Page 9 - NorthAmOil Week 26

NorthAmOil COMMENTARY NorthAmOil

Canadian producers’

struggle for survival

As high-profile bankruptcies are being reported in

the US, Canadian companies are also struggling to

stay afloat

CANADA US independent Chesapeake Energy’s bank- Embattled industry
ruptcy filing may be in the spotlight, but the rise Canadian oil and gas companies had been
WHAT: in bankruptcies is not limited to the US alone. struggling even before the latest downturn in
A number of Canadian North of the border, many Canadian producers many cases, however, amid crude prices that
producers are struggling are struggling to stay afloat too, with a growing had been unfavourably low for some time and
to ensure their survival. number reportedly opting to restructure in a bid a lack of takeaway capacity out of Western
to survive the downturn. Canada.
WHY: In Canada, firms can file for protection “These entities would have had debt chal-
Canada’s oil patch is under the Companies’ Creditors Arrange- lenges pre-COVID, pre-energy price collapse,”
among the regions that ment Act (CCAA). Recent examples include an EY restructuring partner, Neil Narfason, was
have seen a particularly Bow River Energy in June, as well as Cequence quoted by the CBC News as saying.
severe impact from this Energy and Delphi Energy in recent weeks. The The collapse of crude prices in March – ini-
downturn. CCAA filings suggest that at least some produc- tially brought about by the collapse of OPEC+
ers remain hopeful that they will be able to out- talks, and then exacerbated by the impact of
WHAT NEXT: live the downturn if they can restructure – and the coronavirus (COVID-19) pandemic on
Some companies are that they therefore expect better times for the demand – thus came at an already bad time for
choosing to restructure in industry. Canada’s producers. Large and small companies
the hope of carrying on if “They are seeing their capital structure and alike have scaled back spending and production
oil prices improve. there may be a way that they will be able to fix in response to the downturn. The Canadian rig
their capital structure and move forward as a count has fallen to an all-time record low of 13
company with less debt and more equity,” Sayer in the week up to June 26, with only four of these
Energy Advisors’ president, Tom Pavic, was targeting oil while the remainder drill for gas,
quoted by CBC News as saying this week. He which now looks more profitable.
agreed that it was likely these companies were While these cutbacks are helping some com-
opting to go down the CCAA route because they panies to weather the downturn, they also make
believed current market conditions and oil price it more difficult for those producers that were
trends to be a temporary phenomenon. already struggling with debt to bounce back.

Week 26 02•July•2020 www. NEWSBASE .com P9