Canadian Oil and Gas Companies to See Near-Record Cash Flows in 1994

Strategic Insights -

As the Canadian oil and natural gas industry undergoes significant restructuring, companies are expected to see substantial cash flows in 1994 due to projected oil price increases. According to a research group, PowerWest Financial Ltd., oil prices will average $17.50/bbl for the first six months of 1994 and rise to $18.50/bbl during the second half. This recovery, driven by a predicted increase in global demand, will allow Canadian oil producers to achieve near-record cash flows.

Key Takeaways:

  • PowerWest Financial Ltd. predicts oil prices will average $17.50/bbl for the first six months of 1994 and rise to $18.50/bbl in the second half, resulting in near-record cash flows for Canadian oil producers.
  • A $2/bbl decrease in oil prices from 1993 predictions, down to $18/bbl, is expected to generate a combined cash flow of $6.8 billion for Canadian oil producers.
  • A $1/bbl increase in oil prices to $19/bbl could lead to a total cash flow of $7.4 billion, a level not seen since 1985, a record-breaking year.
  • The forecast is based on a recovery in global oil demand and a low likelihood of a collapse in OPEC production.
  • The only risk to this forecast is the lack of a significant price increase as of yet, which could be offset by the ongoing industry restructuring and new equity injections.

Statistics:

  • Oil prices predicted to average: $17.50/bbl (first six months of 1994), $18.50/bbl (second half of 1994)
  • Projected combined cash flow for Canadian oil producers at $18/bbl: $6.8 billion
  • Projected total cash flow for Canadian oil producers if oil prices rise to $19/bbl: $7.4 billion
  • Last time Canadian oil producers achieved a cash flow of $7.4 billion: 1985
  • Predicted increase in oil demand driving the price recovery: Unspecified
  • OPEC collapse likelihood: Low, according to PowerWest's forecast

Sources:

  • "PowerWest sees cash flows near record in '94," Calgary Herald, December [no date provided]
  • "PowerWest Financial Ltd. Year-End Update 1993," PowerWest Financial Ltd.
  • "Canadian Oil and Gas Industry to See Near-Record Cash Flows in 1994," PowerWest Financial Ltd. (exact date and title not specified in source material)