Oilpatch spending to return: Survey
Prepare for more action, producers say quietly
• Oil and gas producers may be publicly preaching capital discipline and assuring institutional investors they will not boost spending, but behind the scenes they are telling oilfield services companies and drillers to prepare for more activity, according to a new survey.
A majority of mid-cap and small oil and gas producers are planning to spend more money this year, according to a survey by investment bank Raymond James.
If oil prices remain close to US$60 per barrel this year, 51 per cent of oil and gas producers plan to spend more money, with 28 per cent of E&P companies saying they’d revise their budget upwards by more than 25 per cent.
Many are also eyeing mergers and acquisitions.
The analysts gathered anonymous responses from 61 oil and gas producing companies this month.
A separate survey by Raymond James of oilfield services companies — comprising drilling, fracking and construction companies — found that 87 per cent of respondents in Canada expected demand for their services to rise this year compared to 2020, when demand collapse amid the COVID-19 pandemic.
This is in sharp contrast to what some of Canada’s largest oil and gas producers have said publicly this year about capital discipline. Suncor Energy Inc. president and CEO Mark Little said earlier this year that his company would not adjust its capital budget in response to higher oil prices this year.
The Raymond James survey seems to indicate that smaller rather than larger companies are the ones that will make the most of higher prices by spending more on drilling.
“For investors concerned about Canadian operators bringing too much oil to market (and hurting the differential), we will note the higher spending is disproportionately weighted to smaller-cap names,” Raymond James analyst Jeremy Mccrea wrote in a report accompanying the survey, noting that companies were planning to spend most of their capital budget in the first nine months of this year, allowing for flexibility to ramp up spending at the end of the year.
Notably, the survey also indicates that oilfield services companies believe there could be challenges in hiring and training enough field workers if there is an uptick in drilling and fracking activity.
More than two-thirds of Canadian oilfield services companies, 69 per cent, said they expected “some challenges” or “substantial challenges” in hiring and training workers to meet the increase in demand for their services.