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Petroleum industry

Canada's Oil and Gas Producers Struggle Amid Low Prices

Strategic Insights

— 1 min read

Canada's leading oil and gas producers struggled to maintain profitability in the second quarter as low crude oil prices left them with significant losses. Despite strong gas prices, the country's top 11 producers posted a combined deficit of C$36 million, with Gulf Canada Ltd. being the hardest hit with a net loss of C$55 million. Analysts attributed the losses to the wide heavy oil differentials, which averaged C$7.40/bbl in the second quarter, making it challenging for companies to cover costs.

Key Takeaways:

  • The country's top 11 oil and gas producers posted a combined second-quarter deficit of C$36 million (US$23.4 million).
  • Gulf Canada Ltd. was the hardest hit, posting a net loss of C$55 million.
  • Heavy oil differentials averaged C$7.40/bbl in the second quarter, still too wide for most companies to make sufficient returns to cover costs.
  • PanCanadian Petroleum Ltd., the largest independent producer, managed to end the quarter with a 50% profit decline at C$34 million, thanks to hedging. However, analysts expect low prices to weigh heavily on the company's oil production in the coming quarters.
  • Independents increased production in impressive fashion, with second-quarter oil output rising 13% year to year and gas production increasing almost 10%. However, analysts expect the impact of reduced drilling activity to hamper near-term production.
  • Analysts expect many companies to take huge ceiling write-downs on the value of their reserves at the close of the third quarter.

Statistics:

  • Combined second-quarter deficit of the country's top 11 oil and gas producers: C$36 million (US$23.4 million).
  • Heavy oil differentials averaged C$7.40/bbl in the second quarter.
  • Gulf Canada Ltd.'s net loss: C$55 million.
  • PanCanadian Petroleum Ltd.'s third-quarter profit decline: 50% at C$34 million.
  • Independents' second-quarter oil output increase: 13% year to year.
  • Independents' second-quarter gas production increase: almost 10% year to year.
  • Heavy oil spreads improvement: from C$8.03/bbl in the first quarter to C$7.40/bbl in the second quarter.

Sources:

  • Scotia Capital Markets analyst Doug Monaghan
  • Bunting Warburg
  • Poco Petroleum Ltd.
  • Anderson Exploration Ltd.
  • Various industry reports

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