(Calgary) Canadian oil and gas companies plan to increase spending in 2023, but analysts believe it will still be another year of modest growth.
For the country’s energy industry, 2022 was ultimately the year that restored prosperity in this sector. With the lifting of health restrictions around the world, the war in Ukraine and the cumulative impact of years of underinvestment in oil and gas, energy prices reached record levels in 2022, simultaneously allowing companies Canadians generate record profits.
But most of that revenue has gone to pay off debt and reward shareholders, so it hasn’t been redirected to big construction or infrastructure projects. And even if commodity prices were to stay green in 2023, this trend should continue.
“Oil producers have become much more financially disciplined in the last six to eight years,” said Philip Petursson, chief investment strategist at IG Wealth Management. He said the threat of a recession in 2023 is one of the factors making companies hesitate to embark on a spending spree.
“We know that in times of economic slowdown, the demand for oil falls,” recalls Mr. Petursson. That’s why I think [les entreprises] you will want to be a little more careful. »
In Alberta alone, in the first 10 months of 2022, crude oil production averaged 3.7 million barrels per day, an all-time high that was broken due to growing global demand, according to ATB Financial.
High production in 2023
Experts expect production to be even higher in 2023. They make this prediction in light of previously released investment budgets and production forecasts by oil and gas companies.
Many companies were able to pay off large chunks of their debt in 2022, meaning they will have more cash next year if commodity prices stay around $75 a barrel.
In addition, the expansion of the Trans Mountain pipeline is expected to be completed by the end of the year, providing additional transportation capacity for oil companies and increasing export growth potential.
The Canadian Association of Petroleum Producers also expects investment in natural gas and liquefied natural gas to increase in 2023.
Mr. Petursson even goes so far as to predict that Canadian oil production in 2023 will exceed the record set in 2022, but only by a hair.
“I think there will be a very small increase, because there are new projects that are currently under construction, he stresses. But I don’t think we’re going to go back to “pump, baby, pump” like we have in recent years. »
In 2023, the industry is likely to continue to focus on shareholder returns and maintain the financial viability of its businesses. In addition to global economic uncertainty, Canada’s oil and gas sector faces increasingly aggressive greenhouse gas emission reduction targets. The federal government is currently in the process of developing a legislative cap on the sector’s emissions, which is opposed by the industry.
Advantage Energy Chairman and CEO Mike Belenkie says his company expects to grow at a rate of 10 to 12 percent over the next few years.
“We have probably never been in a stronger position than today. Our debt is very low, our production is increasing and our team is stable”, says Mr. Belenkie.
But he blames recent guidance from the federal government, including carbon pricing, for forcing the industry as a whole to end the era of big projects.
“During the last decade, most of the companies that were not in good condition had to close. And the companies that have stayed are quite strong and have the capacity to withstand a lot of volatility,” Belenkie believes.
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