CALGARY — Lower discounts on western Canadian oil prices have swollen producer coffers in the first three months of the year, but analysts say they don’t expect to see increases in drilling budgets as oil and gas companies report results over the coming weeks.
Cenovus Energy Inc. reports its first-quarter results on Wednesday, followed by fellow oilsands producers Husky Energy Inc. and Imperial Oil Ltd. at the end of next week.
U.S. benchmark West Texas Intermediate spot prices averaged US$54.85 in the first quarter, seven per cent less than in the last three months of 2018, according to RBC Dominion Securities.
But Edmonton Par light oil prices rose 55 per cent to C$66.45 per barrel and Western Canadian Select bitumen blend jumped 121 per cent to C$56.57 per barrel after Alberta imposed production cuts as of Jan. 1 designed to draw down storage levels.
The increases will allow large Calgary-based oil companies to register huge quarter-over-quarter increases in profitability, but analyst Nick Lupick of AltaCorp Capital says he doesn’t think it will result in changes to cautious 2019 spending budgets rolled out in late 2018 and earlier this year.
He says he expects the companies he watches to continue to be influenced by uncertainty regarding timelines for the construction of new Canadian pipelines, the duration of the Alberta production curtailment program, politics in Canada, trade tensions between the U.S. and China and the status of oil sales from OPEC members Venezuela and Iran.
“Despite the increase in the commodity environment, and expectations for sizable increases in 2019 consensus cash flow estimates, we do not anticipate capital spending plans to increase imminently given the ongoing uncertainty in the macro environment,” Lupick said.