Cautious optimism rules oilpatch as fourth-quarter reporting season dawns

·2 min read

CALGARY — Canada's oil and gas producers are expected to maintain spending discipline in 2021 as optimism from stronger oil prices is offset by fears of weak demand due to new strains of the COVID-19 pandemic.

Analyst Matt Murphy of Tudor Pickering Holt & Co. says he doesn't expect big changes in spending plans as senior members of the energy industry roll out fourth-quarter results over the next few weeks, starting with oilsands and refining giant Imperial Oil Ltd. next week.

Nor does he expect surprises on Thursday when oilsands producer Cenovus Energy Inc. unveils its first capital budget after buying rival Husky Energy Inc. in an all-shares deal at the end of 2020 — a deal expected to potentially result in more than 2,000 layoffs.

Murphy says that while U.S. President Joe Biden's decision to kill the Keystone XL oil pipeline last week was a long-term negative for the sector, it won't affect the short-term plans of Canadian oil producers.

He says that's because the Line 3 replacement pipeline and the Trans Mountain expansion will provide nearly one million barrels a day of export capacity, more than enough to account for the sector's very modest growth plans over the next couple of years.

In a recent report, RBC analyst Greg Pardy says he expects a fourth-quarter oil prices rally to set the stage for a strong finish to an "immensely challenging 2020" for most energy producers, but he also doesn't expect to see any change in their focus on cost and capital spending control.

"It's still a very uncertain near-term demand picture," said Murphy.

"There's optimism, somewhat cautioned with the near-term uncertainties, but as we look back on very challenging 2020, the view for 2021 and beyond is certainly looking quite a bit more optimistic."

This report by The Canadian Press was first published Jan. 27, 2021.

Companies in this story: (TSX:IMO, TSX:CVE)

The Canadian Press