Canada’s main crude-producing province effectively became a mini-OPEC this year after the Alberta government imposed production quotas to relieve pipeline congestion and drain a glut of crude in storage.
The move boosted prices leaves Canadian producers starved of opportunities to grow output - usually the go-to strategy of any energy firm flush with cash.
The oil patch’s caution has contributed to a slow pace of deal-making, despite plenty of assets being up for sale. Several companies that announced big year saw their stocks slide.
The energy sector’s cash flow is projected to be C$527 billion ($39.1 billion) this year, the highest in five years, yet spending is declining year-on-year, said ARC Financial analyst Jackie Forrest.
That is prompting producers to ramp up share buybacks and debt repayment, as they bide their time pending two key political decisions. New Alberta Premier Jason Kenney has yet to say what happens next with curtailments and Prime Minister Justin Trudeau’s government is due to decide by June 18 whether to expand the Trans Mountain pipeline it owns.
Sentiment could change quickly with construction starting on expanding Trans Mountain or another new pipeline, because producers could then time their investments with takeaway expansion, said Grant Fagerheim, chief executive of Whitecap Resources."