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Petroleum

Canadian Oil and Gas Companies Expected to See Excellent Financial Results This Year

Strategic Insights

— 2 min read

Canadian oil and natural gas companies are poised to experience a significant surge in financial performance this year, thanks to a combination of favorable factors. The latest quarterly forecast from Peters & Co. Ltd. projects higher U.S. oil prices, a weaker Canadian dollar, reduced U.S. discounts on oil, and a narrowing of the spread between light and heavy crude oil. This is expected to lead to improved year-over-year performance for both oil and gas companies, as well as oil field service and equipment manufacturing companies.

Key Takeaways:

  • Peters & Co. Ltd. projects a US$17/bbl price for West Texas Intermediate (WTI) this year, rising to $19/bbl in 1995.
  • The export price for natural gas is expected to increase by 5% to 10% from last winter's average of $2.11/Mcf.
  • The Canadian dollar has slumped against the U.S. dollar, trading at about US72* from 86* just about a year ago.
  • The price of Canadian heavy oil has increased, now hovering around $15/bbl while WTI is just over $19/bbl.
  • The traditional discount between Canadian crude and WTI has narrowed to about 60*/bbl from about $1/bbl.
  • Utilization of the Canadian contract drilling fleet is running at a 10-year-high average of 67%.
  • Land sales and lease prices in western Canada have jumped, with the industry leasing about 6.4 million acres from provincial governments.
  • Peters & Co. analysts Wilf Gobert and Richard Wyman attribute the positive year-over-year performance to the combination of higher U.S. oil prices, a weaker Canadian dollar, reduced U.S. discounts on oil, and a narrowing of the spread between light and heavy crude oil.

Statistics:

  • Projected increase in West Texas Intermediate (WTI) price this year: $0.02/bbl to $17/bbl
  • Projected increase in West Texas Intermediate (WTI) price in 1995: $2/bbl to $19/bbl
  • Expected increase in export price for natural gas: 5% to 10%
  • Current trade value of the Canadian dollar: US72*
  • Recent price of Canadian heavy oil: $15/bbl
  • Recent price of West Texas Intermediate (WTI): $19/bbl
  • Previous discount between Canadian crude and WTI: $1/bbl
  • Current discount between Canadian crude and WTI: $0.60/bbl
  • Utilization rate of the Canadian contract drilling fleet: 67%
  • Land sales and lease acres leased during the three months ended June 30: 6.4 million
  • Land sales and lease acres leased during the same period in 1993: 2.2 million
  • Land sales and lease acres leased during the same period in 1992: 3.7 million

Sources:

  • "Canadian Oil and Gas Companies Expected to See Excellent Financial Results This Year" - Peters & Co. Ltd. quarterly forecast
  • Peters & Co. analysts Wilf Gobert and Richard Wyman
  • Western Canadian land sales and lease data
  • Canadian dollar exchange rates
  • West Texas Intermediate (WTI) and Canadian heavy oil prices

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