Western Canada's oil and natural gas industry faced largely the same array of risks entering 2013 as it had a year earlier. Natural gas prices were in the range of Cdn$3 per mcf at AECO, high regional crude oil price differentials were reducing Canadian oil producers' revenues, political uncertainty surrounded the crucial Keystone XL and Northern Gateway oil export pipeline projects, and many producers' share prices were weak. Internationally, numerous regions faced profound economic uncertainty and some regions were experiencing geopolitical instability.
Notwithstanding these risks, Pulse's management team and Board of Directors view 2013 with greater optimism and confidence than any of the previous four years. The unprecedented strength of Pulse's finances, including the recently closed new credit facility, is the first of two main reasons for this outlook. The Company will have increased flexibility to direct its capital spending in 2013 in pursuit of those initiatives that it anticipates will generate the greatest returns.
Field operations for both the 541 square km McKinley and the 487 square km Fox Creek 3D participation surveys have been completed. The 153 square km Pembina 3D participation survey began in January and field operations are expected to be completed by the end of March. The Company anticipates opportunities for additional participation surveys in the Duvernay and Montney plays, areas that remain highly active and also contain multiple other prospective zones, creating the sought-after prospect of future re-licensing sales.
Pulse anticipates western Canada's producing sector's continued repositioning into unconventional liquids-rich natural gas and oil play areas. It cannot be predicted whether the high level of licensing sales and transfer (change of control) fees related to transactions among Pulse's customers in 2012 was exceptional or indicative of the future. The high capital needs and technical risks of these plays, plus pressure from mineral lease expiries, do help encourage companies to reduce their risks and access outside capital through joint ventures, farm-outs, asset sales or outright corporate sale.
Pulse is hopeful of seeing further such transactions in areas where it holds or is shooting data. As always, the Company cautions that seismic data library sales levels have intrinsically poor visibility and can be very uneven from quarter to quarter. Pulse can generate solid shareholder free cash flow and continue to pay its dividend under moderately low year-over-year data sales.
Commodity prices remain uncertain. There are signs that the multi-year ramp-up of U.S. natural gas production is decelerating, and the U.S. Energy Information Administration is forecasting essentially flat overall production for 2013. Any subsequent price effects will depend on the demand side and continued gradual draw-down of natural gas storage. Pulse does not have a view of natural gas prices in 2013. On the crude oil side, numerous Canadian producers and marketing organizations are reporting efforts to transport oil by rail into the U.S. and to eastern Canadian markets. If successful on a reasonable scale, this could help to ease the regional price differential somewhat. Producers' netbacks will still depend on the movement of international benchmark prices interacting with the regional differential.
In its annual drilling forecast for the year ahead, issued in November 2012, the Petroleum Services Association of Canada forecast that 11,400 oil and natural gas wells would be drilled across Canada in 2013, little changed from 11,250 in 2012. Of the total, approximately 70 percent will be horizontal wells and 87 percent will target crude oil. According to the Canadian Association of Oilwell Drilling Contractors, the number of active drilling rigs in November 2012, December 2012 and January 2013 was lower than in each of the corresponding months one year earlier.
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