Page 14 - NorthAmOil Week 33

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CER forecasts 6.6% decline

in Canadian production

CANADA THE Canada Energy Regulator (CER) has fore- oil sands producers curtailed their output.
cast that the country’s oil production will average The curtailed volumes, which are estimated
4.38mn barrels per day (bpd) over the whole of to have reached 1mn bpd at times, are now in
2020. If this plays out, it would mark a 6.6% year- the process of being restored, but the CER’s
on-year decline on 2019. The forecast comes as figures – if accurate – illustrate the impact that
Canada’s oil industry attempts to recover from the production cuts had. The regulator expects
2020’s industry downturn, which came when it oil production to gradually recover during the
was already facing considerable headwinds. remainder of 2020. However, it anticipates that
Canada’s average production in 2019 was by December, output of both light and heavy
4.69mn bpd, up from 4.58mn bpd in 2018. It is oil – including upgraded bitumen – will still fall
worth noting that last year’s output was artifi- slightly short of levels seen at the start of 2020.
cially lowered by Alberta’s provincial curtailment In June, the Canadian Association of Petro-
programme, which had been introduced in a bid leum Producers (CAPP) estimated that the
to prop up regional oil prices. country’s producers would spend CAD23.3bn
Prior to the collapse in crude prices this year, ($17.8bn) this year, down from about CAD37bn
the country’s producers were already struggling ($28.3bn) in the group’s January forecast.
with Western Canadian oil trading at a discount Canada’s oil sands have increasingly been
to West Texas Intermediate (WTI) – a situation falling out of favour owing to environmental
exacerbated by a looming shortage of new take- concerns and the development costs associated
away capacity. This year, though, as a result of the with major projects. However, consultancy IHS
crude price collapse, which was compounded by Markit recently projected that oil sands produc-
the demand impact of coronavirus (COVID-19), tion would hit nearly 3.8mn bpd in 2030, up by
Western Canada’s pipeline bottlenecks eased as almost 1.1mn bpd from current levels.™

Chaparral enters bankruptcy

protection for second time

OKLAHOMA SHALE driller Chaparral Energy has joined including Chaparral, has been severe. Therefore,
the ranks of US oil and gas producers filing for after thorough analysis of our strategic options,
Chapter 11 bankruptcy protection. The com- we determined that a voluntary Chapter 11 fil-
pany had issued a warning in May over its ability ing with broad creditor support provides the best
to continue as a going concern after crude prices course for Chaparral and its stakeholders,” stated
collapsed earlier this year, plunging the oil indus- Chaparral’s CEO, Chuck Duginski. “A swift
try into crisis. restructuring will right-size our balance sheet,
This is its second bankruptcy filing, follow- improve our cost structure and best position
ing one from which it emerged in March 2017 Chaparral for the future. Importantly, we intend
in the wake of the last industry downturn. This to maintain normal operations and meet all of
time, Chaparral joins fellow shale drillers Chesa- our trade commitments timely and under their
peake Energy and Whiting Petroleum, as well as existing terms.”
conventional producer California Resources, in According to the bankruptcy filing, Okla-
bankruptcy protection. homa-focused Chaparral’s assets and liabili-
In an August 17 statement, Chaparral said ties are in the range of $500mn to $1bn. It had
78% of its first-lien lenders and bondholders around $421mn of debt at the end of 2019.
had given their support for a proposal to swap And as of August 14, it had roughly $32mn
$300mn of unsecured notes into equity, raise a of cash on hand. Combined with its normal
$175mn reserves-based exit facility and issue operating cash flow, the company said it
$35mn worth of convertible notes. expects this to be sufficient to allow it to main-
“While we have taken carefully measured tain normal operations and meet its financial
and decisive action to address the challenges of commitments during the Chapter 11 restruc-
2020, the overall impact to the energy industry, turing period.™

P14 www. NEWSBASE .com Week 33 20•August•2020