Oilsands ruling boost for gas firms, says Birchcliff CEO
Restrictions on state-owned enterprises taking ownership of oilsands operations will boost the prospects for natural gas producers, says Jeffery Tonken, president and CEO of Birchcliff Energy Ltd.
“From our view, of course, we need foreign capital,” Tonken said Tuesday during a panel discussion at a Canadian Association of Petroleum Producers conference here. “Having the ability for us to sell our company to SOEs is very positive.”
“Canada will need new capital from the perspective of unlocking gas, building pipelines and LNG projects.
“I thought the government did a good job of ring-fencing the oilsands and allowing natural gas, for the current time, to be owned or developed by SOEs.”
Access to capital is a significant problem for some of the smaller gas producers, and the business model of small players building a company to sell to larger companies “has disappeared.”
“That’s because of the abilities of bigger companies such as ourselves to develop drilling opportunity using new technologies, shale and oil- sands, and they have all opportunities they need to exploit the assets they have,” Tonken said.
Natural gas producers have been hit by prices languishing at a decadelow during the summer to under $2 US per million British thermal units. While prices have recovered since then to just over $3 US per MBtu, they remain below the comfort levels of many producers.
Birchcliff, which produces 27,500 barrels of oil equivalent per day and has production facilities in the Montney gas play in B.C., had sought bids for sale of the company in October 2011, but abandoned the process as prices fell below $2 US by March.
“When we started the public process, the price of gas was $4.75 US, and when we said no to the bid, the price was $1.58,” said Tonken, adding the company will continue to raise production and had earnings of $2.7 million in the third quarter, although far below the $11.4 million netted during the same period last year.
Birchcliff is participating in the BC LNG Export Co-Op’s Kitimat project which plans to ship 700,000 million tonnes of natural gas to Asian markets annually by 2014, in the hopes of fetching prices of around $17 US per MBtu for natural gas.
“If gas prices don’t go up, the benefit that we see is that a lot of players are nearly not as competitive as we are … so our competitors get knocked out of business, and we will be able to produce more at a low price.”