CNR and Cenovus Lead Alberta’s Drilling Renaissance While Rig Shortage Looms

By AWF Team • May 28, 2025

May 22-26, 2025 | 5-Day Rolling Analysis

TL;DR: Drilling activity surged Monday with 11 operations after a quiet Friday, driven by horizontal completions in premium locations. Canadian Natural leads activity while drilling stocks face headwinds despite strong operational fundamentals.

📊 Industry Forecast Alert
"Projected 2025 wells drilled: 6,604 – an increase of 448 (7.3%) from 2024"
— Canadian Association of Energy Contractors (CAOEC)

Executive Summary

Alberta drilling activity averaged 9 operations per day over the 5-day period, with notable volatility from Friday’s low of 5 activities to Monday’s peak of 11. The week demonstrated resilient operator commitment to horizontal drilling programs despite challenging market conditions, with 64% of all wells being horizontal developments.

Key Metric: 45 total drilling activities across 5 days, representing steady commitment to capital deployment in core plays.

Market Leaders & Activity Rankings

Top Operators by Activity Volume

Canadian Natural Resources - 8 operations (18% of total)
- Heavy focus on horizontal drilling in Lind, Elm, and Karr formations
- Mixed drilling phases: 3 new wells, 3 surface casing, 2 resumptions
Cenovus Energy - 5 operations (11% of total)
- Concentrated in Fisher and Steepbank areas
- All operations were resumptions of previously started wells
Ensign Drilling (Contractor) - 12 rig deployments (27% of contractor activity)
- Leading drilling contractor by activity volume
- Heavy exposure to horizontal completions
Precision Drilling (Contractor) - 11 rig deployments (24% of contractor activity)
- Second-largest contractor presence
- Diversified across multiple operators

Emerging Players

NuVista Energy: 4 operations focused on Elm formation horizontals
ARC Resources: 3 operations in Karr and Lator plays
Whitecap Resources: 2 operations in Kakwa and Kaybobs

Geographic Hotspots

Prime Drilling Zones

Kakwa Region (NW Alberta)
- Multiple operators active: Whitecap, Cenovus, Paramount
- Focus on condensate-rich Montney formations
- Recent $1.6B ARC Resources acquisition highlights area value
Elm Formation Cluster
- Heavy NuVista and CNR activity
- Township 70, Range 8 seeing concentrated development
- Multiple horizontal phases across adjacent sections
Lind Formation
- CNR-dominated with Strathcona participation
- Consistent horizontal drilling activity
- Proximity to existing infrastructure
Fisher/Steepbank Complex
- Cenovus-operated oil sands periphery
- Focus on resuming existing well programs
- Heavy oil/bitumen blend opportunities

Technical Analysis

Well Type Distribution

Horizontal Wells: 28 of 45 operations (64%)
Drilling to Licensed Depth: 24 operations (53%)
Surface Casing Only: 8 operations (18%)
Resumption Activities: 13 operations (29%)

Operational Patterns

Monday surge: Peak activity (11 operations) suggests optimized rig scheduling
Weekend slowdown: Natural reduction to 8 operations Sunday
Midweek consistency: Thursday led with 12 operations

Formation Focus

Activity concentrated in proven resource plays (AER Natural Gas Statistics):

Montney Formation (liquids-rich gas) - 89% horizontal wells
Cardium Formation (light oil)
Mannville Group (conventional)
Duvernay Formation (condensate-rich)

🔧 Drilling Technology Dominance
"Horizontal wells accounted for 89% of new wells, of which 95% were completed using horizontal multistage fracturing (HMSF), the dominant technology since 2011."
— Alberta Energy Regulator Natural Gas Report

Market Context & Economics

Commodity Environment

WTI Forecast: US$77/bbl for 2025 (Alberta Energy Regulator ST98)
WCS Differential: Expected US$13/bbl below WTI
Natural Gas: Rising demand from LNG Canada startup
Current Pressure: Trade tensions and OPEC+ increases weighing on prices (IEA Oil Market Report)

Industry Catalysts

Trans Mountain Expansion: Operational since 2024, boosting export capacity (Canada Energy Regulator)
LNG Canada: Expected 2025-2026 startup driving gas demand
Rig Shortage Anticipated: Western Canada expected to hit 10-year high activity levels (BNN Bloomberg)

🎯 Employment Outlook
"Total jobs expected: 41,800 – an increase of 2,720 (7.0%) from 2024. These represent mortgage-paying, blue-collar jobs for Canadians that will help build strong communities."
— CAOEC President Mark Scholz

Capital Efficiency Trends

Operators prioritizing capital discipline post-2022 surge (AER Statistical Report ST98)
Focus on high-return horizontal drilling
Extended-reach completions with multi-stage fracturing
Infrastructure-led development in hub concepts

⚡ Technology Impact
"For horizontal wells using hydraulic multistage fracturing, the increased fracturing stages per well, longer well lengths, and multiple lateral legs resulted in higher production rates and slower decline rates."
— Alberta Energy Regulator ST98 Report

Stock Market Impact Analysis

Operator Stock Performance Context

Canadian Natural Resources (CNQ)

Recent: Q1 2025 record production, earnings beat estimates (Canadian Natural Resources)
Price Target: Analysts avg. $60 (93% upside potential) (WallStreetZen)
Capital: $6.05B budget (-$100M reduction), maintaining production targets (The Globe and Mail)
Dividend: 5.46% forward yield, strong free cash flow generation

💰 Capital Discipline
"Canadian Natural said it would lower its annual capital budget by $100-million to $6.05-billion, adding it would have no impact on the company’s planned operating activities or targeted production levels for 2025."
— The Globe and Mail

Cenovus Energy (CVE)

Focused on optimization of existing assets
Fisher Valley operations showing consistent activity
Trans Mountain benefits enhancing heavy oil economics

Drilling Contractor Stocks

Precision Drilling (PD)

Analyst View: 137% upside potential, $124 price target (Stockchase)
Fundamentals: 26% free cash flow yield expected 2025
Strategy: Debt reduction focus, 30-40% cash return to shareholders
Market Position: Leading contractor with 11 rig deployments this week

📈 Analyst Outlook
"Ridiculously cheap. Investors don’t realize how much debt they have paid down. Much upside ahead. 26% free cash flow yield then 30% this and next year."
— Industry Analyst via Stockchase

Ensign Energy Services (ESI)

Current Price: CAD $2.09 (+1.6% daily) (TradingView)
Analyst Target: CAD $3.32 average (58% upside) (Stock Target Advisor)
Challenge: High P/E ratio of 25.45, recent quarterly loss
Strength: 27% contractor market share by rig count

Investment Themes

Bullish Factors:

Trans Mountain capacity providing export optionality
LNG Canada driving natural gas demand
Western Canada rig shortage anticipated for 2025
Strong free cash flow yields across drilling sector

Risk Factors:

Trade war tensions pressuring commodity prices
OPEC+ production increases creating supply overhang
Interest rate environment affecting capital costs
Potential tariff impacts on cross-border operations

Regional Development Spotlight

Kakwa Montney Expansion

The Kakwa region continues as Alberta’s premier condensate play, with recent ARC Resources’ $1.6B acquisition of Strathcona assets highlighting the area’s strategic value (Tank Terminals). Current week activity includes:

Whitecap Resources: 2 operations focusing on extended-reach horizontals
Cenovus Energy: 1 resumption targeting liquids-rich zones
Production Context: Area yields ~14,000 bopd with high condensate ratios

Economic Driver: Kakwa wells historically average 118 bbl/mmcf condensate ratios, making them highly economic at current pricing (BOE Report).

🏭 Strategic Consolidation
"The acquired assets are located directly adjacent to ARC’s existing operations in Kakwa, adding approximately 40,000 barrels of oil equivalent per day (boe/d) of current production."
— ARC Resources Acquisition Announcement

Elm Formation Development

NuVista Energy’s concentrated 4-well program in the Elm formation represents systematic development of this emerging play:

Technical Approach: 250-meter inter-well spacing optimization
Infrastructure: Leveraging existing processing capacity
Reservoir: Multiple horizontal legs with multi-stage fracturing

Cardium Renaissance

Whitecap’s continued Cardium development in West Pembina demonstrates the formation’s enduring economics:

Well Performance: Consistently exceeding expectations
Technology: Enhanced completion designs improving returns
Market Position: Light oil premium to heavy oil benchmarks

Infrastructure & Logistics Update

Processing Capacity Utilization

Kaybob Area: Whitecap’s 15-07 facility approaching 36,500 boe/d capacity
Third-Party Connections: New 7,000 boe/d incremental capacity commissioned
Debottlenecking: Focus on reducing capital duplication through infrastructure synergies

Transportation Developments

Trans Mountain: Operating at capacity, reducing Western Canada Select differentials
Pipeline Constraints: Potential mid-2023 congestion if completion delays occur
Rail Alternatives: Backup transport maintaining market access

Labor Market Dynamics

Employment Growth: 7% year-over-year increase expected in 2025 (CAOEC Forecast)
Total Jobs: 41,800 anticipated in drilling sector
Skills Shortage: Biggest challenge facing expanded drilling programs

⚠️ Tariff Warning
"I think what we do know is that there would be some impact on jobs. Trump’s recent threat of 25-per-cent tariffs across the board on goods coming into the U.S. from Canada and Mexico should be taken very seriously."
— CAOEC President Mark Scholz

Environmental & Regulatory Landscape

Emissions Focus

Technology Deployment: Advanced drilling systems reducing environmental footprint
Automation: Reducing personnel requirements and improving safety
Water Management: Enhanced recycling in fracturing operations

Land Access Trends

Recent land sale weakness reflects (World Oil):

Trade War Impact: US-Canada tensions affecting investment sentiment
Price Pressure: Lower commodity prices reducing bonus payments
Selective Bidding: Focus on core acreage rather than exploration

Regulatory Outlook

Federal Policy: Net-zero commitments affecting long-term planning
Provincial Support: Alberta maintaining pro-development stance
Indigenous Relations: Continuing consultations on development projects

Technology & Innovation Trends

Drilling Efficiency Gains

Extended Reach: Longer horizontals with multiple laterals
Fracturing Intensity: Increased stages per well improving productivity
Automation: EDGE AutoPilot and similar technologies reducing costs

Data Analytics Integration

Real-Time Monitoring: Performance optimization during drilling
Predictive Maintenance: Reducing downtime and improving reliability
Formation Evaluation: Enhanced reservoir characterization

Forward-Looking Indicators

Q2 2025 Outlook

Activity Expectations:

Rig Count: Anticipated increase as weather improves
Completion Focus: Emphasis on bringing drilled wells online
Infrastructure: New processing capacity additions

Market Drivers:

LNG Canada: Production ramp-up driving gas demand
Summer Driving: Seasonal gasoline demand supporting oil prices
Election Impact: US policy uncertainty affecting cross-border investment

🔮 Industry Forecast Context
"Building on the modest but steady growth of last year, the Association is optimistic that growth will continue through 2025. With increased pipeline capacity following the completion of the Trans Mountain Expansion (TMX) and LNG Canada projects, combined with the new U.S. administration..."
— CAOEC 2025 Forecast Report

Investment Considerations

For Equity Investors:

Operators: Focus on integrated players with processing assets
Contractors: Free cash flow yields attractive despite cyclical concerns
Infrastructure: Midstream assets benefiting from increased throughput

For Industry Professionals:

Employment: Strong hiring outlook in technical roles
Technology: Automation creating efficiency opportunities
Safety: Enhanced protocols reducing incident rates

Week Ahead Preview

Expected Developments

Completion Activity: Multiple wells transitioning from drilling to production
Rig Releases: Some equipment redeployment as programs conclude
Infrastructure: Tie-in activities for recently drilled wells

Monitoring Points

Commodity Prices: WTI and WCS movements affecting drilling economics
Rig Utilization: Contractor deployment efficiency
Weather Conditions: Spring breakup impact on access roads

Key Metrics to Watch

Daily rig count changes
New well spud announcements
Production tie-in schedules
Land sale results and bonus levels

Data Sources: Analysis based on Alberta Energy Regulator daily activity reports (AER Activity and Data), market data from TSX/NYSE, and industry sources. Commodity price forecasts from Alberta Energy Regulator ST98 Statistical Report (AER ST98). Industry forecasts from Canadian Association of Energy Contractors (CAOEC).

📋 Methodology Note
"We publish industry activity lists and other data on a daily, weekly, monthly, or annual basis. Users have access to data and other information on oil, gas, oil sands, coalbed methane, and shale gas."
— Alberta Energy Regulator

Disclaimer: This analysis is based on publicly available Alberta Energy Regulator data and market sources. Past drilling activity does not guarantee future performance. Commodity price volatility and regulatory changes may impact operational and investment outcomes.

Alberta Well Finder Newsletter - Providing data-driven insights for industry professionals. Next edition: June 2, 2025