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Bloomberg
In the snowy prairies of Western Canada, not even temperatures below -40 degrees have stopped Stampede Drilling Ltd.’s 60 recently rehired workers from manning the oil-service provider’s rigs after a nine-month dry spell for the business.
“Once oil hit $50, everybody started phoning again,†Bill Devins, the drilling company’s 57-year-old owner, said in a phone interview from his office in Estevan, Saskatchewan, a town bordering North Dakota right at the heart of the Bakken shale formation. “We started to have some activity come our way.â€
From the tight-oil plays of Saskatchewan to the oil sands of northern Alberta, Canada’s energy producers are returning to growth mode after more than two years enduring the worst market rout in decades. They are leaner and more efficient after cutting staff, shelving projects and reducing costs since the downturn. Cheaper crude doesn’t feel so painful any longer.
Companies such as MEG Energy Corp., Canadian Natural Resource Ltd., Cenovus Energy Inc., Encana Corp. and Seven Generations Energy Ltd. have all announced plans to expand production. Calgary-based Precision Drilling Corp. hired and recalled about 1,000 field workers to reactivate rigs in Canada and the US
The renewed focus on expansion happens as the Organization of Petroleum Exporting Countries cuts output and after the Canadian government in November approved construction of two expanded oil pipelines that will add a million barrels a day of export capacity to Western Canada.
‘MORE COMFORTABLE’
“A lot of companies have started increasing capital budgets,†Amir Arif, a Calgary-based analyst at Cormark Securities Inc., said by phone. “They are getting more comfortable in the $45 to $60 oil world. The stability in the oil price is a key factor.â€
Crude has rallied on the back of the OPEC-led supply cuts, trading mostly above $50 a barrel in New York since a Nov. 30 agreement. While that’s nothing like the industry’s heyday years of about $100 before the crash, it’s a big improvement from the near-$25 doldrums of a year ago.
MEG plans to spend C$590 million ($446 million) in operations this year, almost five times more than in 2016, as it expands production at the Christina Lakes oil-sands site by about 25 percent. Cenovus will proceed with a 50,000-
barrel-a-day expansion of its own Christina Lake project
and Canadian Natural is moving ahead with its 40,000-barrel-a-day Kirby North project. The three ventures represent the first oil-sands expansions to be announced since the downturn began.
The rosier outlook is filtering into Western Canada. Alberta’s economy will grow 2.1 percent this year, tying with British Columbia for second-fastest among Canadian provinces behind Ontario’s 2.3 percent, according to the median of forecasts compiled by Bloomberg. The growth follows two straight years of economic contraction in the oil-rich province and will be largely due to the rebuilding of Fort McMurray, the gateway to the oil sands that was devastated by wildfires last year. Saskatchewan, the country’s second-largest oil producing province, will also emerge from a two-year recession to grow 1.7 percent.
Oil companies that form the backbone of the Western Canadian economy cut capital spending 50 percent in the past two years to C$17 billion in 2016, according to the Canadian Association of Petroleum Producers projections. About 110,000 jobs were lost between late 2014 and April of last year, CAPP said. The number of rigs drilling for oil and natural gas in Canada has jumped almost 40 percent from a year ago, after falling to the lowest since the early 1990s last year, according to data from Baker Hughes Inc.