File photo by THE CANADIAN PRESS Pumpjacks pump crude oil near Halkirk, Alta. A pair of Calgary oil companies are cutting their dividends and reducing production because of current steep discounts on western Canadian oil prices.

Junior oil firms cut dividends, output despite crude oil price rebound

CALGARY — Prices for western Canadian oil continued to strengthen on Friday as markets adjusted to a plan by the Alberta government to eliminate a glut of oil that has plagued producers for months.

After hitting highs of more than US$52 per barrel in October, the discount on Western Canadian Select bitumen-blend crude versus New York-traded West Texas Intermediate settled at about US$15 per barrel on Friday, according to Net Energy.

That’s a level that analysts consider to be normal or typical based on higher transportation costs and lower quality compared with WTI.

A week earlier, just before Alberta Premier Rachel Notley announced the province would curtail production from large companies to remove 325,000 barrels per day of oil from its over-taxed pipelines starting Jan. 1, the WCS-WTI differential was twice as much, at US$29 per barrel.

“What changed with the premier’s announcement is now there’s confidence that the market will be balanced with the cuts that are being made in the first quarter and the increase in crude-by-rail,” said Jackie Forrest, research director for the ARC Energy Research Institute in Calgary.

“I expected it would happen fairly quickly because the futures market is really set by expectations about how things will evolve over the year and, with the premier’s announcement, that view changed drastically.”

The province also announced it would buy railcars and locomotives to move more oil starting in late 2019.

Forrest said increasing prices for WTI linked to production cuts announced Friday by OPEC and its allies are also good news for the Canadian oilpatch.

The oil price improvements came as a pair of junior Calgary oil companies announced they would cut payouts to shareholders and reduce production because of the current quarter’s low oil prices to date.

Both Cardinal Energy Ltd. and Granite Oil Corp. said they can’t afford to wait and see if Alberta’s production cuts will result in a sustained recovery in oil prices.

Cardinal shares closed down 8.1 per cent on the Toronto Stock Exchange on Friday after it announced late Thursday it would cut its monthly dividend from 3.5 cents to a penny per share and had trimmed 15 per cent from what had been record production of 22,000 barrels of oil equivalent per day.

Granite stock closed 3.5 per cent lower after it announced it would suspend its monthly dividend of 2.3 cents per share and had stopped production of about 200 boe/d after posting third-quarter output of just under 2,000 boe/d.

“Although we don’t think that the current pricing differentials between Canadian barrels and U.S. barrels will be permanent, we are obligated to our shareholders to protect our business and our balance sheet until Canadian prices improve,” said Cardinal in a news release.

Junior oil firm Bonterra Energy Corp. announced last month it would cut its monthly dividend to a penny from 10 cents per share because of low oil prices.

Bonterra and several other Alberta oil companies have said they will delay announcing budgets and providing guidance for 2019 until January in anticipation of more visibility on where oil and gas prices are headed.

oil & gas

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Shaun Janse van Rensburg, a Red Deer resident, said he is tired of changing clocks twice a year. Photo by Mamta Lulla/Advocate staff
After COVID, Kenney may consider referendum on daylight savings

Albertans may be divided on several issues today, but there’s a consensus… Continue reading

COVID-19-death toll in Alberta reached 309 according to numbers posted on the province’s website Tuesday afternoon. (Image courtesy CDC)
Another 422 COVID cases reported in Alberta and two more deaths

The Alberta government confirmed 422 COVID-19 cases Tuesday and two more virus… Continue reading

test tube with the blood test is on the table next to the documents. Positive test for coronavirus covid-19. The concept of fighting a dangerous Chinese disease.
COVID-19 death toll verges on 10,000 as second wave continues to surge

Nearly 10,000 Canadians have died due to COVID-19, a mark of the… Continue reading

The Red Deer RCMP has filed another set of charges after an alleged assault at an anti-racism rally on Sept. 20. (File photo by Advocate Staff)
More assault charges filed after Sept. 20 anti-racism rally in Red Deer

Trevor Lyle Roy faces a second set of charges stemming from the event

Your weather forecast for Thursday, August 1st, 2019. (Pixabay)
Expect a slightly windy day in Red Deer Tuesday

Expect a slightly windy day in Red Deer. Although as of noon… Continue reading

Alice Kolisnyk, deputy director of the Red Deer Food Bank, says the agency expects an increase in demand as the COVID-19 pandemic continues. Every new subscription to the Red Deer Advocate includes a $50 donation to the food bank. (Photo by BYRON HACKETT/Advocate Staff)
Support the food bank with a subscription to the Red Deer Advocate

The community’s most vulnerable members are always in need of a hand,… Continue reading

Minister of Families, Children and Social Development Ahmed Hussen rises during Question Period in the House of Commons on Parliament Hill in Ottawa on Tuesday, Sept. 29, 2020. THE CANADIAN PRESS/Justin Tang
Feds split rapid-housing cash between big cities, offer up rest for projects

Feds split rapid-housing cash between big cities, offer up rest for projects

Cilantro and Chive Owner Rieley Kay is set to open a second location, this time in Red Deer. (Todd Colin Vaughan/Lacombe Express)
Cilantro and Chive excited to open second location

New spot will open early in 2021 and is located near Westerner Park

Cases in Ponoka (East Ponoka County) as of Oct. 27. (alberta.ca)
Diagnosed cases of COVID-19 at three Ponoka businesses

Town ‘strongly encouraging’ residents to wear non-medical masks in public

Red Deer Rebels forward Jayden Grubbe is one of three Rebels on the NHL Central Scouting players to watch list for the 2021 NHL Draft. (Photo by BYRON HACKETT/Advocate Staff)
Three Rebels on 2021 NHL Central Scouting Players to Watch list

A trio of Red Deer Rebels has caught scouts’ eyes ahead of… Continue reading

Kathleen Finnigan, who was named superintendent of the Red Deer Regional Catholic School Board on Tuesday, has more than 30 years of experience as an educator. (Courtesy of Red Deer Regional Catholic Schools)
Kathleen Finnigan named Red Deer Regional Catholic Schools superintendent

The Red Deer Regional Catholic School Board will continue to be led… Continue reading

(Emily Jaycox/Bashaw Star)
Wreath laying ceremony held in Manfred, Alta.

Ceremony marks 64th anniversary of Hungarian revolution, honours settlers

The Red Deer Regional Hospital Centre could be affected by cuts to Alberta Health Services announced by the government Tuesday. (Photo by BYRON HACKETT/Advocate Staff)
David Marsden: Yes, we know how to do laundry

Union leaders would have us believe there’s something special about their members:… Continue reading

Most Read