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Moody’s Cuts Credit Rating of Canadian Oil Sands

The rating action targeting the largest owner of Canada’s giant Syncrude oil-sands mining consortium comes amid a swoon in oil prices below $40 a barrel, which has eroded profit margins in the energy industry and made it more difficult for highly-levered oil producers to service their debt loads. Moody’s lowered its creditworthiness assessment of Canadian Oil Sands’ senior unsecured debt to Baa 3 from Baa 2 and kept its “negative” outlook for the Calgary-based company. Baa 3 is Moody’s lowest rung of investment-grade credit and just above the speculative, or junk, grade. “Moody’s expects negative free cash flow [at Canadian Oil Sands] of about 125 million Canadian dollars ($94 million) from June 30, 2015, to September 30, 2016, to be largely debt funded,” it said. The ratings action was prompted by the recent tumble in crude prices to more than six-year lows and Canadian Oil Sands’ deteriorating balance sheet. […]

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Canada’s Largest Refinery Shifts from Bakken Shale Oil to Brent Crudes

The operator of Canada’s largest crude oil refinery, Irving Oil Ltd., said it has stopped importing Bakken Shale oil from the U.S. in favor of cheaper crudes from such producers as Saudi Arabia, reflecting a shift in crude costs affecting East Coast refiners during a global slump in oil prices. The closely held company’s 320,000-barrel-a-day refinery in Saint John, New Brunswick, one of the biggest by volume in North America, has reduced purchases of Bakken crude shipped by rail to zero from a high of nearly 100,000 barrels a day two years ago, Irving President Ian Whitcomb said in an interview on Thursday. “We’re not importing any Bakken crude right now,” he said. The move reflects shifting economics in the energy industry even as the price of oil—including Bakken crude—has slumped to six-year lows . A once-yawning gap, between the cost of oil produced in North America and overseas […]

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Canadian Oil-Sands Producers Struggle

CALGARY, Alberta—Canada’s high-cost oil-sands producers are struggling as oil prices sink to fresh six-year lows, and even the most efficient drillers are losing money on every barrel they produce at current prices, according to a report published Wednesday. Canadian oil-sands production has grown 30% in the past five years but the recent price slump has hit producers’ bottom lines and forced them to suspend development of new projects. Western Canadian heavy crude costs more to extract than other oil sources because it must be separated from deposits of sand. It also trades at a discount to other crudes, in part because of the distance it must be transported from remote boreal forests in Alberta. Benchmark West Texas Intermediate oil cost less than $41 a barrel in Wednesday trading, which although at multiyear lows was still well above the Western Canadian Select average of around $24 a barrel. More than […]

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As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms

Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices. (Bloomberg) — Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices. Trican Well Service Ltd., Canada’s largest fracking service provider, said last week it may be unable to continue because it’s in danger of breaching the terms of its debt. It’s the latest firm to see crude’s descent to a six-year low sap the cash flow needed to meet financial obligations. Oil’s plunge has pushed a measure of the average debt burden among Canadian energy firms to the highest since at least 2002, and another measure of their ability to make interest payments to the third-lowest level in a decade, according to data compiled by Bloomberg. Facing some of the […]

Posted On : Published By : Tom Whipple
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Brace for More Dividend Cuts in Canada Oil Patch

Dividend cuts among Canadian energy producers are poised to accelerate as cost reductions fail to boost shrinking cash flow. Companies from Canadian Oil Sands Ltd. to Baytex Energy Corp. are in line for deeper payout decreases, according to analysts, after Crescent Point Energy Corp. slashed its dividend for the first time last week as crude sank to a six-year low. Just 38 percent of the 63 energy companies in Canada’s Standard & Poor’s/TSX Energy index had positive free cash flow, defined as operating cash flow minus capital expenditures, as of Aug. 17. That’s down from 43 percent in 2013, data compiled by Bloomberg show. The dwindling cash flow comes even after Canadian companies joined some $180 billion in global cutbacks this year, the most since the oil crash of 1986, according to Rystad Energy AS, an Oslo-based energy consultant. “There’s so much cash being spent on dividends,” said Greg […]

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Alberta producers review low-carbon agenda

Canadian oil and gas production group seeks balance in developing low-carbon economy in Alberta. Photo by akiyoko/Shutterstock CALGARY, Alberta, Aug. 17 (UPI) — Canadian oil and gas producers will work with the government in Alberta to find a balance between economic and environmental gains, a top executive said. The provincial government of Premier Rachel Notley appointed a five-member panel to develop a climate change strategy for resource-rich Alberta. Parks and Environment Minister Shannon Phillips said the panel is driving toward an organic and domestic-driven agenda . "Climate change is a threat we all face, affecting everything from our health, food production and fresh water, to biodiversity and our economy," she said in a statement. "All Albertans will have an opportunity to contribute to their province’s new plan to address this pressing global issue here at home." Most of Canadian oil sector activity is based in Alberta, a province that […]

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Canadian Stocks Resume Declines as Oil Slumps to Six-Year Low

Canadian stocks resumed their slide, falling for the fourth time in five sessions, as crude prices traded at the lowest in more than six years and financial shares slumped. Energy producers paced a decline in equities as crude futures dropped 1.5 percent in New York amid an increase in U.S. drilling and the prospect OPEC production may rise to a record after sanctions on Iran are lifted. Concerns grew that demand for oil may slip as manufacturing in New York unexpectedly shrank and Japan’s economy contracted last quarter. The Standard & Poor’s/TSX Composite Index fell 26.35 points, or 0.2 percent, to 14,251.53 at 4 p.m. in Toronto, paring a loss of as much as 0.7 percent in the final half hour of trading. The benchmark Canadian equity gauge has fallen 2.6 percent this year. Commodities producers are the worst-performing industries in the S&P/TSX this year as crude has slumped […]

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BP Refinery Outage Could Push Down Oil Prices

The outlook for Canada’s oil sands is pretty grim, but it just got hit with an unexpected blow. An outage at a Midwest refinery could lead to deeper discounts for Canadian oil for several months. BP’s Whiting refinery in Indiana was forced offline for unexpected repairs. Without going into too much detail, BP said that it “shut down the largest of its three crude distillation units for unscheduled repair work.” It also said that production has been cut back at the refinery, which has the capacity to process 413,000 barrels per day, or 19 million gallons of refined fuel each day. The disruption of the Indiana-based Whiting refinery could lead to a spike in gasoline prices in the Midwest as the region suddenly encounters shortages of fuel supplies. Gas prices in Chicago are above $3 per gallon, while the national average is $2.61. The impacts could reverberate beyond the […]

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Abu Dhabi’s Taqa Cuts 22% of Jobs Amid Loss on Falling Oil Price

Abu Dhabi National Energy Co., the government-owned utility that produces crude from Canada to the U.K., has slashed 22 percent of its oil and gas jobs in the past year amid a loss due to tumbling global prices. The company known as Taqa plans to cut spending 2.5 billion dirhams ($681 million) this year after reducing capital expenditures by 1.05 billion dirhams in the first half, according to an e-mailed statement from the company on Thursday. Headcount at the Abu Dhabi headquarters is down 32 percent since July last year. Oil producers are cutting costs after Brent crude slumped 48 percent last year and is down another 13 percent this year. Taqa’s oil and gas production averaged 150,000 barrels of oil equivalent a day in the first six months, down 5 percent from a year earlier as revenue from the business slumped 48 percent. “While the current commodity price […]

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CERI: Lower demand, prices may trim near-term oil sands spending

Lower crude oil prices and reduced demand resulting from a global economic downturn could reduce Canadian oil sands capital expenditures through 2017, the Canadian Energy Research Institute said. Production and capital outlays still are expected to increase well into the future, it emphasized in its latest Oil Sands Supply Update . Production from Canada’s oil sands reached 2.34 million b/d in 2014, 11% higher than 2013’s 2.08 million b/d, CERI’s 10th annual oil sands update said. “Production from oil sands includes an increasing share of Alberta’s and Canada’s crude oil production,” it noted. “In 2014, non-upgraded bitumen and [synthetic crude oil] production made up 58% of total Canadian crude production and 74% of Alberta’s total production.” CERI expects oil sands production to reach 3 million b/d by 2020, despite increased production and what it termed “market access challenges.” In addition to several in-situ projects or phases currently under way […]

Posted On : Published By : Tom Whipple