Q3 kind to refiners, CIBC says
CALGARY – Higher refinery profit margins mean that oil and gas companies with downstream assets will likely report improved third-quarter results, according to a CIBC World Markets report.
Meanwhile, volatile oil prices and only slightly improved natural gas prices for the three months ended Sept. 30 are unlikely to significantly benefit upstream producers in the Calgary oilpatch, the bank’s researchers add.
“Natural gas prices rebounded from Q2 lows but still averaged only $2.88 US per 1,000 cubic feet — still a challenging level for most gas producers,” says the report from analyst Andrew Potter.
“Benchmark oil prices traded all over the map during the quarter, but most crude streams averaged quite close to Q2/2012 levels.
“The only clear winner in the quarter was in the downstream, with crack spreads hitting record levels for inland Canada and U. S. refineries.”
CIBC notes that its estimates are about 10 per cent higher than consensus for producers and about 36 per cent higher for integrated companies. It suggests other analysts will move their estimates up in the weeks leading to the launch of reporting season with Encana Corp. on Oct. 24.
Commodity prices are a key driver of economic performance in the oilpatch and experts remain uncertain about which way Canadian prices will go.
In a recent report, Scotiabank noted that the Western Canadian Select heavy oil discount compared with New Yorktraded West Texas Intermediate narrowed to about $16.08 US per barrel in September and $9.71 in October after widening to $24.72 in August.
“The combination of high refinery demand, high levels of supply outages and increasing rail transport ... has removed pressure from Canadian crude discounts,” agrees the CIBC report.
“However, we continue to believe pressure will mount on differentials in the October/November time frame as supply returns and planned downtime is undertaken at PADD 2 (U.S. Midwest) refineries.”
Amid the turbulence, CIBC sees a strong possibility of the deferral or postponement of major oilsands projects.
On Friday, Peters & Co. said in a report that signs point to Suncor Energy Inc. cutting its 2013 capital spending to less than its $7.5 billion 2012 budget.