Canadian oil and gas capex gets a bump but still well off spending highs: StatsCan

​Canadian oil and gas capex gets a bump but still well off spending highs: StatsCan

June 1st, 2017

There’s good news about Canada’s oil and gas spending this week, but it comes with a big caveat.

Capital expenditures for the oil and gas extraction industries totaled $10.6 billion in the first quarter, according to new data from Statistics Canada.

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This is the first year-over-year increase in spending since the fourth quarter of 2014, and is up 5.1 percent from the first quarter of 2016.

“It’s the first-time spending has risen above the $10 billion mark in a year, and a 24 per cent increase from the low it reached in the spring of 2016. That increase sounds impressive. Yet considering the level of spending witnessed prior to the oil price plunge three years ago, capital spending is still comparatively weak,” noted ATB analysts in Thursday’s edition of The Owl newsletter.

“The record high was hit in the fourth quarter of 2014 at $22.2 billion. Even though oil prices had already started to decline in June of that year, spending continued to ramp up for another half year.

Canadian oil and gas expenditures June 1 2017

“But by early 2015, the reality of oil’s price collapse started to set in. Capital spending dropped swiftly for the next year-and-a-half, falling 70 per cent from peak to trough.”

The WTI oil price bottomed out in US$26/bbl in February 2016 and has since stabilized and increased to around US$50/bbl, thanks in part to the OPEC-led crude oil production cut agreement in November 2016 and its recent extension into spring 2018.

Canadian producers have increased capital spending as pricing has improved, particularly in conventional oil and gas.

In April the Petroleum Services Association of Canada revised upwards its 2017 drilling forecast for the second time, currently expecting 6,680 wells this year compared to its earlier expectation of 4,175 wells.

While conventional development spending may be increasing, oilsands capital investment remains for the most part stalled. Some producers including Cenovus Energy and Canadian Natural Resources have announced restarts of construction at projects stalled in the price collapse, but the days of multiple megaprojects under development at once are likely over.

“Recovery may take a while,” ATB analysts wrote.

“And given that oil prices are not expected to recover much above $US 50-60 per barrel for WTI anytime soon, capital spending may never quite fully recover to 2014 levels.”




About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on June 1, 2017, in economic impact, oil, political. Bookmark the permalink. Leave a comment.

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