A strong drop in oil prices in the first months of the year has undermined any plan for oil companies “Drill, baby, drill“
But the reaction to the price of crude has developed differently in Canada against the United States, with companies south of the border looking at the production cuts, while the Canadian sector remains stable.
Since the beginning of the year, the reference price of a barrel of oil has fallen from a maximum of $ 80 us a barrel At around $ 60 we this week.
The fall in oil prices has been due, in part, to the commercial policies that leave the White House, according to Max Pyziur, director of Research at Energy Policy Research Foundation, a group of American energy experts.
While the president of the United States, Donald Trump, campaigned on a “simulation, baby, exercise” platform and appointed an industry executive like countries Secretary of EnergyThe tumult of its commercial policy has led to great uncertainty of the market and Fears of a possible recessionwhich would mean a lower oil demand.
“It’s ubiquitous,” said Pyziur, who said that many companies range from Fedex to Kellogg They have lowered their forecasts due to broader economic uncertainty.
The downward pressure on oil prices has been aggravated by an OPEC+decision, a group of main nations that export oil, to loosen Supply limitations and bring more oil to the market.
“If you have a weak demand and more supply, you have created a concern that we are going to have an excess of supply, and that has been reducing prices,” said Randy Ollenberger, managing director of Petroleum and Gas Research with BMO Capital Markets.
In the United States, Pyziur said it hopes that companies begin to reduce production.
In a recent letter to the shareholders, the head of the largest independent oil producer in the Perma Basin said that he believes that the industry is in a “turning point“For US oil production at current prices.
“It is likely that the production of oil in the land of the United States has reached its maximum point and begins to reduce this quarter,” said Travis Stice, CEO of Diamondback Energy, in a letter to the shareholders, who said that the company is dropping three platforms and a traffic this quarter.
“To use a driving analogy, we remove our foot from the accelerator when we approach a red light.”
Conocophillips, whose operations are largely concentrated in the United States, announced this week that it was reducing its capital budget of $ 12.9 billion US to a range of $ 12.3 billion US to $ 12.6 billion of the US. UU. Due to the “economic volatility.”
UU. Vs. Canada
But that is in the United States, where most of oil production implies shale Wells, most of them in the Permian Basin, located in western Texas and Southeast New Mexico. Squis wells decrease rapidly, which means that companies have to continue drilling new ones just to maintain production.
“The Permian, on the right, is a running tape,” said Mark Oberstoetter, head of Research upstream of North America with Wood Mackenzie.
In comparison, Canadian oil production is dominated by the oil tariffs. The exit of these wells and mines does not decrease almost so fast. That means that although it costs a lot of money in advance, building these facilities, generally they do not require much new investment to continue.
During the last week, the price of oil has fallen below the cost of taking profitable from oil in the US. According to a survey of oil companies by the Dallas Federal Reserve BankThis equilibrium point costs around $ 65 from USA per barrel in Texas. The West Texas Intermediate Market price, a widely used reference point, currently costs around $ 59 from the US.
Meanwhile, in Canada, conventional medium -sized oil producers often have a equilibrium price at $ 50 of US $ 50 to $ 55 of USA per barrel range. Petroleum sand companies can withstand much lower prices.
On Thursday, the largest oil and natural gas producer in the country, Canadian natural resources, said that maintenance capital and dividends to shareholders could still cover in the rank per barrel of the bass in mid -$ 40.
“The largest companies here in Canada … have cost structures that are among the best in the world,” said Ollenberger, with BMO capital markets.
“They can support WTI prices in the $ 40 range [US] And they still have enough cash flow to maintain production. “
In recent years, oil prices have shot themselves to the extent that companies have sometimes compared with broken bank machines. But unlike previous boom times, companies have been conservative, choosing to pay the debt and buy shares instead of spending effective on new projects.
“I think, even before the recession, we had put ourselves in a defensive position,” said Brian Schmidt, CEO of Tamarack Valley Energy, based in Calgary, in an interview.
“We are not planning to close platforms or change our plans yet. And to a large extent it is because our company can tolerate, it is quite profitable, at low prices.”
For now, Pyziur, with the group of US energy experts. UU.
He also said that, as some US companies seek to increase production, producers of Canadian oil sands could capture a greater proportion of the market.
“That, I think, is an opportunity for Canadian producers upstream.”
