Quarterly Industry Watch
Despite showing resilience last quarter, the Alberta Oilsands area in Q4 2015 fell in line with the negative trends in revenue-related metrics witnessed in other regions. Furthermore, U.S. shale-focused areas continued to fall as expected, although to a lesser degree than the rest of the year. Operating and service metrics across the regions remained largely in line with prior quarters, with behaviour observed hinting at longer planning horizons on the part of guests. If sustained, the trend could benefit operators’ cost control efforts.
About The Data
Over 1.5 million resident days in CampWare™
Average Camp Capacity:
October 1, 2015 to December 31, 2015
Alberta Oilsands, U.S. Fracturing, Western Canada, Other U.S.A.
With WTI prices in the $50 range, the early months of 2015 showed a tempered response across most of the camps in our sample. The U. S. Fracturing region, however, would be the exception, seeing significant negative impacts almost immediately.
This pattern of distribution proved to be the general story of 2015: rapid declines in the U. S. Fracturing areas, with relatively modest movements in the other areas sampled, particularly in revenue-related metrics.
As production and drilling plans continue to be deferred or canceled, we believe the negative trend of 2015 will not markedly alter course in 2016. We do anticipate that the U. S. Fracturing region will see a floor at or close to current levels. Meanwhile, we expect the Alberta Oilsands and Western Canadian areas will continue to see single-digit declines per quarter.
Unsurprisingly, over a period that saw oil producers cut investment levels by 40%, a consistent decline in occupancy rates dominated the calendar year, if only modestly so in the first two quarters. The U.S. Fracturing region saw by far the most dramatic drop, with its year-end occupancy falling to less than half its year-opening level. In all other regions the negative growth, while consistent, was smaller in magnitude, with none seeing more than a 12-point fall between Q1 and Q4.
The severity of the U.S. Fracturing region decline was enough to pull the annual, overall occupancy rate from 60% in 2014 to 13.00 well under 50% in 2015.
Our own view is that 2016 will see the negative trend continue, although much less so in the U. S. Fracturing region and more so in the Alberta Oilsands region, relative to 2015.
With the exception of the Other U. S. A. area, regional length of stay remained in line with the trends established in the first half of 2015: a trend to longer stays in the Alberta Oilsands, and a trend to shorter stays in the U. S. Fracturing and Western Canada regions.
Longer residencies and wider use of cross-shifting could account for both the continuation and length of stays in the Alberta Oilsands, in Q4 particularly. The constriction of stay length in other regions we attribute to an adherence to standard work rotations and a curtailing of overtime.
Year-over-year, correlating with the decline in occupancy, the average length of stay in the industry fell from 13.5 days in 2014 to 11.3 days in 2015.
Despite a trend-defying booking spike in Q3 2015 driven largely by the Alberta Oilsands region, overall reservations at year-end returned to Q2 levels. We did note that Q4 reservations exceeded those of Q1, when WTI price was nearly 60% higher than at the end of 2015 – an uptick we attribute at least in part to seasonality.
As in Q3 2015, reservations were dominated by “Standard” room requests, representing 87% of the total at year-end. Perhaps the result of a relaxation in travel restrictions, “Executive” room bookings did rise modestly from 5.8% to 8.6%, but remained well off the peak of 15.5% observed in Q1 2015.
At 27.5%, Q4 2015 proved to be the only period throughout the year where the proportion of reservations made within seven days of arrival was significantly below 40%. We continue to see no evidence of incentives by operators encouraging greater booking notice, so we surmise the drop is related to factors that also influence Average Days Stayed: wider use of cross shifting and standard shift rotations, both of which create longer planning horizons for guests.
Likely to the benefit of operators’ staffing and procurement efforts, Q4 2015 cancellations 24 to 72 hours prior to expected arrival dropped over 40% quarter-over-quarter. Operators further benefitted from a modest reduction in No-Shows over the same period. We attribute both again in part to what could be a longer planning horizon on the part of guests and contractors.
Q4 2015 saw a continuation of prior trends in all regions: U.S. Fracturing, Alberta Oilsands, and Other U. S. A. regions continued to show rates of check out similar to the balance of 2015, where Western Canada continued to show a decline in check outs proportionate to its room count.
At more than double the length of time observed in Q3, rooms sampled in the Alberta Oilsands region in Q4 remained uncleaned nearly two days after check out. While we anticipated excess room capacity and reduced service frequency, the degree of change in this metric was unexpected. We believe Q1 2016 will show levels similar to Q3 2015 at or around 24 hours.
At the other end of the spectrum, camps in Western Canada went from the greatest length of time uncleaned across the sample to the shortest. The amount of hiring and training required to see such a reversal would be difficult to accomplish over a quarter – consequently, this could be the result of rooms taken off-market, while keeping existing staff levels constant.
Despite a decline in Q3 2015 relative to the first half of the year, the number of rooms removed from booking eligibility grew by more than 30% quarter-over-quarter. Anecdotally, we noticed more decommissioning of assets in Q4 2015 than at any other time in our 15 years serving the remote workforce accommodation industry, with the data sampled here supporting that notion. Given operating costs increase as a step function of room count, we expect this trend could continue throughout 2016.