{"id":8490,"date":"2023-11-01T14:18:16","date_gmt":"2023-11-01T14:18:16","guid":{"rendered":"https:\/\/roydadnaft.ir\/English\/?p=8490"},"modified":"2023-11-01T14:18:16","modified_gmt":"2023-11-01T14:18:16","slug":"varcoe-more-consolidation-high-prices-forecast-to-carry-healthy-canadian-oilpatch-into-2024","status":"publish","type":"post","link":"https:\/\/roydadnaft.ir\/English\/8490\/","title":{"rendered":"Varcoe: More consolidation, high prices forecast to carry ‘healthy’ Canadian oilpatch into 2024"},"content":{"rendered":"

RoydadNaft – <\/a><\/span>\u00a0With petroleum producers remaining disciplined and spending well below their cash flow levels, the Canadian sector should be in a healthy spot in 2024.<\/p>\n

Blockbuster oilpatch takeovers, OPEC production cuts and expectations of strong commodity prices are setting the stage for a busy 2024 for the Canadian oil and natural gas sector, even as recessionary concerns grow.<\/p>\n

At the annual oil and gas forecast breakfast of the CFA Society Calgary, a panel of industry executives, investors and analysts discussed their outlook for the coming months, noting global energy demand continues to rise.<\/p>\n

\n
\n

This advertisement has not loaded yet, but your article continues below.<\/p>\n<\/div>\n<\/section>\n

Prices for West Texas Intermediate (WTI) crude have been highly volatile in recent weeks, climbing by almost 20 per cent since mid-June when they were mired below $70 a barrel. Prices topped $93 a barrel in late September before falling back in recent days, closing Tuesday at $81.02.<\/p>\n

With petroleum producers remaining disciplined and spending well below their cash flow levels, the Canadian sector should be in a healthy spot in 2024.<\/p>\n

\u201cWe\u2019re excited with where the industry is at. I think there\u2019s a lot of volatility, a lot of geopolitical risk, which is going to make things a little bit uncertain,\u201d Tamarack Valley Energy chief financial officer Steve Buytels told reporters Tuesday after speaking at the event at the Calgary Petroleum Club.<\/p>\n

\u201cI do believe we\u2019re going to be range bound and it\u2019ll be healthy \u2014 $70, $80 oil is healthy for producers . . . At the end of the day, I do feel we\u2019re range bound in that $70 to sort of $100 WTI environment.\u201d<\/p>\n

Oil prices have been buoyant this year as demand has increased, while OPEC+ countries have throttled back production. However, markets have come off the highs seen last year following Russia\u2019s invasion of Ukraine, when WTI crude briefly topped $120 a barrel.<\/p>\n

\n
\n

This advertisement has not loaded yet, but your article continues below.<\/p>\n<\/div>\n<\/section>\n

In September, Saudi Arabia agreed to extend its voluntary production cuts of one million barrels per day until the end of this year.<\/p>\n

The International Energy Agency says demand growth in China, India and Brazil has helped global consumption rise by 2.3 million barrels per day (bpd) this year, reaching almost 102 million bpd in September.<\/p>\n

However, growth is expected to slow to 900,000 bpd next year \u201cas the post-COVID rebound runs out of steam, while the economic expansion slows,\u201d the agency said in its latest oil market report.<\/p>\n

There are concerns a decelerating global economy could begin to crimp energy demand, while recessionary fears persist.<\/p>\n

In Canada, gross domestic product was unchanged in August. On Tuesday, Statistics Canada reported that its advance estimates suggest GDP in the third quarter was essentially flat.<\/p>\n

The International Monetary Fund recently reduced its outlook for world economic growth in 2024; advanced economies are forecast to expand by 1.4 per cent as higher interest rates start to bite.<\/p>\n

A new report by TD Economics examined the effect of higher oil prices on the powerful U.S. economy, concluding the drag on its economic growth in 2023 is projected to be quite small.<\/p>\n

Yet, \u201ca further escalation in geopolitical tensions stands to not only push oil prices higher, but also lead to higher and more persistent inflationary pressures,\u201d it cautioned.<\/p>\n

Some forecasters have suggested oil prices could jump back above $100 a barrel in the coming months amid conflict in the Middle East, rising energy consumption and tight inventory levels.<\/p>\n

\u201cOPEC is in control,\u201d Rafi Tahmazian, senior portfolio manager at Canoe Financial, said at the breakfast event.<\/p>\n

\u201cI don\u2019t think they\u2019re going to flood the market to bring the price down . . . I would venture to say we\u2019re going to be closer to $100.\u201d<\/p>\n

\n

FILE PHOTO: The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of OPEC\u2019s headquarters in Vienna, Austria, on March 3, 2022.<\/span>Photo by Lisa Leutner<\/span> \/The Associated Press<\/span><\/p>\n<\/div>\n

While oil prices have been strong, natural gas prices have been subdued throughout most of 2023.<\/p>\n

However, the completion of the Coastal GasLink pipeline<\/a> \u2014 it will ship gas to the LNG Canada project, once it begins operating in 2025 \u2014 has spurred expectation prices will improve by this time next year.<\/div>\n
\n
\n

This advertisement has not loaded yet, but your article continues below.<\/p>\n<\/div>\n<\/section>\n

The LNG growth boom in North America \u201cis a huge part of the gas story,\u201d Jamie Heard, manager of capital markets at Tourmaline Oil, said during the panel.<\/p>\n

By the end of the decade, LNG exports from North America will grow from about 12 billion cubic feet (bcf) of gas per day to about 30 bcf a day, he noted.<\/p>\n

\u201cPrices are going to have to rise to balance the system,\u201d said Heard.<\/p>\n

\n

Construction continues at the LNG Canada site at Kitimat, B.C., in June 2023.<\/span>LNG Canada photo<\/span><\/p>\n<\/div>\n

Meanwhile, the oil and gas industry is going through another aggressive consolidation phase.<\/p>\n

On an international scale, supermajor ExxonMobil struck a deal recently to buy U.S. independent Pioneer Natural Resources for US$59.5 billion, followed by Chevron snapping up Hess for US$53 billion.<\/p>\n

Deals involving the supermajors show that these producers are moving to secure top-tier resources, \u201cbetting for six to 10 years that you\u2019ve got a cycle here that\u2019s going to be supported by some pretty decent oil price,\u201d Buytels said.<\/p>\n

And the wave of mergers and acquisitions isn\u2019t expected to stop.<\/p>\n

\u201cYou look at the M&A that\u2019s happening \u2014 it\u2019s the big mega-caps basically telling you, we need more resource, there is going to be a scarcity of supply at some point,\u201d he added.<\/p>\n

Similarly, Raymond James analyst Jeremy McCrea anticipates plenty of transactions in 2024 as Canadian petroleum producers seek to expand, hoping to attract a larger base of investors and lower their cost of capital.<\/p>\n

McCrea, who moderated Tuesday\u2019s discussion, believes Canadian oilpatch capital expenditures will increase by about 10 per cent next year as companies earmark more money to add production \u2014 modestly \u2014 if commodity prices remain healthy.<\/p>\n

\u201cWhat they are looking for is long-term sustainable prices,\u201d he said in an interview.<\/p>\n

\u201cCompanies will continue to buy back their stock, but there\u2019s still a lot of excess free cash flow that I think they will start to put toward some growth.\u201d<\/p>\n

Updated on