Oilweek's Top 100, sponsored by KPMG, reflects an industry still struggling to find solid footing

Canada’s publicly traded oil and gas producers saw a major turnaround in their fortunes in 2017 as higher prices and lower costs resulted in a combined $12.4 billion in net income, compared to a combined loss of around $1.8 billion in 2016.

Revenues were up 33 per cent in 2017 from the previous year, reaching $140.1 billion. Cash from operations climbed to $38.6 billion, up 70 per cent from 2016.

But the recovery was uneven, with the top five largest and integrated operators capturing 92 per cent of total net income, and almost 80 per cent of total revenues.

“At current oil prices many companies can make money—not a lot of money—but they can make money,” says Michael McKerracher, National Industry Leader, Energy, KPMG. “But the truly integrated companies can be quite profitable. They have a better system of pipelines in place so market access issues are somewhat minimized and they have the benefit of downstream revenue.”

Natural gas is a different story, says McKerracher. While operators with strong condensate or liquids production had a profitable 2017, those with mostly dry gas production faced difficulties, with prices turning negative for brief periods last summer.

“Gas producers are just holding on,” he notes, adding that those with no choice but to market through the AECO system are facing the greatest challenges.

McKerracher says market volatility is a new reality facing the industry as pricing swings become more extreme and price cycles become shorter as operators bring on new supplies more quickly. With prices uncertain, operators focused on lowering costs per barrel of oil equivalent produced in 2017, like in 2016.

“Operators have driven lots of costs out of the system,” McKerracher says, adding this focus will continue through 2018, as “costs are controllable even if price isn’t.”


The Oilweek 2018 Top 100, sponsored by KPMG, is the latest annual rankings of publicly traded Canadian oil and gas producers and major service and supply operators, based on financial and operational data.

Click here to download the report.

The supporting data files are available exclusively to Daily Oil Bulletin subscribers. Click here for a DOB trial.


The industry has seen a period of rapid change in the last two years as the widespread application of technologies has opened up an abundance of resources to development, he notes. This is changing the focus from finding oil and gas to developing resources as effectively as possible.

“The industry will be moving to a manufacturing process over the next 10 years,” he explains. “Many companies are saying they know their reserves and now they need to find the most efficient way to get them out of the ground.”

While many operators saw improved financial performance in 2017, oilfield service companies continued to struggle, with the top 50 publicly traded companies reporting a combined loss of over $962 million.

“Service companies aren’t covering the depreciation of equipment at current prices,” says McKerracher. “This is impacting ability to buy new equipment and keeping up with technology. This is not sustainable long-term, but prices are not going back to where they were. They need to keep their cost structures down.”

McKerracher says there are a number of ways service companies can meet these challenges. The first is through using technology to drive productivity improvements and cut costs.

“Technology has a huge role to play,” he says, pointing to the automation of drilling rigs to reduce manpower costs as one potential opportunity. Another example is using automation and data analytics in head offices.

“But you need cash flow to invest in technology,” he adds.

A second opportunity is through collaborative contracting. McKerracher says a number of operators are moving away from the “three quotes” method of contracting to longer-term relationships.

“Lately we’re seeing more companies show service companies three-to-five-year plans and having the service company come back to them and tell them how they can support that plan,” he explains. “This kind of collaboration gives service companies more insight into the future and allows operators to be more efficient. They are building projects instead of one-off wells.”

Overlaying the new pricing realities and focus on cost-reduction are a variety of other challenges facing the Canadian industry, including a lack of export market access for both oil and gas production, along with an uncertain regulatory environment that is driving away investment.

“We’re still seeing the exit of foreign money. They like the companies, they like the assets, but they don’t like the jurisdiction,” he explains.

The federal government’s recent takeover of the Trans Mountain pipeline to ensure its construction is good news for the industry, says McKerracher, although he believes the fact the government had to take over the pipeline to move it forward doesn’t send a positive signal to investors.

The upcoming final investment decision (FID) on the Shell-led LNG Canada project will also help reduce Canada’s natural gas glut.

“We’re closer to an LNG facility than ever before,” he notes, adding that although it will take three to five years to build the project, if approved, it will improve sentiment on gas markets and could provide more stability in natural gas prices.

However, McKerracher says the challenges in getting major projects built in Canada, combined with the regulatory burdens being placed on the industry through new project approval processes and carbon taxes, will limit the ability to attract foreign capital.

“No one invests in uncertainty,” he explains. “They want to see a stable regulatory environment, the ability to sell their products, and the ability to get viable projects done.”


The Oilweek 2018 Top 100, sponsored by KPMG, is the latest annual rankings of publicly traded Canadian oil and gas producers and major service and supply operators, based on financial and operational data.

Click here to download the report.

The supporting data files are available exclusively to Daily Oil Bulletin subscribers. Click here for a DOB trial. to download the supporting data files.