Despite a reduction in activity due to weak natural gas prices, the oilpatch is on pace to drill a record number of wells this year, says the Canadian Association of Oilwell Drilling Contractors.

In releasing its outlook for the remainder of the year and 2007, CAODC said the number of rigs drilling declined last month in response to weak gas prices.

During the fourth quarter an average of 454 rigs are expected to be running and over the course of 2006, the average number of rigs drilling is pegged at 498, representing a utilization rate of 62%.

In terms of overall activity, the association expects 22,298 well completions this year, which is more than 3,700 lower than CAODC's original estimate released last October, but still ahead of the record 21,927 completions in 2005.

Drilling is projected to decline further next year, resulting in an average of 427 rigs running, a 51% utilization rate and 19,023 well completions, a drop of 15% from 2006.

"The 2007 forecast of drilling activity is dominated by weaker gas prices," said the association's outlook.

"The CAODC expects oil well drilling and deeper gas work to continue. Drilling to establish gas reserves is not impacted by reduced gas prices, which are assumed to be a relatively short-term phenomenon."

The forecast is based on oil being US$65 per barrel and natural gas prices of US$6.50 per thousand cubic feet.