Last year Canada's natural gas and oil producers suffered their weakest performance since 2002, but the downturn prepared the country's energy sector for a promising future, according to the Canadian Annual Energy Survey, an annual review of the top producers by PricewaterhouseCoopers (PwC).
Results from the survey, completed in partnership with JuneWarren-Nickle's Energy Group, were issued on Tuesday.
"While in many respects 2009 was a year that Canadian oil and gas producers would like to forget, it produced outcomes that were necessary for the long-term health of the sector," said Scott Bolton, PwC's national leader of the Energy practice. "Soaring costs were brought back to earth in the face of a dramatic pullback in capital spending."
Lower capital spending "also forced the Alberta government to back off its higher royalty agenda," noted JuneWarren-Nickle's Editorial Director Stephen Marsters. "Both occurrences were necessary, given a mid-term outlook where we are not likely to see a rise in natural gas prices."
For the top 100 producers surveyed, gross revenue fell by 32% in 2009 to C$132.9 billion from C$194 billion a year earlier. Revenue for the top 20 operators accounted for more than 90% of total revenue. The 100 companies surveyed booked a combined profit of C$8.5 billion in 2009, down from C$26 billion in 2008.
Total production last year rose slightly to average 4.64 million boe/d from 4.48 million boe/d in 2008, according to PwC. Operating costs per equivalent barrel fell by 7% in 2009 to C$13.61 from C$14.67 in 2008.
Producers proved that horizontal drilling and multi-stage hydraulic fracturing "could unlock new reserves in many different oil and gas formations across Western Canada," noted PwC. "The combination of all of these factors has already helped to produce a notable increase in first quarter 2010 drilling activity."
For the first three months of 2010, the rig release count of 3,634 wells increased 22% from the 2009 multi-year low of 2,970, according to the survey.
Alberta oilsands activity continues to put a global spotlight on the province, PwC noted. Last year Alberta produced an average of 1.49 million b/d of raw crude bitumen from the oilsands, according to the Energy Resources Conservation Board (ERCB).
Last year's total of 544 million bbl represents a 14% increase over Alberta's 2008 production and has pushed total oilsands production since 1967 to nearly 7 billion bbl, according to the ERCB. By 2019 Alberta's raw bitumen production is expected to increase to 3.2 million b/d based on announced expansions of existing projects and the start of new projects.
"The direction the oilsands industry takes will really depend on a myriad of related issues including access to capital, cost-competitiveness and environmental regulations that will shape and impact the sector as a whole," said Bolton.
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