Obsidian supportive of Alberta oil curtailment as it defers capital spending

Image: Joey Podlubny/JWN

Intermediate oil and gas producer Obsidian Energy says it is deferring some capital spending into the second half of 2019 as a result of Alberta’s mandated oil curtailment.

But, unlike larger producers Suncor Energy and Imperial Oil that have been vocal on their opposition to the cuts, Obsidian said it is in favour of the government action as it has improved product prices.

“Since the announcement, there has been a meaningful contraction of Canadian differentials improving the outlook for Western Canadian producers. Obsidian Energy is supportive of these actions and views them as a near-term positive step for the energy industry in Western Canada,” it said in a statement on Monday.

“Currently, the company has approximately 2,200 boe/d behind pipe and if the curtailment requirements were to be lifted or reduced, we would bring those volumes on production.”

While Obsidian is maintaining its previously announced $120-million 2019 capital budget, it is moving some of its spending into the second half of the year.

In light of the curtailment, Obsidian said it has elected to defer a four-well pad with two Cardium wells and two Deep Basin wells to the second half of 2019. The deferral will reduce first half 2019 capital expenditures by approximately $20 million to $45 million.

“Our first half 2019 drilling program now consists of five Willesden Green Cardium wells which is underway, with production expected near the end of March,” Obsidian said.

The company has revised downward its 2019 production guidance based on the curtailment, now at 26,750 to 27,750 boe/d, down from 28,000 to 29,000 boe/d.

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