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Land rush slows in Western Canada
Gary Park For Petroleum News
There was a time when Canada’s resource provinces and territories could count on a useful cash infusion — consistently in the billion-dollar-plus range in Alberta, British Columbia and Saskatchewan — from the sale of oil and natural gas land rights.
Not anymore.
Returns across the country slipped to C$992 million last year from almost C$1.4 billion in 2012, with Western Canada’s Big Three raking in the lion’s share at C$990 million.
Alberta collected C$698 million, compared with C$1.12 billion in 2012 and a staggering C$3.5 billion in 2011 — posting its lowest return since C$477 million in 2002.
In the oil sands, Alberta sold only 147,000 hectares last year for a mere C$28 million, compared with the record 1.5 million hectares which fetched C$1.96 billion in 2006.
British Columbia, despite positioning itself as the leading source of gas for LNG exports, auctioned off C$225 million of rights, C$85 billion better than 2012, but far short of the benchmark C$2.7 billion in 2008 from its hot shale and tight gas plays.
Saskatchewan collected a modest C$67 million last year, compared with C$102 million in 2012 and not even close to its take of C$1.2 billion in 2008 when exploration companies started awakening to the Bakken potential.
Among the other regions, Manitoba dropped to C$2.03 million from C$11.3 million, while work commitments contributed C$19.2 million in the Northwest Territories, underpinned by the Canol shale play in the Central Mackenzie Valley, and Saskatchewan added C$4.61 million.
Per-hectare average prices moved in two directions, with Alberta slipping to C$306 from C$354 in 2012, while British Columbia surged to C$1,886 from C$1,020 and Saskatchewan climbed to C$605 from C$266.
Calgary investment bank Peters & Co. said in a recent note that successful bids in Western Canada generated an average C$397 per hectare, compared with C$391 in 2012.
Deals seen as barometer Land deals are seen as one of the strongest barometers of upstream confidence and company plans for drilling within the next year.
Many factors have contributed to the drop off in overall returns, led in Alberta by a cooling down in the feverish scramble to secure rights in the Duvernay formation, with its high liquids content.
Already delivering sweeping budget cuts, the Alberta government is unable to count on land returns to soften those blows.
For the fiscal year ending March 31, 2014, it has been counting on C$1.15 billion from land, but the most recent budget update showed it was C$30 million short of the C$211 million in had expected in the first quarter of the budget year.
Calgary investment bank Peters & Co. said in a recent note that successful bids in Western Canada generated an average C$397 per hectare, compared with C$391 in 2012.
Saskatchewan Energy and Resources Minister Tim McMillan is confident that companies operating in his province are shifting their emphasis from accumulating assets to the exploration and development phase.
Noting that Saskatchewan was ranked as the top jurisdiction in Canada for oil and gas investment policies in the Fraser Institute’s latest annual study, he said that vote of confidence from the industry “shows that our government is taking the rights steps to ensure we remain competitive in Canada and globally.”
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