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Oil and gas industry to endure losses for second straight year: Conference Board


May 4, 2016
By Manufacturing AUTOMATION

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May 4, 2016 – A pair of forecasts released last week see little in the way of good news for Canada’s ailing oil and gas sector.

The Petroleum Services Association of Canada predicts drilling activity will be 36 per cent lower than what it anticipated just six months ago, with only 3,315 wells drilled in 2016. It’s the second time the forecast has been revised downward since November.

“These are dire times for the Canadian oilfield service, supply and manufacturing sector, with no indicators for positive change in the near future,” PSAC CEO Mark Salkeld said in a release.

“The last two drilling seasons were pretty much non-existent. What a lot of people don’t realize is when the oil and gas sector is not working, oilfield services companies are tools down and there is no cash flow. This is unlike our customers, the producers, who can still generate some revenue, however dismal, from production.”

As well, a new report from the Conference Board of Canada says the country’s oil and gas industry is expected to be in the red for the second year in a row. Following a record pre-tax loss of more than $7 billion last year, Canada’s oil extraction industry is expected to post losses of more than $3 billion in 2016. Meanwhile, Canadian natural gas producers losses are expected to total $1 billion in 2016.

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“Canada’s oil producers are in for another tough year but conditions are gradually improving,” said Carlos Murillo, economist, The Conference Board of Canada. “Next year, a combination of cost-cutting measures, increasing production and slightly higher oil prices should boost industry profits, helping the industry return to the black in 2017.”

The price of West Texas Intermediate crude, the key U.S. benchmark, is projected to rise from US$39 a barrel this year to around $65 a barrel in 2020.

In 2017, the Conference Board sees oil producers turning a profit of $809 million and gas producers eking out $172 million in earnings.

— With files from Lauren Krugel, The Canadian Press