The Oil Sands Weekly
- Suncor CEO set to retire next spring
- Deeply discounted Cdn crude disheartens oil patch
- Alberta banks on crude-by-rail as losses mount
- Newly merged GE-Baker Hughes begin divorce proceedings
- North Dakota faces more pipeline constraints
- Big Oil eyes more Permian assets
- US output hits another record high
- OPEC and IEA warn of oversupply
- Russia scoffs at calls for more output cuts.
Suncor Energy announced the retirement of its CEO Steve Williams, effective May 2019. Williams joined Suncor in 2002 and took over for Rick George in 2012. The current COO, Mark Little, will assume the CEO position.
Despite little change in the heavy oil discount, Western Canadian Select fell below US$13 a barrel on Tuesday, dragged lower by a continued decline in the price of West Texas Intermediate (WTI).
Cenovus Energy CEO Alex Pourbaix says Alberta is facing a "wholesale economic catastrophe," which warrants drastic intervention. Pourbaix would like to see the province use its legislated authority to order producers to reduce output. The law was used in the early 1980s when former PM Trudeau enacted the National Energy Program, forcing Alberta producers to sell their oil at a deep discount.
Peters & Co estimates the province's losses at about $50 billion, with respect to total economic activity, and $5 billion in terms of provincial government revenues. The investment firm estimates that about 200,000 bbl/day of production will be taken offline during the last two months of the year due to the depressed prices.
GMP Capital CEO Harris Fricker calls the situation "depressing," and estimates the current lack of pipeline infrastructure is costing the country $16 billion annually. GMP's former chairman says capital flight out of Canada’s oil patch is the worst he's seen in 25 years, blaming the current fiasco on federal and provincial regulatory burdens. The investment bank has halved their staff in energy and mining, which was traditionally their core business, and instead have begun shifting their focus to cannabis and blockchain.
Peyto Exploration CEO Darren Gee blames the capital exodus on the politicization of Canada's energy sector. Gee says environmental and regulatory concerns have added an "entire layer of risk" that investors are unable to assess. The CEO also says the country should have expected a fight in its bid to ramp up production, and Canadians should be ready to put their "elbows up and fight back"
Total Energy Services CEO Daniel Halyk says he's offended to be selling Canadian resources "for pennies on the dollar." Advantage Oil & Gas CEO Andy Mah says he would like politicians and the general public to understand how important the energy sector is to the Canadian economy.
California-based Capital Group is telling its investors to avoid the Canadian energy sector, unless more is done to improve market access. The financial services firm has asked PM Trudeau to be "more proactive in securing market access which will assure the competitiveness of Canadian energy companies." Capital Group manages US$1.7 trillion in global assets, including more than US$30 billion in Canadian securities. The firm is the the largest shareholder of Suncor Energy, Enbridge, Canadian Natural Resources and Keyera.
Alberta's Energy Minister Marg McCuaig-Boyd says the province is reviewing its options on the recent work stoppage at Keystone XL, and is looking for ways to boost shipments by rail in the short-term. The minister says the province has submitted a plan to the federal government, but Ottawa says they haven't seen anything yet. In response to the onslaught of criticism this week, Federal Natural Resources Minister Amarjeet Sohi says he understands everyone's frustration, but the problem can only be solved by building more export pipelines.
After buying Baker Hughes in the summer of 2017, GE has accelerated its plans to divest the oil field services company, in a desperate effort to raise cash. The company plans to sell up to 101 million shares in Baker Hughes, and will eventually reduce its stake to zero in the next few years. GE has seen three CEOs in less than 18 months, refocusing its efforts on debt reduction and streamlining its business units into three areas - jet engines, power plants and renewable energy. After more than 110 years on the index, GE was delisted from the Dow this past summer, as share prices have fallen 75% since the beginning of 2017.
Chevron, ExxonMobil and possibly ConocoPhillips are reportedly in talks to buy privately-held Endeavor Energy. Endeavor has drilling rights on 329,000 net acres of land in the Permian Basin, of which only 2% has yet to be developed. Exxon is seen as the most logical buyer, having already signed a 7-year agreement with the company to boost output from the region. Endeavor is worth an estimated US$15 billion, and had previously indicated plans for an IPO in 2019.
Bakken crude differentials to WTI hit as much as US$20 a barrel last week, as output from the region reached a record 1.3 million bbl/day in October, exceeding pipeline capacity. The onset of winter is expected to put more downward pressure on prices, as frigid weather in North Dakota will likely disrupt rail loadings. Startup of the Dakota Access pipeline in 2017 helped alleviate export bottlenecks, but increases in output has once again constrained takeaway capacity. Operator Energy Transfer Partners plans to expand the line from 525,000 to 570,000 bbl/day. North Dakota had also been relying on TransCanada's Keystone XL pipeline from Alberta, where 100,000 bbl/day of capacity had been reserved for Bakken crude. The Bakken shale is the third largest producing region in the US.
According to the US Energy Information Administration (EIA), total US production hit a record 11.7 million bbl/day last week, up 1 million bbl/day from just last spring. The EIA now says it expects US production to top 12 million bbl/day by the middle of next year.
After years of speculation, the Dutch government finally put a drop-dead date for gas production out of the Groningen gas field. The current 2018/19 year will see volumes trimmed from 21.6 billion cubic meters per year (Bcm/yr) to 19.4 Bcm/yr, then reduced to 12 Bcm/yr by the fall of 2022. Volumes will be reduced to 7.5 Bcm/yr after that, ultimately falling to zero. Groningen is the largest gas field in Europe, operated by a joint-venture between Royal Dutch Shell and ExxonMobil. Production was scaled back due to a series of small earthquakes and tremors which resulted in extensive property damage, prompting the government to pay out €1.2 billion in compensation.
Both OPEC and the International Energy Agency (IEA) warned of too much supply this week and slowing demand out of emerging markets, putting more pressure on Saudi Arabia and Russia to curb production next year. OPEC will likely ask its members to cut output by 1.4 million bbl/day going into 2019, when they meet in Vienna at the beginning of December. Russia has so far indicated a reluctance to take part, calling production cuts "not the right systematic approach" to stabilizing oil markets.
While warning of too much supply in 2019, the IEA also warns there isn't enough investment in conventional oil, putting the global economy at risk of a "supply crunch." The agency says the world needs an extra 7.5 million bbl/day by 2025, but new production may not be enough to offset natural declines. Under the current trajectory, world oil markets are relying heavily on US shale production to keep rising in order to keep up with rising demand.
- December contract expiry for WTI
- NEB kicks-off TMEP Reconsideration OTE sessions in Calgary, AB
- API Weekly Statistical Bulletin released @ 4:30pm ET
- September wholesale trade data released by StatsCan @ 8:30am ET
- EIA Weekly Petroleum Status Report released @ 10:30am ET
- EIA Weekly Natural Gas Storage Report (holiday schedule)
- Finance Minister Bill Morneau delivers fall economic update
- OECD releases Economic Outlook @ 11:00am CET
- September Employment Insurance data released by StatsCan @ 8:30am ET
- US markets closed for Thanksgiving
- Calgary Chamber of Commerce hosts PM Justin Trudeau
- October Consumer Price Index released by StatsCan @ 8:30am ET
- Baker Hughes Rig Count released @ 1:00pm ET