Report predicts $2.1B loss in 2015

Jobs cuts in crude extraction to hit 5,400 in dramatic reversal from $5.6-billion profit in 2014

Canada’s crude oil extraction industry is expected to suffer a $2.1-billion pre-tax loss in 2015 and end the year with 5,400 fewer employees, the Conference Board of Canada predicts.

That’s a dramatic reversal from the $5.6-billion profit in 2014, the Ottawa-based think-tank said in its Canadian Oil Industry Outlook on Wednesday.

Job losses for the wider oil and gas industry have hit 36,000, the Canadian Association of Petroleum Producers estimates.

The Conference Board’s smaller figure represents direct job losses in the crude oil extraction side of the business, which excludes third-party service providers, such as drillers and field operators.

Crude industry revenues are expected to shrink by 22.3 per cent to $75.2 billion while capital spending has been cut by 39 per cent, the report also said.

Meanwhile, the price of crude is expected to remain below recent highs for many years, finally climbing to about $70 (U.S.) a barrel in 2019, the board also said.

The oil industry’s declining fortunes pulled Canada into a mild recession in the first half of the year and continue to weigh on Alberta’s economy.

The forecast comes as Canada’s largest oil companies begin issuing their third quarter results this week, starting with oilsands giant Suncor Energy Wednesday night.

Suncor takeover target Canadian Oil Sands Ltd. reports on Thursday, along with crude producer Cenovus Energy.

Husky Energy and Imperial Oil follow on Friday. Oil and gas heavyweight Canadian Natural Resources Ltd. along with pipeline builders TransCanada Corp. and Enbridge Inc. report next week.

Industry analysts are bracing for more red ink, possible sales of assets and further job cuts.

Seven of Canada’s largest oil producers have already said their capital expenditures this year will be $12 billion, or 39 per cent, below 2014, the report notes.

The belt-tightening should pay off, however, in 2016 as the Canadian oil industry returns to profitability despite continuing downward pressure on global oil prices, the conference board said.

Canada’s oil industry production will continue to grow even as convention oil drilling declines as oilsands projects already under construction can’t easily be cancelled, the report noted.

Direct employment in the extraction industry will rise by about 2,000 jobs next year, the report also predicts.

The global price of oil has plunged by from a June 2014 high of more than $100 a barrel as global supply grew while demand slowed.

The North American benchmark price of crude is expected above $70 a barrel by 2019, the report predicts.

That’s up from an average of $50 a barrel this year but still well below the $90 a barrel seen in the previous four years.

Slowing economic growth in China, more fuel-efficient vehicles and a market share battle between oil producing countries have all contributed to the dramatic decline in oil prices.