Varcoe: Oilpatch survey finds 88% of producers see increased output in 2024, count on improved outlook

‘There may be an overwhelmingly constructive sense across the well being of the trade. And no person is seeking to develop massively’

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Regardless of a uneven journey for vitality costs in latest weeks, the Canadian oilpatch is feeling upbeat in regards to the yr forward and oilpatch hiring is anticipated to extend in 2024.

A brand new examine by ATB Capital Markets took the temperature of Canadian executives over the previous month, with petroleum producers, oilfield companies companies and institutional buyers displaying an “bettering sentiment” as 2024 attracts nearer.

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“By and huge, the Canadian vitality sector is making ready for a average development yr in 2024,” the report states.

“Buoyed by stronger crude costs, trade sentiment indicators have been sharply improved from our spring 2023 survey.”

The newest ballot discovered 60 per cent of executives with vitality companies companies anticipate their firm’s exercise ranges will improve over the following six months.

Almost 9 out of 10 petroleum producer executives — 88 per cent — have an improved outlook for the following six months. The identical quantity count on their manufacturing to develop within the subsequent yr.

The survey of 85 executives was carried out in late September and early October. Oil markets have been bouncing round between US$80 and $93 a barrel in latest weeks, with manufacturing cuts by OPEC+ international locations, geopolitical uncertainty and tight stock ranges persevering with to maintain costs excessive.

ATB Capital Markets has boosted its oil value forecast for benchmark West Texas Intermediate (WTI) crude by $6 to $76 a barrel for subsequent yr. It’s projecting costs will common $85 a barrel throughout the fourth quarter of this yr.

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The Canadian trade is producing sturdy money movement ranges, corporations have paid down debt and producers are remaining disciplined on including new manufacturing, stated ATB analyst Tim Monachello.

“There may be an overwhelmingly constructive sense across the well being of the trade. And no person is seeking to develop massively,” he stated Tuesday.

“Reasonable development is a reasonably wholesome place for the trade.”

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Kelt Exploration chief monetary officer Sadiq Lalani stated with OPEC international locations persevering with to throttle again manufacturing whereas vitality demand stays resilient, he anticipates WTI crude costs will possible common between $80 and $90 a barrel subsequent yr.

“I feel $80 is the ground that OPEC+ is working with,” Lalani stated. “As an oil and fuel producer, I’m feeling fairly optimistic.”

Like most corporations within the sector, the junior oil and fuel producer is at present creating its capital spending plans for subsequent yr.

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ATB’s survey discovered that some 54 per cent of producers suppose their capital budgets will improve subsequent yr, whereas 31 per cent imagine their capital expenditures will stay flat. Solely 15 per cent count on to spend much less.

Commodity costs stay a key driver of optimism inside the sector. On Tuesday, WTI crude costs closed up 18 cents to $85.44 a barrel.

Within the quick time period, 27 per cent of executives who have been surveyed count on the common value for WTI crude to extend from present ranges, whereas the identical quantity count on it to drop, and 46 per cent count on it to stay the identical.

In relation to pure fuel costs, 46 per cent suppose it can improve from present ranges over the following yr, whereas 42 per cent count on it to remain the identical.

Benchmark costs for U.S. pure fuel have been decrease in 2023 than a yr in the past because of hotter climate. Fuel costs closed Tuesday at $3.08 per million British thermal models.

Peyto Exploration & Improvement CEO Jean-Paul Lachance, whose firm acquired Repsol’s exploration and manufacturing belongings in Western Canada final month, stated the Calgary-based producer initiatives its capital spending subsequent yr shall be within the vary of $450 million to $500 million.

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That might signify a few 10 per cent hike from this yr’s cap-ex ranges.

“I feel (fuel) costs shall be higher subsequent yr than this yr, however I don’t see them taking off just like the yr earlier than,” Lachance stated in a latest interview.

“Past 2024, we see that with the build-out of extra LNG . . . takeaway capability (is) going up considerably and we expect 2025 goes to be a fantastic yr for fuel costs.”

The Woodfibre LNG site
The Woodfibre LNG web site is seen on Howe Sound as work continues to organize for development, in Squamish, B.C., Wednesday, July 5, 2023. Darryl Dyck/The Canadian Press

Over the longer run, 91 per cent of survey respondents imagine costs for WTI crude will common greater than US$75 a barrel over the following three to 5 years.

For oilfield companies companies, together with drillers, 90 per cent stated they imagine exercise ranges from clients will improve subsequent yr, assuming oil stays within the vary of $85 to $95 a barrel.

Extra spending ought to result in extra oilpatch jobs.

The survey indicated 46 per cent of vitality corporations count on to rent extra employees over the following six months. Solely 5 per cent count on to scale back their workers.

Throughout the nation, the oil and fuel sector employed 179,000 folks final month, in accordance with Vitality Security Canada.

The ATB survey additionally highlighted the dangers and rewards dealing with the sector, with the prospect of increasing LNG initiatives on the Pacific Coast being extensively seen because the trade’s high medium to longer-term alternative.

Federal environmental and vitality insurance policies have been recognized as the highest perceived threat within the subsequent three to 5 years. The ballot discovered 68 per cent of respondents ranked it as the highest threat.

Chris Varcoe is a Calgary Herald columnist.

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