Latest Numbers from December's Public Offering Released

The latest numbers are in for December's public offering of crown petroleum and natural gas rights generating $20.1 million for the province.

While most of the attention was placed in the Wilkie and St Walberg area, 5,473.394 hectares of petroleum and Natural gas and 2,800.373 hectares of petroleum natural gas lease were available in the Weyburn-Estevan area totalling $3,083,599.39 of revenue.

“Saskatchewan continues to be an attractive destination for investment by the oil and gas industry,” Energy and Resources Minister Bronwyn Eyre said. “Our competitive policies and incentives, designed in collaboration with industry, encourage sustainable activity, job growth, and good resource management.”

The highest bid for a 5,568.500 hectare parcel of land east of Wilkie purchased by BASM Land & Resources Ltd for $9,126,103.28.

The final offering for the fiscal year will be held on February 5, 2019.

6 things to know about Canada's oil-price gap, from gluts to the differential

Here's what you need to know about the historically low prices

Here's everything you need to know about the low prices being paid right now for Canadian oil. (Jason Lee/Reuters)

 

The Alberta government has ordered a mandatory cut to crude oil production next year to deal with historically low prices being paid for Canadian oil.

Here are six things to know about Canada's resource:

Light or heavy

Each type of oil around the world has its own price.

New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America.

Western Canadian Select (WCS) is the reference price for heavy crude oil from the oilsands delivered at Hardisty, Alta.

Price differential

Canada's heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

Record gap

The biggest gap — $52 US per barrel — was recorded in October.

Experts say the extreme discount happened due to a reliance on high-cost transportation — rail and truck — instead of new pipelines.

The glut

Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can't be shipped out. Roughly 35 million barrels, about twice the normal level, are in storage.

Cutting production

The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January.

As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December.

The move is expected to narrow the differential by at least $4 per barrel.

Winners and losers

Calgary economist Trevor Tombe says $4 per barrel doesn't sound like much, but, over a year, it's worth about $1 billion to the Alberta government's budget. While some companies will also benefit, those with their own refining and upgrading operations may not.

SOURCE: CBC

Two key Canada-to-U.S. oil pipelines hit by disruptions

NEW YORK/VANCOUVER (Reuters) - Two major pipelines carrying oil from Canada to the United States were hit by weather-related disruptions on Tuesday, the latest hit to Canada’s oil industry just days after the Alberta government announced forced cuts in crude production.

A number of lines on the Enbridge Inc (ENB.TO) Mainline system, which carries crude and other liquids, were hit by power outages in the Western Canadian province of Saskatchewan due to severe weather, the company said Tuesday.

TransCanada Corp’s (TRP.TO) 590,000 barrel-per-day crude Keystone pipeline was also shut due to the outage, according to a shipper on the line and traders. There was no estimated restart timeline for the line, one source said, citing a notice to shippers. The company did not respond to a request for comment.

The outages, though temporary, are just the latest constraints to hit Western Canadian oil producers already struggling to export crude due to full pipelines as production has surged to a record at more than 4.6 million barrels a day in 2018.

Both systems originate in Alberta, where most of Canada’s oil is produced.

Enbridge, for its part, said it will remain in contact with SaskPower, that province’s primary utility, through the night “to evaluate the possibility of starting the lines earlier.” The Mainline system ships about 1.2 million bpd.

Western Canadian Select (WCS) heavy oil prices weakened on the news, dealers said, closing at $29.25 a barrel below West Texas Intermediate CLc1 benchmark prices. In October, that discount hit a record of $52 below U.S. prices, but had narrowed to a $19 discount on Monday after the production cuts were announced.

Traders said they expect the outages to be brief.

“If the lines are not up tomorrow, I’m sure folks will start to get nervous,” one shipper on the lines said.

Enbridge said its lines 1, 2a, 3, 4, 13 and 67 would be shut through the night, as SaskPower anticipates power will remain down until at least until Wednesday morning.TransCanada’s Keystone line runs to Steele City, Nebraska and from there to other U.S. markets. Decreased power consumption on that line was observed at about 9:30 a.m. EST (1430 GMT), according to market intelligence firm Genscape.

Reporting by Devika Krishna Kumar in New York and Julie Gordon in Vancouver; Editing by Marguerita Choy and Lisa Shumaker

SOURCE: REUTERS

Canadian oil producers trade shares for growth but investors hard to impress

WINNIPEG/TORONTO (Reuters) - Depressed Canadian oil prices are forcing energy companies to use their shares as a currency to fund acquisitions, but investors have been hard to win over to the strategy.

Canadian oil producers face a dwindling amount of capital willing to invest in the sector, leaving many with a stark choice, said Eric Nuttal, senior portfolio manager at Ninepoint Partners, which owns shares in MEG Energy (MEG.TO), Baytex and Athabasca Oil (ATH.TO).

“Do you increase in scale and get your market cap above $1 billion to get on the radar screen? Or do you just throw in the towel?”

Many are scaling up. The result, Nuttall said, will likely be more deals into early 2019, and a shrinking number of small-cap Canadian oil producers in the long term.

The Canadian oil patch has made 29 deals so far in the second half, worth $9.5 billion, the busiest half-year period for deals since the first half of 2017, according to Cormark Securities data.

“When you get into a period of such volatility, I think any kind of M&A is very difficult because revenues are certainly challenged.”

Shareholders are mainly interested in companies that pay dividends or buy back shares, said Cormark analyst Amir Arif.

“It’s almost like you can’t win if you’re a Canadian energy company,” said Janan Paskaran, a partner at Torys LLP who provides M&A advice to energy companies. “It’s hard to invest within Canada, and it’s tough to get investor support when you expand outside.”

“People are saying, ‘let’s not spend any capital.’”

On Tuesday, Trinidad Drilling (TDG.TO) shareholders rejected a friendly stock deal to sell to Precision Drilling Corp (PD.TO), choosing instead the certainty of a cash offer from Ensign Energy Services (ESI.TO). [nL4N1Y24UP]

Swiss-based IPC’s shares have traded more in line with the industry since the steep sell-off last month when it announced its purchase of BlackPearl Resources (PXX.TO), and investors generally support the deal, said CEO Mike Nicholson.

“We’re now well positioned for the recovery over the next two to three years,” Nicholson said in an interview from Geneva. “Should we start to see (Canadian) pipelines and crude-by-rail improve, I think there’s a huge amount of upside now in our share price.”

Reporting by Rod Nickel in Winnipeg, Manitoba and John Tilak in Toronto; Editing by Phil Berlowitz


'I'm afraid for Canada': Energy CEOs losing patience with country's indifference to oilpatch's plight

Executives say Canada doesn't support the industry, and one says Trudeau's government actually has no interest in getting the Trans Mountain pipeline built. 

The Canadian oilpatch is losing patience with the country’s lack of support for the industry.

The plunge in global crude prices is being exacerbated in Canada by a lack of pipeline capacity, sending the country’s oil prices to a near record discount to the U.S. and energy stocks reeling. Gas producers can’t even catch a break: while U.S. gas has surged about 19 per cent in the past week amid an expected cold stretch, Canadian prices have actually dropped 14 per cent.

“Globally, we’ve politicized energy so much,” Darren Gee, chief executive officer of Peyto Exploration & Development Corp., a Calgary-based gas producer, said in an interview at Bloomberg’s Toronto office Wednesday. Environmental and regulatory concerns have added an “entire layer of risk that people just don’t know how to asses.”

Gee joins other executives and investors lamenting the country’s inability to get its energy to global markets. The Keystone XL and Trans Mountain oil pipeline projects are facing fresh environmental scrutiny while gas exports are largely handled by only one pipeline company, TransCanada Corp., said Gee.

An analyst with one of the largest foreign holders of Canadian energy stocks, Capital Group Cos., warned in a letter to Prime Minister Justin Trudeau recently that investors and companies will continue to avoid the Canadian energy sector unless more is done to improve market access.

Separatist Sentiment

Canada’s main energy index is down 11 per cent over the past 12 months compared with a 3.4 per cent drop for U.S. energy stocks.

While the government bought the Trans Mountain project in an effort to get more oil flowing to the Pacific coast, Gee holds out little hope of progress. Trudeau’s government has “absolutely no interest in having that pipeline built or expanding this basin,” Gee said. The government’s seeming indifference to the patch’s plight is likely to foment political friction in Alberta, he said.

Miles of unused pipe for Keystone XL. The plunge in global crude prices is being exacerbated in Canada by a lack of pipeline capacity. ANDREW BURTON/GETTY IMAGES

 

“I’m quite afraid that we’re going to see a separatist agenda in the west and a lot of separatist movement because of the energy industry. I’m afraid for Canada for that reason,” Gee added.

Advantage Oil & Gas Ltd.’s CEO Andy Mah said the country has to stand up for the industry. “We keep coming back and finding better ways to do things but there gets to be a point where we need people, public and political, to understand this is a big sector in Canada,” he said in an interview at an energy conference in Toronto on Wednesday.

Former Canadian Prime Minister Stephen Harper said Canada could be an energy superpower but he should have made clear that “the rest of the world will fight us tooth and nail for market share like mad, so get ready Canada, we’ve got to put our elbows up and fight back,” Gee said.

“As a Canadian, I’m offended by what’s going on,” Daniel Halyk, CEO of Total Energy Services Inc. said at the GMP FirstEnergy conference. “We’re selling our resources for pennies on the dollar.”

SOURCE: BLOOMBERG

BP Refineries Run at 15-Year High to Gain From Cheap Canadian Oil

By 
October 30, 2018, 2:26 AM CST
  •  
    Western Canadian crude traded at a large discount to WTI
  •  
    BP profits from cheap Canadian oil thanks to Whiting refinery
 

BP Plc ran its oil refineries at the hardest rate in 15 years during the third quarter, racing to profit from unusually cheap Canadian crude.

The British oil major said its refining business -- or downstream -- delivered adjusted profit before interest and taxes of $2.11 billion in the third quarter, up from $1.46 billion during the second quarter. Much of the increase came from "higher North American heavy crude oil discounts," BP said. The company said that its trading unit, one of the largest in the industry, also delivered better results than in the second quarter.

BP is able to profit from cheaper Canadian crude better than its rivals since it spent $4 billion in 2012 and 2013 to overhaul its largest refinery, located in the outskirts of Chicago, to process low quality crude that arrives directly via pipeline from Canada. Whiting refinery can now run on a diet of 85 percent low quality Canadian crude, compared with 20 percent before.

 
 

Western Canadian Select crude traded at a discount of about $28 a barrel to benchmark West Texas Intermediate crude during the third quarter, compared with $10.50 a barrel in the same period of last year. Booming production north of the border overwhelmed pipeline capacity and the discount widened to a record of $52.4 a barrel in early October.

The WCS-WTI average price gap between July and September was the second widest for any quarter, only trailing the $31.20 a barrel gap of the fourth quarter of 2013, according to data compiled by Bloomberg.

BP said its refineries ran at a utilization rate of 96.3 percent during the third quarter, the highest since 2003. Traditionally, oil companies struggle to run their refineries at more than 90-95 percent at any given time as some units are always down due to planned maintenance and outages.

BP started maintenance on Whiting, about 17 miles southeast of downtown Chicago, in mid-September. The plant, with a capacity to process 413,500 barrels a day, is the largest inland refinery in the U.S. The company plans to wrap up the work in early November.

SOURCE: BLOOMBERG

CANADA FX DEBT-C$ weakens for 3rd straight day as stocks and oil slide

* Canadian dollar dips 0.2 percent against the greenback * Price of U.S. oil falls 0.8 percent * Bond prices trade mixed across the yield curve * Canada-U.S. 2-year spread widens by 1.4 basis points By Fergal Smith TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened for the third consecutive day against its U.S. counterpart on Monday as stocks and oil prices declined, while the greenback broadly climbed. U.S. stocks fell in a volatile session, hurt by fresh worries of an escalation of the U.S.-China trade war and a sharp drop in big tech and internet names. "The Canadian dollar tends to be more risk sensitive, so (I am) not surprised to see it lower," said Erik Nelson, a currency strategist at Wells Fargo. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt if the global flow of trade or capital slows. Oil prices fell after Russia signaled that output will remain high and as concern over the global economy fueled worries about demand for crude. U.S. crude oil futures settled 0.8 percent lower at $67.04 a barrel. The U.S. dollar climbed against a basket of currencies. News that German Chancellor Angela Merkel will not seek re-election as head of her CDU party weighed on the euro. At 4:48 p.m. (2048 GMT), the Canadian dollar was trading 0.2 percent lower at 1.3129 to the greenback, or 76.17 U.S. cents. The currency, which on Friday hit a six-week low intraday at 1.3160, traded in a range of 1.3083 to 1.3149. The loonie got a boost last Wednesday from a Bank of Canada interest rate hike but has lost ground on the three subsequent days of trading. The central bank raised interest rates for the fifth time since July 2017 and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus. Speculators have cut bearish bets on the Canadian dollar to the lowest since March, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Oct. 23, net short positions had decreased to 7,228 contracts from 11,019 a week earlier. Canadian government bond prices were mixed across the yield curve, with the two-year up 0.5 Canadian cent to yield 2.264 percent and the 10-year falling 1 Canadian cent to yield 2.396 percent. The gap between Canada's 2-year yield and its U.S. equivalent widened by 1.4 basis points to a spread of 55.8 basis points in favor of the U.S. bond. (Reporting by Fergal Smith Editing by Frances Kerry and Phil Berlowitz)

SOURCE: REUTERS

C$ weakens for 3rd straight day as stocks and oil slide

* Canadian dollar dips 0.2 percent against the greenback * Price of U.S. oil falls 0.8 percent * Bond prices trade mixed across the yield curve * Canada-U.S. 2-year spread widens by 1.4 basis points By Fergal Smith TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened for the third consecutive day against its U.S. counterpart on Monday as stocks and oil prices declined, while the greenback broadly climbed. U.S. stocks fell in a volatile session, hurt by fresh worries of an escalation of the U.S.-China trade war and a sharp drop in big tech and internet names. "The Canadian dollar tends to be more risk sensitive, so (I am) not surprised to see it lower," said Erik Nelson, a currency strategist at Wells Fargo. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt if the global flow of trade or capital slows. Oil prices fell after Russia signaled that output will remain high and as concern over the global economy fueled worries about demand for crude. U.S. crude oil futures settled 0.8 percent lower at $67.04 a barrel. The U.S. dollar climbed against a basket of currencies. News that German Chancellor Angela Merkel will not seek re-election as head of her CDU party weighed on the euro. At 4:48 p.m. (2048 GMT), the Canadian dollar was trading 0.2 percent lower at 1.3129 to the greenback, or 76.17 U.S. cents. The currency, which on Friday hit a six-week low intraday at 1.3160, traded in a range of 1.3083 to 1.3149. The loonie got a boost last Wednesday from a Bank of Canada interest rate hike but has lost ground on the three subsequent days of trading. The central bank raised interest rates for the fifth time since July 2017 and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus. Speculators have cut bearish bets on the Canadian dollar to the lowest since March, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Oct. 23, net short positions had decreased to 7,228 contracts from 11,019 a week earlier. Canadian government bond prices were mixed across the yield curve, with the two-year up 0.5 Canadian cent to yield 2.264 percent and the 10-year falling 1 Canadian cent to yield 2.396 percent. The gap between Canada's 2-year yield and its U.S. equivalent widened by 1.4 basis points to a spread of 55.8 basis points in favor of the U.S. bond. (Reporting by Fergal Smith Editing by Frances Kerry and Phil Berlowitz)

SOURCE: REUTERS

Province Committed To Health and Safety In Response to Sour Gas Report

A study done by researchers from Harvard and Northeastern University showed air quality indicators were reporting off the chart levels of H2S gas in southeastern Saskatchewan, and there was no action taken by the provincial government. The readings were gathered by the researchers who were working with a collaboration of journalists from various outlets across Canada, and the University of Regina.

The reports and findings presented by the group showed the provincial air quality standards had been breached multiple times since 2014, and no action was taken by the provincial government in response. This includes penalties for companies who are responsible for the emissions.

In a written reply to Discover Weyburn’s questions about the report and the province’s response, the Ministry of Energy and Resources didn’t directly provide a response when asked about the government’s reaction or position to the report. The reply did highlight the province has made a number of steps to strengthen oversight of sour gas management, including increasing inspections, collection gas composition data, increasing staffing levels and funding of air monitoring stations.

H2S is also known as sour gas or hydrogen sulphide. It is a colourless, poisonous gas which is found commonly around crude oil and natural gas production sites. It can be fatal when inhaled. The report presented last week in the media indicated high levels of the gas were found in many areas, which does provide an immediate health risk to some residents of southeastern Saskatchewan.

The statement from the province indicated there had been no need to issue any notices to residents of the air quality reaching critical levels, as the regional air quality levels didn’t reach the point where they would pose a risk to public health and safety. They did state they took action where there were high levels of the gas, and followed up on public complaints related to odours of the gas.

In order to operate a well or facility in Saskatchewan, a company needs to have an emergency response plan in place, which puts the onus on the operator to take steps to notify those at risk of an incident, and to protect safety in the immediate area of the incident, including contacting the Ministry of Energy and Resources when there is an uncontrolled release of sour gas.

While the report from the researchers last week stated there were cases of levels of the gasses high enough to cause corrosion to various items, there were no incident reports available from the individual companies according to the researchers. The province, which monitors incidents to make sure they are dealt with by the operator, said there has been no need for prosecution under The Oil and Gas Conservation Act for failure to follow the reporting procedures. There was no clarification if any companies had their licenses suspended for not following procedure.

In their statement to Discover Weyburn, the government highlighted the regulatory staff respond to all sour gas complaints on a 24/7 basis, and the cases are investigated and corrective actions ordered when necessary, with a commitment to keeping public safety as the number one priority.

No officials from the Ministry of Energy and Resources were available for an interview to clarify or elaborate on any of the responses received in the written statement.

Canadian dollar shakes off plunge in oil as investors brace for rate hike

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday as investors maintained bets that the Bank of Canada will hike interest rates on Wednesday even as oil prices plunged.

At 3:43 p.m. (1943 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at 1.3088 to the greenback, or 76.41 U.S. cents.

The currency, which on Friday hit its weakest level in more than five weeks at 1.3132, traded in a narrow range of 1.3082 to 1.3123.

“I think it is in a holding pattern, waiting for the Bank of Canada tomorrow,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The central bank, which sees Canada’s economy operating near capacity, has hiked four times since July 2017 to leave its key policy rate at 1.50 percent.

Chances of a rate increase on Wednesday held at more than 90 percent despite further volatility in global equity markets and a sharp drop in the price of oil, one of Canada’s major exports. BOCWATCH

 

U.S. crude oil futures CLc1 settled 4.2 percent lower at $66.43 a barrel as the sell-off in stocks raised worries about demand growth and after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of U.S. sanctions on Iran.

Canada runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

A deep discount for Canadian heavy crude could explain why the slump in U.S. oil prices had little impact on the loonie, Cieszynski said.

“We didn’t participate as much when (U.S.) oil was going up so therefore we haven’t been getting hit when it goes back down,” he said.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries as investors sought safety in low-risk debt.

The two-year CA2YT=RR rose 3.5 Canadian cents to yield 2.277 percent and the 10-year CA10YT=RR climbed 30 Canadian cents to yield 2.449 percent.

The 10-year yield touched its lowest intraday since Sept. 28 at 2.418 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and Sandra Maler

SOURCE: REUTERS

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