Mergers, cost cuts help natural gas firms survive

CALGARY — With natural gas prices reaching depths not seen since 2002, hard-hit producers in Western Canada are coping by pulling the few levers that are within their grasp.

CALGARY — With natural gas prices reaching depths not seen since 2002, hard-hit producers in Western Canada are coping by pulling the few levers that are within their grasp.

“There’s not much that can be done about the natural gas price. It’s beyond everybody’s control. So people have to look at what they can do in the short and medium term to try to get through it,” Gary Leach, head of the Small Explorers and Producers Association of Canada, said Tuesday.

The Alberta spot natural gas price closed at $2.30 per 1,000 cubic feet on Monday. Most producers say they need gas in the $6 to $8 range to eke out a profit.

The vast majority of SEPAC members are focused on natural gas, which means there generally isn’t much wiggle room when prices crater.

A few have the option of investing more of their capital in developing oil, which has seen much more robust pricing in the US$70-per-barrel range.

“If companies don’t have those kinds of opportunities, they are, and have been for some time now, trying to reduce expenses to live within their cash flow,” Leach said. “For a lot of companies, particularly smaller juniors, though, that means the likelihood of production declines.”

Another option for companies could be to “grow your way out of the problem” through mergers and acquisitions.

This past week a number of deals were announced. On Friday, Junior Delphi Energy Corp. (TSX:DEE) agreed to buy Fairmount Energy Inc. (FMT) for $14.5 million, allowing Delphi to tap into lower-cost natural gas fields in Alberta.

And Monday, Daylight Resources Trust (TSX:DAY) added more oil to its portfolio by acquiring Highpine Oil & Gas Ltd. for $530 million.

Just Posted

Scares and chills await at haunted house in Red Deer

Zed Haunted House helps raise money for Boys and Girls Club of Red Deer District

PHOTO: Renewable Energy Fair at Red Deer College

The Renewable Energy Fair and Workshops event was held at Red Deer… Continue reading

PHOTOS: Red Deer College Queens host third annual Pink in the Rink game

Queens raised $12,035 for the Central Alberta Cancer Centre.

PHOTOS: The Mustard Seed CEO speaks at Seeds of Hope Gala in Red Deer

The first-ever Seeds of Hope Gala was held at the Red Deer… Continue reading

Person airlifted to hospital after collision near Innisfail

One person was airlifted to hospital after a serious collision west of… Continue reading

WATCH: Make-A-Wish grants Star Wars loving teen’s wish

The Make-A-Wish Foundation granted Anakin Suerink’s wish in Red Deer Saturday afternoon

Turkey to reveal details of probe into Khashoggi’s killing

ISTANBUL — In a sign of growing pressure on Saudi Arabia, Turkey… Continue reading

Utah truck driver is jailed without bond after crash kills 6

HEBER, Utah — A man suspected of driving under the influence remained… Continue reading

A ragged, growing army of migrants resumes march toward US

TAPACHULA, Mexico — A ragged army of Honduran migrants streamed through southern… Continue reading

Postal workers to begin strikes in 4 Canadian cities Monday if deal not reached

OTTAWA — The union representing 50,000 Canada Post employees says it will… Continue reading

Migrant caravan swells to 5,000, resumes advance toward US

CIUDAD HIDALGO, Mexico — Despite Mexican efforts to stop them at the… Continue reading

“I don’t feel real”: Mental stress mounting after Michael

PANAMA CITY, Fla. — Amy Cross has a hard time explaining the… Continue reading

Toronto residents set to vote Monday on the next four years of civic leaders

Toronto’s municipal election campaign, marked by unprecedented provincial interference, ends Monday when… Continue reading

Former PQ minister Lise Payette remembered as role model for female politicians

MONTREAL — Members from across Quebec’s political spectrum gathered at a downtown… Continue reading

Most Read