Canada’s oil industry to lose $10 billion this year
Canada’s oil extraction industry is on track to post a second consecutive year of shortfalls — to the tune of $10 billion — on the back of ongoing revenue woes, combined with a slower than anticipated cost cutting response, a local think-tank said Tuesday.
According to the Conference Board of Canada’s latest outlook for the industry, the crude sector’s losing streak will last about three years, from the last quarter of 2014 through to the second quarter of 2017.
Investment cutbacks are expected to continue this year and next, which will result in lower production levels.
The report also estimates that profit margins will hit record lows this year to a negative 19% and that while they will improve from 2017 onwards to roughly 4% in 2020, return to profitability remains uncertain.
In terms of production, the board expects it to contract slightly this year for the first time since the 2008 global financial downturn.
When it comes to investment in the sector, the think-tank is not positive either. It says that only last year producer slashed to $25 billion in expenditure and that the cutbacks expected to continue this year and next. From 2014 to 2017, industry investment will have been cut by an estimated $38 billion, it noted.
That pullback in investment will, in turn, result in lower production levels, the board warns, adding that it expects Canada’s crude output to fall by 1% this year. This, mostly as a direct consequence of disruptions caused by wildfires in Fort McMurray earlier in the year, as well as ongoing investment cutbacks.
Recent data from Statistics Canada shows the country’s economy shrank in the second quarter of the year touching levels not seen since 2009, mostly due to Alberta fires.