stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
Natural gas producers cut costs as price outlook deteriorates
space
space
By JEFF LEWIS
  
  

Email this article Print this article
Monday, January 15, 2018 – Page B1

CALGARY -- Canada's moribund natural gas industry is retrenching with cuts to capital spending and dividends as a sharp plunge in wholesale prices shows no signs of letting up.

Companies had already curtailed production through the fall to cope with a darkening outlook for the commodity following pipeline outages on TransCanada Corp.'s Alberta system that led to a buildup of fastgrowing supplies.

Now, even the most efficient producers are recalibrating, a sign of deepening malaise in a corner of the energy industry that has historically accounted for big employment gains and drove hefty budget surpluses for the Alberta government.

Last week, Peyto Exploration & Development Corp. chopped its monthly dividend by 45 per cent, to six cents a share, and slashed its 2018 budget to about $225-million, from a midpoint of $375-million that was set last November.

It said production in 2018 would be 2 per cent lower against last year's total.

The company attributed the tough medicine to a 40-per-cent drop in near-term Alberta wholesale prices from the time it began mapping out its 2018 budget last fall. On Friday, gas for spot delivery in the province sold for $1.80 per 1,000 cubic feet, according to the NGX Electronic Exchange.

A deteriorating outlook for longer-term prices, known as the forward curve, has also made it harder for companies to use financial contracts to lock in future sales at higher levels, removing a major safeguard for cash flows in a falling market.

"We're an industry leader in costs, and we're saying we need to defer capital investment today because the returns are better tomorrow," Darren Gee, Peyto's president and chief executive officer, said in an interview.

"It's defensive, but at the same time it's the only thing we control," he added. "You can't sit back and say we're going to hope that the gas price is going to get better. That's not a strategy."

Calgary-based Peyto joins Tourmaline Oil Corp., Advantage Oil and Gas Ltd. and Painted Pony Energy Ltd. in tapping the brakes on spending this year while shifting focus away from gas deposits to drilling prospects with more valuable petroleum liquids.

Advantage's 2018 budget of $175-million this year is down from about $205-million set in 2017. Painted Pony expects to spend $185-million, versus more than $300-million in 2017. And Tourmaline, led by chief executive officer Mike Rose, cut spending this year to $1.08-billion from $1.52-billion previously.

Such caution contrasts with spending increases planned by companies whose production is skewed more toward crude oil.

U.S. and global crude prices have surged as rising demand and production cuts help erode a worldwide glut.

Across much of North America, however, natural-gas supplies remain ample. That's true even with the record drawdowns from storage in the United States to cope with frigid winter weather that blanketed much of the eastern part of that country last week.

The Energy Information Administration said net withdrawals from natural gas storage totalled 359 billion cubic feet for the week ended Jan. 5, surpassing the previous record of 288 bcf set four years ago. Prices for gas traded in New York barely moved.

"I've never seen anything close to that, and gas was up only 4 or 5 per cent. Even when you have a cold winter, the market is still saying we've just got too much gas coming on here," Raymond James Ltd. analyst Jeremy McCrea said.

"Ultimately, what's going to need to happen to fix this is just more prudent investment decisions by gas operators, and some guys who aren't making money [will have to] start shutting in some of this gas volume here."

To cope, producers are spending more to coax higher-priced liquids out of the ground, while also diversifying markets in a bid to reduce exposure to weak Alberta prices.

Peyto said it plans to prioritize spending in Alberta's Deep Basin exploration region. The company also implemented a new marketing strategy, aiming to cut exposure to Alberta-based pricing to 40 per cent of volumes over time, from 100 per cent currently.

RS Energy Group analyst Samir Kayande said the move underlines the growing importance of marketing arrangements as Canadian gas struggles to compete with low-cost U.S. shale production.

"We've believed for quite some time that finding markets for gas is actually more important than resource development," he said. "Low cost isn't everything. It's having low costs, and having a market."

Associated Graphic

Peyto Exploration and Development says it plans to prioritize spending in Alberta's Deep Basin exploration region.

COURTESY OF PEYTO EXPLORATION AND DEVELOPMENT


Huh? How did I get here?
Return to Main Brent_Jang Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page