Canadian Insight

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Updated on Friday, March 27, 2020

Worst crude oil crash in 29 years as Russia and Saudi Arabia attempt to grab a greater market share— March 9, 2020

OPEC and its main ally, Russia, seem to be parting their ways. Last week’s OPEC meeting in Vienna failed to reach an agreement. Both Russia and Saudi Arabia have made a U-turn and intend to step up their oil output. As a result, oil prices have plummeted by 30% in the past three days. Oil prices have fallen to the lowest since 1991.

It is possible that this is a coordinated attempt to stop US shale oil development by increasing global oil inventories and driving crude oil prices down. It is also possible that Russia has decided on its own to take its own course and not continue to cooperate with OPEC. 

Saudi Arabia and Russia are two of the three major oil players. There are possibilities that this is an attempt to stall or derail US shale oil development and progress. American oil production has surpassed Russia and Saudi Arabia. US  has pushed its way into the global markets.

The possibilities of the spread of the corona virus and its effect on the global economy and the global oil demand is adding to the market chaos. The introduction of the price war between Russia and Saudi Arabia is adding a significant component which the markets and investors have previously not expected.

 

 

MEG Energy  asks provincial regulator to shelve  its oil sands project — March 2, 2020

MEG Energy has asked Alberta Energy Regulator to shelve its oil sands project for a three year delay.

MEG Energy is postponing its project due to political and continuing uncertainties in the Canadian business environment.

Company states that due to overloaded pipelines and uncertainty in future pipeline construction, it has decided to wait for more positive changes.

The project was awaiting provincial regulatory approval.

 

 

British Columbia’s Liberal leader discloses evidence that foreign capital is funding pipeline opposition — March 2, 2020

British Columbia’s Liberal opposition leader, Andrew Wilkinson, released evidence that foreign capital funding has channeled at the very least $4.2 million to various pipeline protestor groups .

Andrew Wilkinson stated that US tax documents reveal that  five American organizations have been funneling funding to six Canadian groups which have launched blockades and  protests opposing Coastal GasLink Pipeline project.

U.S. based, Rockefeller Foundation, Tides Foundation, Wilberforce Foundation, Bullitt Foundation, and Gordon & Betty Moore Foundation have been funding the following protest groups in Canada: Wilderness Committee, Sierra Club B.C, West Coast Environment Law, Dogwood B.C. and Stand. Earth.

 

 

Teck Resources pulls out of a major oil sands project — February 24, 2020

Teck Resources is pulling out of a major oil sands project  which was approved by National Energy Board but was still awaiting approval of the Trudeau Administration. Political insiders felt that the project was going to be denied an approval.

The Frontier oil sands project was valued at $20.8 million dollars and was estimated to produce 260,000 barrels of crude oil per day upon completion.

Don Lindsay, Chief Executive Office of Teck Resources, placed the blame directly on the Trudeau Liberal government. Lindsay stated, “The growing debate around this issue has placed Frontier and this company squarely at the nexus of much broader issues that need to be resolved. It is now evident that there is no constructive path forward for the project.”

 

 

Trans Mountain Pipeline clears another  legal hurdle — February 4, 2020

Federal Court of Appeal has announced its decision on legal objections laid by four challenges from First Nations in British Columbia.

In a 95 page ruling, the Federal Court of Appeal stated that there was no legal basis to uphold the already federal government approved pipeline project.

The court stated that all of the hearings that were held  gave ample time for al necessary consultations and all reviews were done properly.

The decision now means that the pipeline project could continue to proceed but the First Nations could still challenge the ruling in the Supreme Court. They have a time window of sixty days for an appeal.

The Trans Mountain Pipeline expansion project was approved by the federal government in 2016. Approval was overturned by the federal Court of Appeal on August, 2018.

Once completed the Trans Mountain pipeline expansion could triple the volume of crude oil coming from Hardisty, Alberta to the western port of Vancouver.

Cost of the pipeline and expansion project to the Canadian taxpayer is estimated to be over $14 billion.

 

 

CAPP forecasts a big lift in Canadian oil and gas investments — January 31, 2020

Canadian Association of Petroleum Producer has issued a positive forecast for 2020 in the Canadian oil and gas industry. CAPP predicts that investing in upstream oil and gas industry will increase by $2 billion over last year.

Conventional oil and natural gas capital investment for 2020 is forecast at $25.4 billion, up from an estimated $24.4 billion last year.

Capital investment in the oil sands is forecast at $11.6 billion in 2020, up from an estimated $10.7 billion in 2019. This marks the first time in five years that oil sands capital spending is expected to experience an upswing.

Overall for the oil and natural gas sector, total capital investment this year is forecast at $37 billion, up from an estimated $35.1 billion in 2019, for a combined increase of six per cent in 2020. This would halt the dramatic decline seen since 2014, when investment numbers reached $81 billion.

CAPP Tim McMillan, President and CEO commented, “We are very happy to see an increase in capital investment expected for 2020. It's a reflection of the hard work and determination on many fronts to bring the industry into a more competitive position. That includes the corporate tax cut by the Government of Alberta, and incenting crude by rail under curtailment, which is helping to attract business and investment."

 

 

Commission of Canada Energy Regulator resumes hearings on Trans Mountain pipeline — January 28, 2020

As of today,  Commission of the Canada Energy Regulator will hold detailed route hearings for landowners along the path of the Trans Mountain Expansion Project. These hearings are the first since regulatory processes on the project resumed in July of 2019.

The Commission to decide on whether the exact location of the pipeline is the best possible, and will confirm the most appropriate methods and timing of construction. Landowners whose lands are proposed to be crossed by the pipeline, as well as Indigenous groups and other persons whose lands may be adversely affected were able to object to the detailed route proposed by Trans Mountain.

Construction is permitted in areas where applicable conditions have been satisfied and the detailed route of the pipeline has been approved. Pipeline construction is currently underway along Alberta portions, as well as at the Edmonton and Burnaby Terminals, and the Westridge Marine Terminal.

 

 

Supreme Court denies Horgan’s socialist government the right to regulate what a pipeline may carry — January 17, 2020

Canada’s Supreme Court ruled on Thursday that British Columbia’s provincial government cannot regulate what is transported in a major crude oil pipeline crossing its territory.

The Supreme Court ended the previous decision which set a challenge against Trans Mountain, but others remain. The pipeline is under construction and is expected to be in service by the summer of2022.

 

Delayed pipeline project will begin construction this February — January 15, 2020

Work will soon begin on Keystone XL pipeline. TC Energy announced that it will begin preliminary work in three northern US states in February. Construction permits are still pending US federal government approval but the company stated that it expects no long delays.

TC Energy stated that  it plans to start building pumping stations along the entire pipeline route in June. Work on a pipeline segment in Nebraska would also start in June, followed by the start of construction of some segments in Montana and South Dakota in August.

Last March, President Donald Trump signed a renewed permission for the Keystone XL pipeline. This is a move in his administration’s pursuit of maximizing production of oil, gas and coal for domestic use and global exports.

 

 

 

 

 

 

 

 

 

 

Our most recent ‘Shouts & Toots’  from the Oil Patch  — March 27, 2020

Africa Oil Corp. (AOI:TSX) announced the posting of its end of 2019 statement of reserves on SEDAR. Company reported an increase of 3.1 Mmboe in Proved Reserves (1P) and an increase of 4.5 Mmboe (2P) in Proved + Probable Reserves.

Africa Oil President and CEO Keith Hill commented, "These are extremely challenging times for the international oil and gas sector. However, despite the dramatic developments of last few weeks, Africa Oil's management and board of directors continue to view our recent investment in Prime positively. Net to our 50% shareholding, Prime has a modest 2020 capital budget of $55 million, which compares to the guidance of $630 to $680 million7 for 50% of Prime's 2020 cash flow from operations, before capital investment and financing cash flows.”

Africa Energy Corp. is a Canadian oil and gas company with exploration assets offshore South Africa and Namibia. Company is based in Vancouver. Africa Energy has a market cap of 130 million and approximately 683 million shares outstanding.

Delphi Energy Corp. (DEE:TSX) announced an operations update on its first three wells of the 2020 capital program.

Completion operations on the Company’s first three Montney wells (3.0 net) in the 2020 drilling program have concluded, with all of the wells expected to be placed on production by months end. These 3 wells are drilled in liquid-rich West Bigstone, in close proximity to existing pipelines, minimizing the tie-in costs.

Although actual costs from the three wells are not yet finalized, current field estimates would indicate completion costs are within a range of $4.0 to $4.5 million. This results in estimated savings of $1.3 million per well when compared to Delphi’s 2019 completion program results.

Company will take the next several months through spring breakup to assess the second half 2020 capital spending levels within the context of volatile and uncertain commodity prices. As part of the Transaction, Delphi has $15.5 million of remaining proceeds available to be drawn, under certain conditions. Given current commodity prices, the Company would likely defer further drilling plans until commodity prices exhibit signs of improvement.

Delphi Energy Corporation is a Calgary based natural gas producer focused on its high quality Montney property, uniquely positioned in the Deep Basin of Bigstone, in northwest Alberta. Company has a market cap of $73 million and approximately 186 million shares outstanding.

Horizon North Logistics Inc. (HNL:TSX) announced a series of announcements today in response to the COVID-19 pandemic and other global commodity conditions, and provided an update on the Corporation's previously announced agreement with 10647802 Canada Limited, operating as Dexterra Integrated Facilities Management.

Horizon North is reducing its 2020 net capital outlook by two-thirds by reducing sustaining capital spend and deferring the remaining spend on both growth projects planned for 2020. Changes to the 2020 capital spending program are a reduction of sustaining capital from $13 million to approximately $8 million, including a pause in mat manufacturing. Company reports a reduction in expected proceeds from Horizon North dispositions from $10 million to $8 million.

Horizon North Logistics Incorporated is a Calgary based energy services company providing a full range of industrial. Company has a market cap of $306 million and approximately 166 million shares outstanding.

PetroShale Inc. (PSH:TSX) announced its financial and operating results for the three and twelve month periods ended December 31, 2019. Revenue increased 131% to $60.6 million in the fourth quarter of 2019, and 36% to $165.3 million in calendar 2019, compared to the respective periods in 2018. Net income was $9.6 million ($0.05 per fully diluted share) in the fourth quarter, 92% higher than $5.0 million ($0.03 per fully diluted share) in the preceding quarter, and 20% higher than $8.0 million ($0.04 per diluted share) in the comparative period of 2018.

PetroShale achieved record production in the fourth quarter and calendar 2019, averaging 12,173 barrels of oil equivalent per day ("Boe/d") in the fourth quarter (88% oil and natural gas liquids ("liquids")), and 8,680 Boe/d in 2019 (87% liquids), a 102% and 54% increase over the same periods in 2018, respectively.

PetroShale is a Calgary based oil company engaged in acquisition, development and consolidation of interests in the North Dakota Bakken and Three Forks region. Company has a market cap of $203 million and approximately 192 million shares outstanding.

Prairie Provident Resources Inc. (PPR:TSX) announced its operating and financial results for the three months and year ended December 31, 2019. Adjusted funds flow for 2019 totaled $22.3 million ($0.13 per basic and diluted share), excluding $3.8 million of decommissioning settlements, due to higher production and improved operating netback. Net loss totaled $33.1 million in 2019, compared to a net loss of $33.0 million in 2018, driven primarily by non-cash items such as depletion and amortization.

Production for 2019 averaged 6,071 boe/d (68% liquids), which was 13% or 699 boe/d higher than 2018, reflecting the impact of a full year of results from the Marquee acquisition completed in November 2018 and PPR’s successful 2019 development program.

Prairie Provident Resources Inc is a Calgary based oil and natural gas exploration, development and production focused on its Wheatland and Princess properties in Southern Alberta and its Evi area located in the Peace River Arch area of Northern Alberta. Company has a market cap of $35 million and approximately 175 million shares outstanding.

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Africa Oil Corp. (AOI:TSX) announce that its Annual General and Special Meeting of Shareholders will be held on Tuesday, April 21, 2020 at 9:00 am (Pacific Time) at Suite 2000, 885 West Georgia Street Vancouver, BC. Given the situation regarding the wide-spread COVID-19 virus, social distancing will be maintained while at the in-person meeting.

Africa Energy Corp. is a Canadian oil and gas company with exploration assets offshore South Africa and Namibia. Company is based in Vancouver. Africa Energy has a market cap of 130 million and approximately 683 million shares outstanding.

Falcon Oil & Gas Ltd. (FO:TSX) announced on March 26th an operational update on the Beetaloo project in the Northern Territory, Australia in light of COVID-19. Following the successful completion of drilling operations, including cementing and casing of the horizontal well section of the Kyalla 117 N2-1H ST2 well (the “Kyalla Well”), the JV has completed the installation of water monitoring bores and preparatory work has continued towards the next phase of operations, which will include the fracture stimulation of the Kyalla Well.

Falcon Oil & Gas Ltd is an international oil & gas company based in Dublin Ireland. Company is engaged in the exploration and development of unconventional oil and gas assets, with the current portfolio focused in Australia, South Africa and Hungary. Falcon Oil & Gas Ltd has a market cap of $113 million and approximately 69 million shares outstanding.

Hemisphere Energy Corporation (HME:TSXV) announced on March 26th highlights from its independent reserves evaluation effective as at December 31, 2019 prepared by McDaniel & Associates Consultants Ltd. Company increased NPV10 BT by 39% to $198.2 million, increased reserve volumes by 30% to 9.9 Mboe (98% heavy crude oil and 2% conventional natural gas) and replaced 478% of estimated 2019 production through organic development.

Hemisphere grew significantly in production and reserve value in 2019 within its low decline, long life oil assets. Corporate production over the first quarter is tracking approximately 1975 boe/d to date, based on field estimates from Jan 1-Mar 22, 2020 (99% heavy crude oil and 1% conventional natural gas).

Hemisphere Energy Corporation is a Vancouver based oil and gas company. Its core operations are in Jenner and Atlee Buffalo areas in southeast Alberta. Company has a market cap of $11 million and approximately 90 million shares outstanding.

Southern Energy Corp. (SOU:TSXV) announced on March 26th a corporate update in response to recent market volatility caused by the COVID-19 pandemic and continued commodity price weakness. Company has secured fixed price hedges on production of 6,000 Mcf per day of natural gas at an average price of US$2.55 per Mcf and 75 barrels ("bbl") of oil per day at an average price of US$55.65 per bbl through December 31, 2020.

The situation around the COVID-19 virus continues to evolve. Company is focused on protecting the health and safety of its personnel while striving for business continuity. Company has proactively reduced corporate salaries for all employees by 20% in response to COVID-19 and weakened commodity prices.

Southern Energy Corp. is a Calgary based oil and natural gas exploration and production company. Southern has a primary focus on developing conventional and unconventional light oil and liquids rich natural gas resources in the SE Gulf States of Mississippi, Alabama, and Louisiana. Company has a market cap of $20 million and approximately 204 million shares outstanding.

TransAtlantic Petroleum Ltd. (TNP:TSX) announced its financial results for the quarter and year ended December 31, 2019 and provided an operations update. Revenues in the fourth quarter of 2019 were $16.5 million, up 6% from $15.5 million in the fourth quarter of 2018 and up 12% from $14.7 million in the third quarter of 2019. Revenues in 2019 were $67.4 million, down 5% from $70.8 million in 2018. Net loss in the fourth quarter of 2019 was $2.5 million, down 253% from a loss of $0.7 million in the fourth quarter of 2018 and down 336% from net income of $1.1 million in the third quarter of 2019. Net loss in 2019 was $5.4 million, down 3% from a loss of $5.2 million in 2018.

Trans Atlantic Petroleum Ltd. Is an international oil and gas company based in Hamilton, Bermuda. Company has operations and holdings in Turkey and Bulgaria. Company has a market cap of $19 million and approximately 62 million shares outstanding.

 More news on Oilpatch Review

Quote of the day

Winston Churchill, “An expert is one who knows more and more about less and less until he knows absolutely everything about nothing.”

Did you know?

Commercial quantities of crude oil was first discovered in Manitoba in 1951. The province has two potential oil and gas production areas, southwest Manitoba and the Hudson Bay lowlands. There are 14 designated oil fields and 135 oil pools. There are close to 3000 producing wells in that province. Manitoba produces 40% of its domestic petroleum requirements.

 

prices compiled and updated on a regular basis by Canadian Insight

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Victoria

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Brandon

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Ottawa

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St. John’s

 

 

$ / liter

 

1.119

1.169

0.789

0.759

0.819

0.859

0.849

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0.969

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0.989

1.009

 

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     WCS  / WTI

 Price Spread $13.75

  March 27, 2020

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