Big Opportunity for Canadian E&P'sCanada stands front and center as the primary trade partner to the U.S. In fact, the U.S. gets a whopping 96.4% of its natural gas imports from Canada. But the opportunities to further expand Canada’s oil and natural gas exports to the U.S. are immense and Canadian E&Ps are responding. Horizontal drilling in Canada’s shale plays has only recently started taking off in the same way the U.S. shale boom did a decade earlier.

Canada is one of the few developed nations that is a net exporter of energy, and is the fourth largest oil exporter in the world with most of the exports finding their way onto U.S. soil.

In March 2016, the U.S. imported more than one million barrels of oil per day from two countries, Canada and Saudi Arabia. And while that distinction certainly sets those two countries apart from the rest of the list, U.S. imports from Canada are more than triple the imports from Saudi Arabia. The U.S. has imported 4.1 MMBoe/d of oil from Canada in 2016 and 1.1 MMBoe/d from Saudi Arabia. The Canada imports comprise roughly 40% of total U.S. imports in the first three months of 2016.

On the natural gas side, Canada stands front and center as the primary trade partner to the U.S. One caveat to keep in mind is the lack of LNG transportation around the globe and the convenience of pipeline transport between neighboring countries. That being said, the U.S. gets a whopping 96.4% of its natural gas imports from Canada.

The Western Canada Sedimentary Basin (WCSB) accounts for about 99% of all gas production in Canada. Shale plays in the WCSB, were the central focus of the shift from years of decline to a time of growth. Plays such as the Montney in British Columbia (B.C.) and the Duvernay and Cardium in Alberta led the production charge. The WCSB spans from northeast B.C. to southwest Manitoba.

In this exclusive video interview with Oil & Gas 360®’s Angie Austin at EnerCom’s Denver conference, Aaron Vandeford talks about the opportunities the Canadian E&Ps have ahead of them as they build acreage, build out infrastructure and improve their drilling and completion efficiencies in Canada’s Montney shale and other plays.


Canadian Producers: Lower Debt Equals Better Growth Projections

Over the course of the last few years, the commodity downturn has wreaked havoc on the oil and gas market. The bankruptcies in 2015 and so far in 2016 have been piling up at a record rate. In the U.S., debt has continued to pile up as companies continue to load up the balance sheet with various forms of debt in order to continue drilling. The rise in debt has not been as dramatic north of the border.

Canadian companies have not levered up to the extent that U.S. companies have. In 2013, both U.S. and Canadian E&Ps clocked in at a debt to EBITDA of 2.3 times. In 2014, U.S. companies pulled ahead and recorded a debt to EBITDA of 2.4 times while the Canadian companies went down a few notches to 2.0 times. In 2015, the fallout of the commodity prices showed through, and the difference in E&P operators came through as well. U.S. operators climbed to an average debt to EBITDA of 3.7 times, while the Canadian operators were at 2.8 times. The Canadian E&Ps were able to manage their debt levels by comparison to U.S. E&Ps.

Big Opportunity for Canadian E&Ps

If the Canadian companies are carrying less debt relative to EBITDA, how does that translate going forward? When companies get over-levered, they need to slow down more in order to continue moving forward by reigning in the spending and focusing on lowering debt. This is evidenced by the projected growth rates moving into 2016. Assessing this through production growth, Canadian companies are projected to grow production in 2016 by 5.8% from 2015 levels. Conversely, U.S. companies are projected to decrease production by -5.1% from 2015 to 2016.

By maintaining lower debt levels, Canadian companies will be able to adjust faster and be less encumbered by debt levels, making it easier for them to grow production and adjust capital spending to reap the benefits of a climbing oil price.

To order EnerCom’s in-depth primer giving a full perspective on Canadian oil and gas opportunities, email EnerCom for information.


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