or that is going to be what this article refers too,seems OPEC aren't the only ones who can cut production,IMHO energy prices are on their way up,only a matter of WHEN,for me this is not speculation but is in fact what will happen.Recoverey can only happen if Oil and Gas consumption increase,there is no other energy option ,at least not in the short term,even when there is alternative energy sources Oil will still be in demand given its other uses..

Calgary — A group that represents Canadian oil and gas drillers is revising its already grim 2009 forecast to reflect an even bleaker outlook for the industry.

The Canadian Association of Oilwell Drilling Contractors is predicting 22 per cent fewer wells will be drilled in Western Canada this year than it called for in its October forecast.

“Activity levels have been low enough that we're not tracking onto a 2009 forecast that was fairly pessimistic to begin with,” association president Don Herring said in an interview Friday.

He said it's the first time in his 25-year tenure at CAODC that a forecast has been revised in mid-winter, typically the busiest time of year for natural gas drillers.

Now the group is set to release a report predicting 11,176 wells will be drilled in 2009, well below the 14,300 it forecast in the fall and half the 2005 and 2006 levels.

Natural gas prices sunk below $4 (U.S.) per 1,000 cubic feet on the New York Mercantile Exchange Friday — about half of what most producers would need to make their drilling economically viable.

As well, a freeze in credit markets has taken a big toll on the industry, Herring said.

A new royalty framework in Alberta introduced at the beginning of the year is also eating away at drillers' profitability, despite moves to ease its impact on smaller companies.

Mr. Herring said his group was to meet with Alberta Energy Minister Mel Knight on Friday to give some input on what should be included in a new incentive program the province is working on.

“You can kind of dress it up any way you want and describe it as some kind of a tax credit, or an incentive. But essentially for activity to increase, the royalty take has to go down,” Mr. Herring said.

There's little the government can do — aside from direct subsidies to natural gas drillers — that would help in any significant way, said BMO Capital Markets analyst Mike Mazar.

“Royalties could be zero and there wouldn't be any activity,” he said.

Like Mr. Herring, Mr. Mazar said 2009 is turning out to be far worse than he had expected as recently as the fall — and there's no reason to believe the gloom will subside in the near future.

“It's shaping up to be historically bad — at least 10-year low levels and perhaps worse than that,” he said.

“There's nothing that makes anybody think that things are going to get better in 2009 or even the first part of 2010. I think it takes beyond that to really get through this.”

Joining the growing list of firms scaling back, Calgary-based oil and gas driller Peak Energy Services Trust said Thursday it would reduce its work force by 15 per cent, cut salaries and force employees to take unpaid days off.

The company said the moves will save between $8 million and $10 million for the 2009 fiscal year.

Also Thursday, Trinidad Drilling Ltd. halved its planned 2009 spending from $330-million to $165-million.

“Given the uncertain economic environment, we believe that a reduction in capital spending and lower expected debt levels for 2009 is the prudent direction to take,” said chief executive Lyle Whitmarsh.