En­ergy com­pa­nies roll out cuts

Winnipeg Free Press - - BUSINESS / OIL - DAN HEAL­ING

ALGARY — Pro­duc­tion cut­backs and de­ferred drilling pro­grams are emerg­ing as a com­mon theme as Cal­gary-based oil and gas com­pa­nies elect to leave bar­rels in the ground rather than sell at cur­rent low prices.

In third-quar­ter re­sults re­leased this week, en­ergy com­pa­nies large and small say they are avoid­ing wider-thanusual price dis­counts com­pared with U.S. bench­mark prices blamed on dif­fi­culty in get­ting bar­rels to mar­ket due to full ex­port pipelines.

At least 110,000 bar­rels per day of po­ten­tial oil pro­duc­tion is be­ing left be­hind, in­clud­ing cut­backs an­nounced by ma­jor oil­sands play­ers Cana­dian Nat­u­ral Re­sources Ltd., Cen­ovus En­ergy Inc. and MEG En­ergy Corp. last week, cal­cu­lates an­a­lyst Phil Skol­nick, man­ag­ing

Cdi­rec­tor with Eight Cap­i­tal.

“Stor­age is tight in Canada so it will help clear the stor­age lev­els or bring then down, which should then help the diffs (price dif­fer­en­tials), and that will be 110,000 bpd that won’t be try­ing to find a home on pipe right now.”

He pointed out bi­tu­men must be blended about three-to-one with dilu­ent to flow in a pipe­line, so the re­duc­tions ac­tu­ally trans­late into a “mean­ing­ful” amount of re­duced de­mand on the sys­tem.

In a note on Mon­day, RBC an­a­lyst Greg Pardy es­ti­mated be­tween 52,000 and 98,000 bar­rels per day wasn’t be­ing pro­duced, a small por­tion of Canada’s over­all out­put of about 4.6 mil­lion bar­rels of oil per day and not enough to make a big dif­fer­ence in pric­ing.

The cuts rep­re­sent “a con­struc­tive start to re­duc­ing Al­berta’s el­e­vated stor­age lev­els, but still fall well below our es­ti­mated sup­ply-de­mand im­bal­ance (af­ter crude-by-rail ex­ports of

250,000 bpd) of 160,000 to 185,000 bpd in the fourth quar­ter of 2018,” he said.

On Wed­nes­day af­ter mar­kets closed, Athabasca Oil Corp. said it would dial back pro­duc­tion at its two steam-driven oil­sands projects by be­tween 16 and 27 per cent to deal with wide dis­counts that it ex­pects to per­sist un­til next spring.

“Athabasca has re­sponded to the widen­ing dif­fer­en­tials by strate­gi­cally slow­ing pro­duc­tion by 5,000 to

8,000 bpd for the bal­ance of the year (No­vem­ber and De­cem­ber) at Hang­ing­stone and Leis­mer,” it said, not­ing third-quar­ter pro­duc­tion of about

30,500 bpd, up eight per cent over the same pe­riod a year ago.


Steep dis­counts for Al­berta oil have sev­eral Cal­gary com­pa­nies cut­ting pro­duc­tion.

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