CALGARY — The sombre mood that has gripped the Calgary-based oilpatch for several years is starting to show flickers of hope, with more financially secure companies making moves to grow in 2021.
Recent export pipeline news is offsetting the ongoing reality of volatile commodity prices, general investor distaste for the sector and regulatory uncertainty and leading to more mergers and targeted increases in capital spending plans, observers say.
“The oilpatch has changed again. I think it’s changed forever in a few fashions,” said veteran oilman Neil Roszell, CEO of newly created Headwater Exploration Inc., in an interview.
“Definitely different dynamics. I don’t think we’re ever going to see one hundred small companies active again in Western Canada.”
Roszell heads a team of executives who have created, built and sold three Calgary-based conventional oil and gas companies in the past dozen or so years. All had water-themed names: Raging River Exploration, Wild Stream Exploration and Wild River Resources.
Early this year, just before the pandemic struck, the team took over management of a junior company called Corridor Resources Inc., changed its name to Headwater Exploration and raised $50 million in equity to add to its working capital balance of about $65 million.
In a deal that closed Dec. 2, Headwater bought northern Alberta conventional oil assets from oilsands giant Cenovus Energy Inc. for $35 million in cash and 50 million Headwater shares.
It plans to have four drilling rigs working those lands in January with a 2021 budget of $85 million to $90 million and a goal of more than doubling the current 2,800 barrels per day of medium oil production.
“Without the pandemic happening, which made a lot of companies re-evaluate their assets, I don’t think this deal would have been available,” Roszell said, noting Cenovus’s decision to slash operating costs and concentrate spending on its core operations as oil prices fell amid the pandemic lockdowns.
As 2021 dawns, the oilpatch is waiting to see if U.S. president-elect Joe Biden will carry through with his campaign vow to kill the Keystone XL pipeline designed to take Alberta oil to the U.S. Gulf Coast refining complex. It’s also waiting to get the details on a new clean fuel standard in Canada expected to decrease the carbon content of transport fuels.
Meanwhile, the energy index which tracks the value of the best oil and gas companies on the Toronto Stock Exchange has fallen by about two-thirds over the past five years. And Calgary’s downtown office vacancy rate — stalled at over 25 per cent — stands to worsen due to layoff plans by Cenovus and Suncor Energy Inc.
