An uptick in commodity prices, combined with two years of supply cost cuts, created some room to get financial houses in order and invest in production growth in 2017.
But the dual spectre of market access limitations and a growing regulatory burden capped any newfound enthusiasm as the year wound to a close. And despite improvements, prices remained volatile throughout the year.
After ramping up natural gas production to the highest level in a decade, operators hit a demand wall, resulting in a major price drop in the summer that has carried through into 2018.
A lack of oil export pipelines began cutting into the recovery as well, with discounted prices cutting top line revenues and cash flows to invest in growth projects. And it is not just heavier crude streams that are being discounted; even Canadian light oil is suffering from the lack of market access.
Capital investment, with better opportunities in the United States, has been slow to return to Canada, adding to the industry’s malaise.
With all these issues playing out in real time, the respondents to our second annual Oil & Gas Industry Outlook Survey present a mixed outlook for 2018.
There is little optimism prices will continue rising in 2018, with the majority expecting a repeat of 2017.
Most respondents said their organizations are focused on the things they can control like costs. But after two years of downsizing, the cost focus has changed to leveraging new technologies and processes to remain competitive in a volatile market.
The vast majority remained committed to the Western Canada Sedimentary Basin, with only a small minority looking to the United States or internationally for future opportunities.
The respondents expressed widespread concern that regulatory issues will continue delaying needed oil export pipelines and LNG facilities. The respondents also said they were concerned carbon taxes will add to the disadvantages the Canadian industry also faces.
Both the Alberta and federal governments received failing grades from the respondents for the handling of energy related issues. And the majority is losing hope issues like market access and regulatory approvals of new projects will ever be solved. Sentiments are souring as a result, with over half of the survey respondents saying they were somewhat or very pessimistic about the future.