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Takeovers shrink international production by Canadian companies Foreign ventures equivalent to 14 percent of domestic output; Talisman, EnCana leaders say global reach is necessary to reduce dependence on Western Canada Gary Park PNA Canadian Correspondent
Four decades of almost unbroken growth went into reverse in 2001 as Canadian-owned E&P companies shrank their international ventures. In his ninth annual report, Calgary analyst Ian Doig, publisher of Doig’s Digest, reported a 19.2 percent drop in natural gas production and a 1.6 percent decrease in oil output.
He said 94 Canadian E&Ps had landholdings in 57 countries last year, with 40 producing 607,374 barrels per day of crude oil and liquids from 28 countries and 23 pumping 631 million cubic feet of gas in nine countries.
In comparison, when Doig first started tracking Canada’s global activities in 1993, crude oil and liquids production averaged 135,890 bpd and gas volumes were 328 million cubic feet per day.
The “foreign content” was equal to 14 percent of the oil and liquids produced in Canada and accounted for 11 percent of total capital spending.
Downturn caused by takeovers The downturn was largely caused by a wave of takeovers in 2001 which saw such major international produces such as Canadian Hunter Exploration Ltd., Chieftain International Inc., Gulf Canada Resources Ltd. and Gulfstream Resources Canada Ltd., along with many lesser operators, fall under the control of U.S.-based companies.
The five biggest Canadian E&P companies with international production are Talisman Energy Inc. (led by its 25 percent stake in a controversial Sudanese field), Nexen Inc. (which depends on the Yemen for half of its total output), Hurricane Hydrocarbons Ltd. (whose operations are concentrated in the volatile former Soviet republic of Kazakhstan), EnCana Corp. and Canadian Natural Resources Ltd. (both active in the North Sea, with EnCana holding a major interest in Ecuador).
Overseas gas production was dominated by EnCana, Talisman, Nexen, Canadian Natural and Nike Resources Ltd., with the focus on the United States, U.K. North Sea, Indonesia, India and Ukraine.
Talisman said to be posed for growth Speaking at a Canadian Association of Petroleum Producers investment forum in June, Talisman chief executive officer Jim Buckee said his company’s international exposure — which accounts for about 55 percent of the company’s total output of about 450,000 barrels of oil equivalent per day and is poised for more growth in Southeast Asia, Algeria and Trinidad — will help compensate for declining rates from the Western Canada Sedimentary Basin.
“I believe other companies will have to develop this international skill set in order to achieve acceptable rates of growth,” he said.
EnCana chief executive officer Gwyn Morgan told the same forum that oil and gas investors should be concerned about the rising portion of cash flow that some companies require to simply maintain production from the declining Western Canada Sedimentary Basin.
He estimated that portion for his own company at 20 to 25 percent, based on forecast 2002 production of about 700,000 barrels of oil equivalent per day, of which 64 percent consists of North American gas production.
Service and supply abroad Canadian service and supply companies have also edged on to the international stage, although in most cases they are content to keep their focus on the world’s two biggest service markets — the United States and Canada.
In its most recent figures, the Alberta government estimated that exports from the province’s services sector reached C$397 million in 2000, with 70 percent of the exporters conducting their business in the United States, which contributed 99.7 percent of the international revenues.
Beyond the United States the best opportunities are emerging in Mexico, where a handful of Canadian firms have signed contracts with state-owned Petroleos Mexicanos, PEMEX.
Precision Drilling Corp., Canada’s largest service company, opened that door with a US$270 million deal with PEMEX and has since been steadily drilling natural gas wells in northern Mexico.
Beyond North America, there has been some dabbling in South America, the Middle East and Southeast Asia, especially in countries where Americans won’t go, such as those under embargo, or aren’t wanted.
Malcolm Cox, president and chief executive officer of Calgary-based Enerflex Systems Ltd., said his company is finding that Middle Eastern countries increasingly prefer to obtain their products and services from countries other than the United States.
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