A surge of producer optimism has prompted Total Energy Services Inc. to nearly double its 2011 capital budget to $71.3 million, the company said Monday.

Producers have been returning to the game in a big way on a recovering North American economy, clarity around drilling royalties in Alberta, as well as strong oil prices, said president Daniel Halyk.

"Gas historically has driven our business, and we've seen a 180-degree turn in regard to oil now driving it," Halyk said.

The $33.5-million infusion to Total's capex will be used to upgrade and expand the Calgary-based service company's rental equipment fleet by 13 per cent and bring its heavy truck fleet up to 107 from 101.

The equipment will be deployed primarily toward oil plays, during the second half of 2011 in time for the upcoming winter drilling season.

Currently wet weather and a labour crunch are the only things holding back an explosion of activity in Western Canada, according to industry observers.

Boggy conditions in southern Alberta and Saskatchewan, where producers have flocked to tap into the Bakken oil play, have affected activity for most companies except those supplying rig matting used to gain access to soggy sites, said Mark Selkeld, president of the Petroleum Services Association of Canada.

"There's talk between some producers and service companies about deferring work until the fall," Selkeld said. "Between this weather and trying to find experienced workers for rigs, they will be playing catch up."

He said industry associations met Monday with educational institutions to discuss ways to attract more new blood to the oilpatch, noting increased activity levels and budgets hearken to a labour crunch at least equal to that seen in the last boom, in 2008.

Despite the inclement weather, the number of drilling rigs being deployed in Alberta and Saskatchewan has been steadily rising since mid-April. Approximately 20 per cent of Alberta's 548-rig drilling fleet and 32 per cent of Saskatchewan's 151-rig fleet were deployed last week. Last year 15 per cent of Alberta rigs and 32 per of Saskatchewan's fleet were on the ground, up from seven and 28 per cent in 2009.

"Alberta certainly fell off a lot harder (in 2009) in part, I think, due to the royalty structure, so we've seen a bigger snap-back," Halyk said.

On the labour side, Total Energy Services is one of the few companies not anticipating labour challenges as it was able to retain much of its staff during the recession by transferring them to Saskatchewan, he said.

Source: The Calgary Herald

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