Peter Tertzakian

Examining the headline plays in the United States, the amount of oil and associated gas that can be brought out of the ground with the grinding pipes and bits of one rig has increased in the range of four-fold since 2012.

Take for example the oil-soaked Permian Basin in Texas. Back in 2012 a rig working in the region for one month could drill enough rock to add 150 BOE/d of average production. Four years later the output from one drilling rig was over 600 BOE/d. In the prime postal codes of the Eagle Ford, the rates are over 1,600 BOE/d! No wonder the OPEC-and-friends cartel is concerned about what’s happening on this side of the world.

The reasons for the productivity improvements are many: Drilling faster and more accurately; employing new-age, alternating-current (AC) electric rigs; migrating to development drilling on multi-well pads; using rigs that “walk” and move quickly from one location to the next; high-grading of prospects to the best areas; and realizing learning-curve effects from completion technologies that are leading to more production from each well.  .....

............
It’s early days yet. Productivity gains have been impressive in a short period of time, in select areas of the vast WCSB. Learning curve effects are just starting to kick in, so the reserve and production potential of natural gas and low-carbon liquids in the wider WCSB is looking promising.
In past columns I’ve made the claim that the recent upturn in the Canadian oil and gas industry – increasing capital expenditures and rig counts – is being driven by innovation, efficiency and speed to market. The Canadian rig productivity data helps to validate that claim, and explains the shift in investment emphasis away from the oil sands toward resource plays in Saskatchewan, Alberta and BC.

Calgary Herald

​Another bright spot has been the results of new fluids Crescent Point has been using to help extract oil from the Viewfield Bakken formation in southeastern Saskatchewan. In tests last year, the fluids improved initial 90-day oil production rates by about 50 per cent.Saxberg did not divulge details about the fluids because they are "proprietary."
"Early results are pretty impressive," he said. "It's pretty exciting stuff in this environment and I think the low-cost environment allows us to do this experimentation and we probably put $50 million of our budget across all of our fields toward that technology."

​Only a matter of time before this diffuses to rest of industry.

 

They are going to start cutting public sector jobs and wages before the private sector has had time to adjust.

From the Calgary Herald

An unexpected battle is brewing between one of the province’s most powerful unions and an NDP government that’s always been labour-friendly but is now facing severe financial straits.
The Alberta Teachers’ Association will sit down with provincial negotiators next week to set parameters under new bargaining rules that will give the province more oversight in central contract issues, including salaries.
But at the same time, two sides that were often seen as allies amid decades of provincial Tory rule will now face off under a dark economic cloud that has seen oil prices plummet for months, tens of thousands of private-sector layoffs, and dwindling government revenue. 
Pundits say with the ATA’s contract set to expire this summer, the upcoming round of contract talks is shaping up to be quite uncomfortable as the New Democrats face some of their strongest political supporters at the bargaining table. 
“The days of being best friends may be gone,” said Duane Bratt, chair and professor in Mount Royal University’s Department of Policy Studies.
“There are teachers that are members of the party, that are some of the NDP’s closest supporters,” said Bratt, adding that several NDP MLAs are former educators.
“What does the government do when faced with this fiscal reality? Will they think of the broader economic situation or will they think about their supporters and members of their caucus?”
With the ATA’s current four-year agreement set to expire Aug. 31, 2016, a new round of collective bargaining is expected to start in the next few weeks.
In their existing contract, teachers received a zero per cent increase for the first three years and a two per cent increase in the fourth year, beginning Sept. 1, 2015, with a one per cent lump sum payment in the final year, paid out in November 2015.
But as they enter a new round of talks, Chaldeans Mensa, associate political science professor at MacEwan University in Edmonton, says teachers need to be aware of the economic reality.
“If teachers make unrealistic demands it may backfire. The public is in no mood to support that.”
“It’s difficult, because the NDP is facing two forces, the economic reality and their traditional allies. But the government knows they will have to hold the line.”
Education Minister David Eggen agrees the New Democrats and labour unions have supported each other in the past. But at the same time, he hopes both sides understand the fiscal challenges ahead.
The NDP announced earlier this week that the steep and prolonged collapse of world oil prices has doubled Alberta’s deficit projection for next year to more than $10 billion.
Union contract talks will have to reflect that reality, Eggen stressed.
“This won’t be easy. I wake up in the middle of the night thinking about how we can do this.
“But we’ve been in a difficult economic circumstance since we were elected. We can see the clouds gathering.
“And we all live in this economic climate, everyone understands what that looks like.”
But ATA president Mark Ramsanker is adamant that in spite of a lack of resources, teachers are still faced with the critical, daily task of educating an increasing number of children and the system is bursting. 
“Everybody keeps talking about the economic reality. But we have to balance that with the demographic reality of today’s classroom.”
Ramsanker estimates 55,000 new students have arrived in Alberta over the last five years, about 11,000 per year. 
“The fact of the matter is classrooms are still very complex, and their sizes are still unmanageable.
“That’s the reality that has to be addressed.”
Under the new Bill 8, the Public Education Collective Bargaining Act, contract talks will be a three-step process starting with setting parameters around what will be negotiated at the central bargaining table versus what will be negotiated at the local level between teachers and school boards.
Once parameters are set, central bargaining begins first, followed by local bargaining by 61 school boards across the province.
Eggen said the initial central bargaining process will be good opportunity for “the funder” to make clear to the union the lack of available revenue.
Ramsanker replied the union will in turn use that opportunity to make clear the urgent needs in the classroom.

They are going to start cutting public sector jobs and wages before the private sector has had time to adjust.

From the Calgary Herald
The NDP government will introduce essential services legislation this spring as the prospect of significant public sector strike action becomes a new reality in Alberta. 
The Notley government is responding to a Supreme Court decision in 2015 that recognized the right of public sector employees to strike but allowed governments to designate some workers as providing essential services who are unable to take job action.
It will be a fundamental change for Alberta, which has long had many of its government workers covered by a blanket ban on striking.
“What this does, it shifts the landscape dramatically,” Guy Smith, president of the Alberta Union of Provincial Employees, said in a recent interview.
“It’s now providing to a majority of our members a right they never had before. So that obviously changes the dynamic at the bargaining table because without that legal right, the tools in the tool box were pretty limited when it came to contract negotiations, and employers knew that.”
Smith said the change will make contract negotiations more fair but won’t automatically mean more labour action.
Bargaining for AUPE’s new contract in 2017 promises to be tough as the NDP government grapples with a massive deficit caused by low oil prices.
Among the workers that have been forbidden to strike in the province are all unionized Government of Alberta employees, post-secondary faculty and staff, and police, fire and emergency medical personnel.
As well, nurses, general support staff, and professional and technical employees at approved hospitals are not allowed to strike.

Zerohedge
Note the parallels to the Canadian market. Resource driven economy, same debt to income ratios.
Jonathan Tepper (the expert on  the 60 minutes piece who called the Irish, Spanish, and USA property bubbles) described the Canadian market in 2013 as one of "biggest housing bubbles in the world". 
See also here and here
Don't act like I never told ya.

Zerohedge 

...just ask Canadians, half of whom said in response to a new Ipsos Reid survey that they are within $200 per month of not being able to pay their bills and make their debt payments.
"Ipsos Reid conducted the poll about a week after the Parliamentary Budget Office issued a report on Jan. 19 that said Canada has seen the largest increase in household debt relative to income of any G7 country since 2000," The Calgary Herald writes, adding that "31 per cent of respondents said any increase in interest rates could move them towards bankruptcy".
The survey also found that 25% of Canadians are already unable to cover their bills and service their debt.
Bloomberg
Demand for new condominiums in Canada’s oil patch sank the most last year since 2008, according to data from Altus Group Ltd. Sales of condos in Calgary fell 38 percent to about 3,000 units from 4,805 units the prior year, according to the Toronto-based real estate consulting and advisory firm. That’s the biggest year-over-year drop since the financial crisis in 2008, when transactions fell 72 percent to 1,103 units.

​Toronto and Calgary residential real estate markets are showing strong evidence of “problematic” conditions, Canada’s federal housing agency said in a report, adding to concern risks in the nation’s housing sector are growing.

​

Trevor Tombe lays out the story in Macleans, Jack Mintz discusses options in FP.

Edit: Here is commentary on the actual budget.

Another commentary in Alberta considering removing the balanced budget law.

His new book, When the Bubble Bursts, was released this month across the country, and is one of the most fulsome looks yet at the current state of Canada’s much-fretted over real estate market. His call is that Canadian real estate is poised for a painful 40 to 50 per cent drop in value when the bubble pops.

Many say strong immigration numbers are supporting growth. Your take?“Immigration is fairly easy to counter. Canada has been a leader in immigration growth. But the second-fastest [market] was the United States, and they had a boom and bubble and huge crash. The foreign investor theme is somewhat different. As soon as there is a downturn in the market, they’ll look elsewhere. They’re not particularly tied down to Canada.”

What could cause the Canadian bubble to burst?“Two things. Interest rates rising. But that doesn’t look like it’s imminent. The more likely cause would be recession. Incomes would drop, and already Toronto is like six or seven times incomes [in average mortgage loan vs household income]. Some borrowers will get into the position where they can’t afford to keep the house they have.”

See also this article:

Now look at the third and final column in the table; the one I believe is the scary one. This summarizes the spending life of the 1.8 million Canadian households who have a mortgage liability ratio (MLR) larger than 20% of disposable income. Recall, this implies that they are spending at least 20% of their after-tax income to cover the mortgage (only). On a pre-tax basis this number is higher and this figure doesn’t include maintenance, property taxes, heating or utility bills and all the other things one needs to avoid freezing in the winter or melting in the summer. The 20% of disposable income (only) goes to keep the bank at bay.