5/5 © Reuters. FILE PHOTO: Natural gas burns at Exxon-owned production plant near Carlsbad 2/5
By Nia Williams (NYSE 🙂 and Scott DiSavino CALGARY, Alberta (Reuters) – Canadian producers are recovering faster from the COVID-19 pandemic than battered US shale companies, putting them in a position to boost exports net of gas to the United States for the first time in five years. The opportunity for Canadian companies to take back a piece of the market from their American rivals reverses one of the dominant energy trends of the last decade, where U.S. shale drillers unleashed a flood of abundant cheap gas, largely a byproduct of drilling, and pushed western Canadian producers out of its only export market. Canadian drilling is recovering rapidly, driven by better access to pipelines and because US producers have reduced crude production and, with it, the associated gas produced with that oil. Canada’s production is forecast to continue to increase as coal plants are decommissioned and its first liquefied natural gas plant is expected to come online. North American oil and gas producers endured a brutal 2020 when the pandemic crushed demand. The drop in Canada was furious, as companies cut gas rigs from 92 in early 2020 to just nine in June. Now, Canadian gas companies are putting rigs back online and have plans this year to increase capex for the first time since 2014. Canada’s rig count has risen from nine to 76, while Canada’s rig count has increased from nine to 76. US gas rigs is 90, down from a low of 68 in July, according to data from Baker Hughes. “What we believe is driving some of the expected increase in capex for 2021 is Canadian natural gas producers capturing market share from the reduction in associated natural gas due to slowing drilling and production in several of the great shale basins of the US, “said Tim McMillan, executive director of the Canadian Association of Petroleum Producers (CAPP). Net Canadian gas exports rose 31% year-on-year to 6.3 billion cubic feet per day (bcfd) in January, the most in a month since March 2018, according to data provider Refinitiv. After falling to a 30-year low in 2020, exports to the United States could rise as much as 29% to an average of 5.8 bcfd this year, estimates Goldman Sachs (NYSE :). That would be the first increase since 2016.Canadian gas exports to the United States have been declining since 2002, particularly since the US shale boom of the last decade unleashed a plethora of cheap gas, robbing Canadian carriers of share of market in the midwestern United States and eastern Canada. (Chart: Canada Natural Gas Exports to US Due to Rise, https://fingfx.thomsonreuters.com/gfx/ce/qzjpqgekwpx/Pasted%20image%201613076631942.png) CANADIAN CAPEX ON HIGH, RECORD OF THE US DEMAND Increased from 0.5 bcfd this year to about 15.9 bcfd, according to S&P Global (NYSE 🙂 Platts Analytics. The nation’s production hit a record 17.5 bcfd in 2001, according to government data. Canadian oil and gas producers are forecast to increase spending by 14%, according to CAPP, with most of that increase coming from gas companies. “We have a bigger capital program this year and that’s due to a recovery in the price of natural gas,” said Darren Gee, CEO of Peyto Exploration & Development Corp, which is increasing capex to C $ 350 million in 2021 from C $ 240 million. last year. Cenovus Energy (NYSE 🙂 Inc, Canada’s third-largest oil and gas company, has allocated about C $ 65 million to increase drilling starting in the third quarter. “(It) will focus on high-yield opportunities in a relatively strong natural gas price environment,” Chief Executive Alex Pourbaix told analysts in a budget call in January. Canadian Natural (NYSE 🙂 Resources Ltd, the nation’s largest oil and gas producer, has said it expects to increase natural gas production by 11% this year. By comparison, shale producers south of the border are expected to cut their budgets for the third year in a row in 2021, causing US production to drop for the second year in a row. Among those that cut spending in 2021 were Cabot (NYSE 🙂 Oil and Gas Corp and CNX Resources (NYSE 🙂 Corp, two of the largest natural gas operators. In addition to falling US supply, Canadian producers are looking to capitalize on increased demand, as US consumption and exports are forecast to hit record highs this year. Gas use in the US, which includes a projected 19% increase in exports of liquefied natural gas (LNG) and pipelines, is expected to increase by approximately 1% in 2021. The imbalance is driving prices higher . Henry Hub futures, a proxy for price expectations, are at roughly $ 3 per million British Thermal Units (mm / BTU), representing an increase of nearly 50% over the 2020 average of $ 2.03 , which was a minimum of 25 years. (Chart: US National Gas Demand, Exports to Hit Record in 2021, https://fingfx.thomsonreuters.com/gfx/ce/yzdpxwrojvx/Pasted%20image%201613076966715.png) SPRING YEAR Definitely , the recovery in Canada is in its early stages. Recent shale M&A, particularly among those producing at Montney’s main Canadian site in British Columbia, could also contain spending. On Wednesday, ARC Resources Ltd said it will buy Seven Generations Energy in a deal that will create Montney’s largest producer. ARC CEO Terry Anderson said the combined company’s immediate focus would be to pay off debt, but next year it will look to expand production. In the longer term, Canadian gas companies are expected to benefit from the phase-out of Canadian coal-fired power plants and the country’s first LNG export terminal, expected to be completed in British Columbia by mid-September. decade. Wood Mackenzie said he sees this year as the beginning of another era of gas growth and forecasts Canadian gas exports to rise to around 9 bcfd by 2030. “2021 is the year of the springboard,” said Dulles Wang, an analyst at Wood Mackenzie.