Calgary-based Trinidad Drilling Ltd. said during an earnings conference call on Thursday.

Alberta alone saw 33 rigs leave the game, letting the count of active rigs there rest at 79. British Columbia lost four rigs to end at 27 active. Saskatchewan lost eight rigs to end at 19.

Spring break-up happens as Western Canada thaws, driving frost from the ground and softening roads too much to be traveled upon by heavy trucks. During this period, rigs can't be moved, and many of them must shut down until road bans are lifted. Trouble is, this year's spring break might run longer than usual -- or desired.

"We have limited visibility for post break-up, and competition remains very strong," Whitmarsh said during the conference call. "Day rates remain under pressure, although we continue to be focused on maintaining reasonable margins in our operations...We expect the first half of 2016 to be quite weak in Canada and an improvement in the back half of the year only if there is an improvement in commodity prices."

During a speech late last month in Edmonton, Alberta, ATB Financial Chief Economist Todd Hirsch said, "Between now and probably mid-summer, I do expect that we will see more pain in the petroleum sector, more rounds of layoffs...A lot of those work crews [off for spring break-up] just aren't going to be called back for the summer drilling season," he said, as reported by CBC News.

Canada's rig count stands at 129, down by 171 units from its year-ago level of 300. Thirty-three oil-directed units left in the latest round, and 13 gas-directed rigs left.

In the United States, the natural gas rig count finally breached the 100 mark, falling by five units, after lingering just above the century mark for a few weeks. As of last Friday, there were 97 natural gas rigs active; that's down by 171 units (yes, the same as Canada's overall decline) from one year ago when the U.S. gas rig count was 268.

The U.S. oil rig count ended at 392 after losing eight units. That's a decline of 530 rigs from the year-ago level of 922.

The overall U.S. rig count came to rest at 489 active units, a decline of 13 from the previous week and 502 from the year-ago level. Ten rigs left land action and three were taken out of offshore operations. Five of the departing rigs were directionals, and the remaining eight leaving were horizontals. Texas gave up four, leading the pack of declining states, and the Permian Basin lost six units, leading declines among plays.

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