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Western Canada Rig Count Climbs Above 5-Year Average, RBC Says

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Canadian oilfield services stocks fell over the past week even as drilling activity across Western Canada continued to strengthen, RBC Capital Markets analysts said in a note on Tuesday.

The Western Canadian Sedimentary Basin rig count rose by seven rigs from the previous week to 189, placing activity 41 rigs above year-ago levels and 32 rigs above the five-year average. The analysts said the increase points to stronger-than-expected drilling momentum heading into the third quarter.

Heavy oil regions led the gains, adding six rigs to reach 45 active rigs. Southeast Saskatchewan added three rigs, bringing its total to 21. Activity in the Montney and Duvernay plays eased slightly, with each region losing one rig week over week.

Among operators, Canadian Natural Resources, ARC Resources, Ovintiv, and Tourmaline were among the most active drillers. Precision Drilling remained the dominant drilling contractor in several key basins, including the Montney and heavy oil regions.

Despite the rise in activity, Canadian oilfield services stocks declined 5% over the past week. Precision Drilling posted the strongest performance, edging up 0.6%, while CES Energy Solutions and Ensign Energy Services recorded smaller declines than peers. The weakest performers included Enerflex, Pason Systems, and Calfrac Well Services.

Even with the recent pullback, the sector remains up 40% year to date, broadly tracking the S&P/TSX Capped Energy Index, which has gained 42.1%.

Looking ahead, analysts expect Canadian exploration and production companies to maintain disciplined spending. Companies under coverage are projected to generate about 8.9 billion Canadian dollars ($6.39 billion) in pre-dividend free cash flow in 2026 and 8.8 billion Canadian dollars in 2027 based on current commodity futures prices.

Producers are expected to reinvest about 58% to 59% of cash flow into operations over the next two years, below the five-year average reinvestment rate of 64%, suggesting continued emphasis on shareholder returns and balance-sheet strength despite elevated drilling activity.

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