Page 4 - NorthAmOil Week 17

NorthAmOil COMMENTARY NorthAmOil
Cuts continue in Canada, but one bright spot emerges
Canadian energy companies continue to cut spending and production, but dry gas producers could benefit as associated gas output drops
CANADA
WHAT:
Canadian oil and gas companies are continuing to reduce capital spending and activity.
WHY:
Oil prices remain at multi-decade lows and Canada’s energy industry is among those hit particularly hard.
WHAT NEXT:
Dry gas producers
may receive a boost if natural gas prices rise as associated output falls.
THE relentless stream of bad news for Canada’s energy industry continues, with more producers announcing cuts to capital spending and activ- ity, while first-quarter results from a handful of firms show losses. However, one bright spot has emerged, as the outlook for natural gas prices firms up on expectations that associated pro- duction of the fuel will drop as oil drillers scale back activity.
The share prices of some gas-focused com- panies, including Advantage Oil & Gas, ARC Resources and Birchcliff Energy, have risen more than 100% in the past month, Bloomberg reported last week. The gains have come along- side a rise in the spot price of gas traded at Alber- ta’s AECO hub. The news service noted, however, that all three stocks remained down by more than 20% since the start of this year, so there is some way to go.
Making cuts
There is little relief in sight for Canada’s oil pro- ducers, meanwhile. A growing number of com- panies are cutting capital expenditure budgets and activity, including some producers unveil- ing further cuts on top of ones reported in recent weeks.
Among those to announce new cuts are Enerplus, which said on April 22 that it would reduce its capex budget by a further CAD25mn
($18mn), while also lowering its cost structure. The company, which focuses on secondary and tertiary recovery in Western Canada and shale in the US’ Bakken and Marcellus plays, attrib- uted its capex reduction to “operational out- performance”, as well as project deferrals. The company suspended all further operated drill- ing and completion activity in North Dakota by mid-April, in line with previously stated plans.
The latest spending cut brings Enerplus’ capex budget to CAD300mn ($215mn), down about 55% from the CAD545mn ($391mn) it originally planned to spend this year. The com- pany said it had begun to temporarily shut in select wells across its Williston Basin and Cana- dian operations.
Whitecap Resources has also said it is looking at which operations to shut down temporarily, and is seeking to cut at least 10% of administra- tive and operating costs. Whitecap’s president and CEO, Grant Fagerheim, told investors at the company’s virtual annual general meeting (AGM) last week that his company was also talking to the provincial governments of Alberta and Saskatchewan about relief from royalty pay- ments. It has not yet been established how much production Whitecap would take offline, he said.
Losses
As oil producers battle to survive the new
P4
w w w . N E W S B A S E . c o m Week 17 30•April•2020