Canadian Insight

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Updated on Friday, February 15, 2019

Effects of Alberta’s mandated crude oil production restrictions  — January 29, 2019

Canadian Crude oil prices have risen and the price spread between WCS and WTI have narrowed since Alberta’s provincial government mandated crude oil output restrictions last December.

Husky Energy was one of the  oil companies that warned the provincial government of long term and dire consequences to the oil industry…. “This restricting legislation will not only cause higher unemployment but may also lead some oil and oil services companies into financial hardship or even bankruptcy.”

Canadian Natural Resources, who was initially in favor of the government action, is now agreeing with Husky Energy and is warning the Alberta government that in February the legislated higher production restrictions will have serious implications and consequences.

Alberta’s oil production will be forced to drop by an additional 33% in February. In total, Alberta oil producers must cut production by 100,000 barrels per day.

 

Federal government in no rush to speed up Trans Mountain review — January 25, 2019

Natural Resources Minister Amarjeet Sohi stated that the federal government is in no hurry to speed up the review process. Sohi went on to say that he is not willing to cut corners in the process and believes that it is running on time as per schedule.

The Federal Court of Appeal struck down the NEB and Ottawa’s approval of Trans Mountain project on August 16, 2018. The court decision stated that NEB review was flawed and many concerns were omitted. The most serious issues were related to land-title rights, protection of water and fish, oil-spill response and marine safety.

The review panel is scheduled to prepare a new report by February 22, 2019 and present it to the National Energy Board. There is no scheduled date as to when the rest of the process would give the project a go ahead or approval.

 

Alberta government to legislate crude oil production cuts — December 3, 2018

Premier Rachel Notley announced on Sunday that her NDP government will introduce legislation which will make mandatory crude oil production cuts in Alberta. The legislation will take effect on January 1, 2019.

Alberta’s premier stated that her government intends to legislate a production cut of 8.7%, or approximately 325,000 barrels per day.  Once the oil glut is down (possibly by spring), production cuts will drop to approximately 95,000 barrels per day.

Last week, Premier Notley announced that her government intends to purchase 80 locomotives and 7000 tanker cars to move crude oil to markets. In the announcement, the premier estimated that this investment should move 120,000 barrels of crude oil daily.

The federal government appears to be in favor of the two proposals but has not offered any financial help in Notley’s endeavor, or help oil industry through the crisis.

WCS crude oil prices have hit all time lows in recent weeks. The Alberta government is hoping to end the oil glut in her province which would also boast the oil prices in western Canada.

 

Imperial Oil Ltd. about to begin construction of its Aspen Oilsands project — Nov. 7, 2018

Imperial Oil announced today that it will go ahead with its Aspen Oilsands project northeast of Fort McMurray. Construction will begin immediately and be completed by 2022.

The oil sands project is estimated to cost $2.6 billion and is expected to employ 700 jobs during the peak of its construction.

Imperial Oil stated that it will be employing new technology in its operations. It will use 25% less water in its operations compared to traditional steam assisted means.

The project when completed will produce  75,000 barrels of crude oil daily. It will have the capability to expand to double its initial production volumes.

 

National Energy Board releases schedule of Trans Mountain Expansion hearings and summation  — Oct. 15, 2018

National Energy Board released a hearing schedule  for Trans Mountain; this is as required by Federal authorities for its reconsideration of aspects of the Trans Mountain Expansion Project pertaining to project related marine shipping.

The hearings will start this month and end in December. Oral summary arguments will be presented in January, 2019. Complete process and issue resulting report will come no later than February 22, 2019.

 

British Columbia’s carbon tax squeezing the profitability out of natural gas in that province — October 11, 2018

Doug Suttles, CEO of EnCana  Corporation, stated that British Columbia’s carbon tax is costing his company $100,000 per each natural gas well drilled in that province. He went on to say that carbon taxes are making it unprofitable to compete with USA

Suttles went on to say that natural gas is a very clean fuel which produces very low carbon emission, and yet, it is not being credited for its benefits but instead taxed. Natural gas is used extensively to produce electricity worldwide.

Doug Suttles went on to conclude that Canada needs stronger voice in this country to steer the its direction in global energy leadership.

 

Federal government of Canada freezes all offshore Arctic oil and gas drilling and development— October 4, 2018

Minister of Intergovernmental and Northern Affairs and Internal Trade, Dominic LeBlanc,  announced Canada's next steps on future Arctic offshore oil and gas development for current license holders. Government of Canada will freeze the terms of the existing licenses in the Arctic offshore.

The federal government will work with Northern partners to co-develop the scope and governance framework for a science-based, life-cycle impact assessment review every five years that takes into account marine and climate change science.

LeBlanc stated that the federal government will negotiate a Beaufort Sea oil and gas co-management and revenue-sharing agreement with the governments of the Northwest Territories and Yukon, and the Inuvialuit Regional Corporation.

Two years ago, Prime Minister Justin Trudeau stated that his government would engage in a one-year consultation process with the current license holders, and a moratorium on new oil and gas exploration licenses in the Arctic, renewable every five years based on the best available science.

 

LNG Canada Project participants reach a final investment decision — October 2, 2018

Petronas and its five joint partners have reached a final investment decision on a major liquefied natural gas (LNG) project in Kitimat, British Columbia.

The LNG export facility includes the design, construction and operation of a natural gas liquefaction plant and facilities for the storage and export of LNG, including marine facilities. Included with the project is  a 670 kilometer pipeline delivering natural gas from the northeast corner of the province.

LNG Canada project will initially consist of two LNG liquefaction processing units with a total capacity of approximately 14 million tonnes per year.  The project has the potential to expand to four times the initial production capacity. The total project is appraised to cost $40 billion.

Eagle Spirit Energy Holdings waiting and willing to construct a northern route pipeline — Sept. 27, 2018

An all indigenous group of investors, Eagle Spirit Energy Holdings, wants the federal government to withdraw legislation which would prohibit oil tankers from using the northern B.C. coastal route.

Eagle Spirit Energy stated that it has a plan to construct a  quadruple 48 inch pipeline from Alberta through northern British Columbia. Two of the pipelines would carry crude oil and the other two would transport natural gas to the west coast.

The leader of the investment group, Calvin Helin stated that the proposed pipeline would be far more advantageous and far more environmentally friendly than the failed Northern Gateway  Pipeline, as the proposed pipeline would not carry any condensate.

Helin went on to conclude that shipping crude oil through Prince Rupert is a safer route and National Energy Board would more likely give approval to. This project would benefit and encourage development of Canada’s natural gas, LNG industry and Alberta’s oil sands.

 

 

Our most recent ‘Shouts & Toots’  from the Oil Patch  — February 15, 2019

Bonavista Energy Corporation (BNP:TSX) announced its financial and operating results for the three months and year ended December 31, 2018. Company reported a revenue of $131 million in the fourth quarter and $514.9 million in 2018. Bonavista experienced a loss of $(17.8) million in the fourth quarter and a net income of $11.8 million in 2018.

Bonavista maintained quarter-over-quarter production at 68,011 boe per day, despite approximately 1,600 boe per day of unscheduled production curtailments, largely due to third party processing interruptions and volatile AECO natural gas prices caused by maintenance on the Nova Gas Transmission system.

Company acquired approximately 13,500 prospective net acres and 500 boe per day of liquids rich production offsetting our operations in the Hoadley Glauconite trend near Willesden Gree. Company drilled five gross (4.3 net) wells in the fourth quarter and increased NGL production to 19,131 per day, a seven percent increase over the prior quarter and the highest quarterly volume in 2018.

Bonavista Energy Corp is a Calgary based independent producer of oil and natural gas in the Western Canadian Sedimentary Basin. Company has a market cap of $330 million and approximately 255 million shares outstanding.

Enbridge Inc. (ENB:TSX) announced on February 15th its fourth quarter and full year 2018 financial results and provided a quarterly business update. Enbridge reported adjusted earnings were $1,166 million or $0.65 per common share for the fourth quarter of 2018 and $4,568 million or $2.65 per common share for the full year 2018, compared to $1,013 million or $0.61 per common share in the fourth quarter of 2017 and $2,982 million or $1.96 per common share for the full year 2017. Enbridge reported net earnings of $1.089 million in the fourth quarter and $2.515 million in 2018.

Enbridge implemented changes to the company's debt funding structure through a series of actions to reduce structural subordination, enhancing the credit profile of the parent corporation and reducing the cost of debt capital. It also suspended the Dividend Reinvestment Program (DRIP) effective with the December 1, 2018 dividend payment, moving Enbridge to a fully self-funded growth model.

Enbridge Inc. is a Calgary based energy generation, distribution, and transportation company in the U.S. and Canada. Its pipeline network consists of the Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines. Company has a market cap of 83 million and approximately 1.9 million shares outstanding.

Enerplus Corporation (ERF:TSX) announced on February 15th that a cash dividend in the amount of CDN$0.01 per share will be payable on March 15, 2019 to all shareholders of record at the close of business on February 28, 2019. The ex-dividend date for this payment is February 27, 2019.

Enerplus is a Calgary based independent North American exploration and production company focused on its crude oil and natural gas assets in Canada and the United States. Company has a market cap of $2.8 billion and approximately 244 million shares outstanding.

Pembina Pipeline Corporation (PPL:TSX) announced that none of Pembina's Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 3 ("Series 3 Shares") (TSX: PPL.PR.C) will be converted into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 4 of Pembina ("Series 4 Shares") on March 1, 2019.

Pembina Pipeline Corporation is a Calgary based transportation and midstream service provider that has been serving North America's energy industry for over 60 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada. Company has a market cap of $22 billion and approximately 506 million shares outstanding.

Surge Energy Inc. (SGY:TSX) announced on February 15th that a cash dividend to be paid on March 15, 2019 in respect of February 2019 production, for the shareholders of record on February 28, 2019 will be $0.008333 per share. The dividend is an eligible dividend for the purposes of the Income Tax Act (Canada).

Surge Energy Inc. is an oil-weighted production and development company based in Calgary. Company has its operations in western Canada. Surge has a market cap of $450 million and approximately 309 million shares outstanding.

Wolverine Energy and Infrastructure Inc. (WEII:TSXV) announced its proposed acquisition of a leading environmental services division from a major midstream provider and the promotion of Gable Gross as President, Midstream Division. In addition, the company wishes to provide an update on its listing on the TSX Venture Exchange and announce a new corporate presentation.

Wolverine is currently finalizing the required due diligence items and anticipates the closing of the Acquisition to occur on or about February 28, 2019, subject to satisfaction of customary closing conditions including receipt of regulatory approvals.

Wolverine is an Edmonton based energy and infrastructure service provider in Western Canada and the U.S. It provides a wide range of services including: water management, oilfield/energy rentals, heavy equipment sales and rentals, transportation and trucking rentals, and civil/infrastructure construction. It is a waiting a listing on the TSXV.

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Emerald Bay Energy Inc. (EBY:TSXV) announced on February 14th that drilling of the wildcat test well has commenced at the Company's Bauer prospect in South Texas. The well was spudded at 4:36 Central Time yesterday afternoon, and it is anticipated that drilling operations will take up to two weeks.

Management has imposed "tight-hole" status on the well, whereby drilling data and geologic information will be kept confidential until such time that the company has assessed the results and secured any additional mineral leases to enhance the prospect.

Emerald Bay Energy Inc. is a Calgary based energy company with oil producing properties in southwest Texas as well as non-operated oil and natural gas interests in Central Alberta. Company has a market cap of $4.2 million and approximately 277 million shares outstanding.

Tag Oil Limited (TAO:TSX) announced on February 14th its third quarter results for the interim period ending December 31, 2018. Revenues generated from oil and gas sales increased by 12% for the quarter ended December 31, 2018, to $8.8 million from $7.9 million for the quarter ended September 30, 2018. Operating netbacks decreased by 8% for the quarter ended December 31, 2018, to $43.14 per boe compared with $47.08 per boe for the quarter ended September 30, 2018. At December 31, 2018, the Company had $2.8 million (September 30, 2018: $3.2 million) in cash and cash equivalents and $3.1 million (September 30, 2018: $2.4 million) in working capital.

Average net daily production increased by 1% for the quarter ended December 31, 2018, to 1,211 boe/d (80% oil) from 1,195 boe/d (80% oil) for the quarter ended September 30, 2018.

TAG Oil Ltd is a Calgary based Canadian oil and gas exploration, development and production company. It operates through three geographical segments including Canada, New Zealand, and Australia. Company has a market cap of $29 million and approximately 85 million shares outstanding.

TransCanada Corporation (TRP:TSX) announced on February 14th its financial results for 2018. Company reported net income attributable to common shares for fourth quarter 2018 of $1.1 billion or $1.19 per share compared to net income of $0.9 billion or $0.98 per share for the same period in 2017. For the year ended December 31, 2018, net income attributable to common shares was $3.5 billion or $3.92 per share compared to net income of $3.0 billion or $3.44 per share in 2017.

Russ Girling, TransCanada’s president and chief executive officer, commented, “ We are very pleased with the performance of our diversified portfolio of high-quality, long-life energy infrastructure assets which produced record financial results again in 2018.”

TransCanada Corporation is a Calgary based energy transporter company. It owns and operates pipelines and power generation assets in Canada, the United States, and Mexico. Company has a market cap of $48 billion and approximately 918 million shares outstanding.

Vermilion Energy Inc. (VET:TSX) announced on February 14th that it expects to release its 2018 fourth quarter and year-end operating and financial results, along with its 2018 reserves information on Thursday, February 28, 2019 before the open of North American markets.

Vermilion is a Calgary based international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing properties in North America, Europe and Australia. Company has a market cap of $4.4 billion and approximately 153 million shares outstanding.

 

More news on Oilpatch Review

Quote of the day

Salvador Dali, “Intelligence without ambition is a bird without wings.”

 

Did you know?

The first twin cone rotary drill bit was invented by Howard Hughes Sr. and his partner Walter Sharp in 1909. The twin cone drill bit became an instant success as it was 10 times faster than the previous fishtail designs. The new designed drill bit combined forces of gouging, crushing and powdering through rock formations. The modern day tri-cone rotary drill bit was later developed by Howard Hughes’ engineers in 1933 and patented in 1934. Hughes drill bits dominated in sales for decades. The Hughes Tool Company merged with Baker International in 1987 to form Baker Hughes.

 

prices compiled and updated on a regular basis by Canadian Insight

City

 

Victoria

Vancouver

Calgary

Edmonton

Saskatoon

Regina

Brandon

Winnipeg

Hamilton

Ottawa

Toronto

Montreal

Halifax

Moncton

St. John’s

 

 

$ / liter

 

1.379

1.419

0.979

0.969

0.959

0.949

0.999

0.989

1.019

1.009

1.029

1.129

1.019

1.059

1.129

 

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     WCS  / WTI

 Price Spread $18.75

  February 15, 2019

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