Canadian small- and mid-sized oil and gas companies are facing a crisis.
Some investors believe the drastic fluctuation in oil prices caused, largely, by COVID-19 and tensions among oil producing nations, will lead to a series of mergers and acquisitions.
“The 20,000-barrel-per-day producer in Western Canada is an endangered species. We don’t see that changing for some time,” Adam Waterous, the CEO of the Waterous Energy Fund, said.
In some instances, banks have tightened their financing rules for smaller companies or pushed them to sell operations to larger organizations.
“Consolidation has never been more urgently needed than right now,” said Waterous in an interview with Calgary Herald. He explained that many small energy companies are becoming “effectively orphaned businesses” that are being left without capital and barred from debt and equity markets.
The Gastech 2020 conference began yesterday, where Natural Resources Minister Seamus O’Regan discussed the importance of Canadian liquefied natural gas (LNG) as a sustainable and competitive natural resource. He alluded to potential investment in energy efficiency programs and backing technologies to make fossil fuels cleaner and Canadian products greener, so they can be viable in the international market.
The use of LNG is known to be supported across party lines federally in Canada. NDP Leader Jagmeet Singh has supported LNG projects based in B.C. and Conservative Leader Erin O’Toole also supports selling LNG internationally.
The International Energy Agency predicted in 2019 that the use of LNG would grow 36 per cent within the next two decades, reported The Canadian Press.
Oil prices dipped to start the week, following a decision by Saudi Arabia’s state-owned Saudi Aramco to slash its planned October prices. There has also been a global flareup of COVID-19 cases, which is believed to contribute to a drop in demand. Reuters has that story.
Meanwhile, the collapse of a marble mine in northwestern Pakistan on Monday has left at least 16 people dead. The cause of the collapse has yet to be determined, reported Reuters.
On Tuesday morning at 8:29 a.m., West Texas Intermediate had fallen by 6.81 per cent or US$2.71 and was trading at US$37.06. Brent Crude had dropped by 4.55 per cent or US$1.91 and was going for US$40.10.