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Western Canadian land sales in tailspin
Gary Park, PNA Canadian correspondent
The strongest barometer of industry confidence, as well as a valuable source of government revenue, has tumbled to one of its lowest levels in the past decade.
Preliminary figures put total sales of government-owned exploration land in Alberta, British Columbia and Saskatchewan at C$893 million for 2002, compared with C$1.58 billion in 2001 and C$1.49 billion in 2000.
As a measure of how tight-fisted E&P companies have become, despite a year of robust oil and natural gas prices, land-buyers forked over C$501.5 million in Alberta, the worst year since 1993.
In the process they dragged average prices per hectare (2.471 acres) to C$180.65 from C$277.81 in 2001 and C$298 in 2000.
Operators in British Columbia also displayed a similar, but less pessimistic mood, paying C$288.5 million to secure exploration opportunities, lagging far behind a record C$439.5 million in 2001, but still the province’s second best year on record.
Like Alberta, the average per-hectare prices in British Columbia went into a tailspin, reaching C$339.75 compared with C$514.48 in 2001, but close to the C$358 average in 2000.
Saskatchewan was the only region to buck the trend, with sales surging by 84 percent to C$103 million from C$56 million in 2001, propelled by investments of C$73 million in a lively new gas play in southwest Saskatchewan.
Outside the three leading oil- and gas-producing provinces, it has been an even more dismal year.
More dismal in other areas Auctions have produced a mere C$14.3 million in work commitments in the Northwest Territories and C$1.16 million in the Yukon.
On the East Coast offshore, Nova Scotia, although it issued no new exploration licenses, is sitting on C$1.56 billion in work commitments that could stretch over the next 8 years.
Newfoundland, which has C$500 million in exploration commitments, deferred its scheduled 2002 offshore land sale.
It said time is needed for the industry to shift its attention to deeper waters and other basins and for major interest holders to complete a process of consolidation.
Some observers say the decision to curb spending was not unexpected following the torrid exploration pace of 2001.
Many E&P companies slashed their budgets for land and seismic work after spending C$3 billion acquiring rights in the previous two years, said Dale Tremblay, chief financial officer of Precision Drilling Corp., Canada’s largest petroleum services company.
He said it makes no sense for companies to have idle investments if they have sufficient land to explore over the next five years.
In addition, many operators have taken the chance to divert cash flow into debt reduction and shore up their defenses for the next downturn, which history suggests is inevitable.
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