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The International Energy Agency has said global oil markets will remain oversupplied in 2016 as demand growth wanes.

RBC Dominion Securities recently predicted drilling in Canada could start to recover in the fourth quarter of 2016 with a “modest recovery” in oil prices in the first half of the year. Paal Kibsgaard, chief executive of global giant Schlumberger, said this week it will likely be 2017 before there’s a recovery in the oilfield services sector.

Precision revealed it retired five drilling rigs and 44 service rigs over the past year to bring its fleet to 507 — 330 drilling rigs and 177 service rigs — as it adds 18 new rigs this year. Neveu said Precision will try to retain current day rates with customers as its focus on maintaining cash flow is more important than propping up rig utilization.

The day rates for Precision’s top-tier drilling rigs, many under long-term contracts, actually went up in the quarter.

After an initial push for rate cuts to get their spending in check, Neveu said producers have been sympathetic to the challenges facing their suppliers in a bleak operating environment.

“Our customers are trying not to put anybody out of business,” he said. “They are being loyal to service space by trying to spread the work around and trying to do the best they can with very small budgets.”

The Canadian Association of Oilwell Drilling Contractors has forecast 5,531 wells will be drilled in Western Canada this year — down from 10,920 in 2014. Meanwhile, the Canadian Association of Petroleum Producers calculated that two-thirds of the jobs lost in the downturn this year have been at oilfield services companies.

Any “cautious optimism” Precision and others expressed when oil prices rallied briefly last spring has faded. Neveu is adamant the company won’t “underestimate the depth and voracity of this downturn” so it accelerated cost-reduction initiatives put in place last fall to weather the downturn and be ready respond to the eventual rebound.

Expect that message to become an industry-wide mantra as companies report results over the next few weeks.

Stephen Ewart is a Calgary Herald columnist

sewart@calgaryherald.com

twitter.com/stephen_ewart