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The Biggest Oil, Gas, Midstream and Service Companies of the Year and Some That Did Not Make It

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Low oil prices have taken a toll on the Alberta Oil 200, with oilfield services firms bearing the brunt of the storm.

The 200 List

Casualties Of The Oil Rout

In last year’s edition of “The 200,” we said we were in “The Calm Before the Storm.” This year, the deluge has swept companies into the maelstrom of plunging prices, lost revenues, and layoffs—and too many companies have not resurfaced. But blue skies will appear again, with firms positioning for the bounce back.

Ian Wild, an executive vice president at ATB Financial says, “From a high level, right now it is likely that things will get worse before they get better—it’s the storm before the calm.” People are focusing on $50 a barrel, but Wild doesn’t think that will stimulate growth as companies are still working to correct their balance sheets and working capital positions, he says.

Many firms have stretched payables and need to repair their relationships with contractors and suppliers. “So it won’t be a situation of, ‘Everything’s great, everybody’s good,’ right away,” he says. “That won’t happen for some time.”

And so the grim reports keep flooding in: Rig counts and investment down; liabilities and layoffs up—and it’s taking its toll. Lightstream Resources, which ranked 40th on last year’s “The 200” list, warned in May that it could fail to meet a $121-million debt payment in mid-June if it couldn’t boost its balance sheet through asset sales. But it’s a tough price environment for firms to find asset buyers. The 28,000-boe/d producer may wind up following Terra Energy, whose debt drove it into receivership in April.

Drilling has borne the brunt of the storm. In April, the Petroleum Services Association of Canada (PSAC) said drilling activity will be 36 percent lower than what it predicted just six months earlier—and PSAC was already being grimly realistic back then. By the end of April it only expected 3,315 wells drilled in 2016, compared to more than 11,000 in 2014. That same month, a report from the Canadian Association of Oil Drilling Contractors showed only 37 of Canada’s 671 rigs were being used—the lowest-ever count since records began in 1984. PSAC CEO Mark Salkeld calls the situation “dire” and says conditions are the worst he’s seen in his 35-year career. PSAC had 265 members before the global slump of 2008. It’s now down to 168 as companies merged, pounced on smaller competitors or shut up shop.

Jobs have been going under too. More than 100,000 direct and indirect jobs have been gouged out of Canada’s oil patch since the downturn. The employee count across PSAC’s membership has been slashed by half. “We’re talking tens of thousands of people unemployed with no end in sight, no indicators that we’re going to come out of this any time soon,” Salkeld says. Direct job losses this year will be between 16,000 and 24,000, according to Calgary-based Enform’s Petroleum Labour Market Information (PetroLMI) division, slightly less than last year’s 28,145 losses.

The Conference Board of Canada, an Ottawa-based economic think-tank, expects the industry to take a loss for the second year in a row. It forecasts oil producers will lose a total of more than $3 billion this year, following 2015’s record $7-billion loss, and gas producers will lose $1 billion in 2016, compared to last year’s $1.1 billion.

But the industry is adjusting. Producers are innovating, not just squeezing service firms to razor-thin margins. Some smaller service firms will consolidate and merge to lower overhead costs. Those that managed their debt and are in the right sector, such as service firms that focus on existing oil sands operations rather than building new projects, or provide cost- and emissions-cutting technology, will survive and even prosper as output increases from 4.5 million b/d last year to 4.8 million b/d in 2017.

“I am continuously amazed at the sheer grit and determination I see with oilfield service providers as they accept the challenge and make the best of a situation that ultimately they can’t control,” says Jeremy Rondeau, an MNP business advisor to oil service firms. “We have challenges [and] how we respond determines the fate of the industry in the future. Canadians don’t back down from a challenge; when their backs are against the wall they fight back, they innovate, the make tough business decisions, they scale operations to adjust to the downturn, retool, strengthen their team and get ready for when a future opportunity presents itself.”

And life isn’t grim for everyone, In fact. For Suncor CEO Steve Williams, the downturn has been one long buying spree of battered, bruised and buried rivals. Last year Suncor bought a 10-percent stake in a Fort Hills development from Total, and this year it bought out Canadian Oil Sands’ and Murphy Oil’s Syncrude stakes to take control of the project with 54 percent ownership. “We expect to be the last oil company standing,” declared Williams. “That’s part of our business goal.” He said Suncor’s expansion will drive its oil output up 40 percent this year, with a 2019 target of 800,000 b/d, a Suncor record, putting it in the pole position for the rebound.

The Conference Board predicts oil producers will make a total profit of $809 million in 2017, and gas producers will bring in $172 million in earnings.

Longer term, Canada’s National Energy Board (NEB) predicts natural gas production reaching 18 bcf/d and its domestic natural gas consumption increasing to 16.4 mcf/d in the next 10 years. In its scenario for US$80 Brent crude by 2020 and US$105 by 2040, oil production will rise 56 percent by 2040.

Just one positive final investment decision (FID) on a major LNG project or one green light to build a pipeline would give the entire industry a big confidence boost, and Malaysia’s Petronas may be the first player to give it that shot in the arm. It says it expects to make the FID on its $36-billion LNG plant in B.C. by July.

The Pacific NorthWest LNG project would signal Canada’s emergence as a hub for exporting North America’s gas glut to Asia. Even though a major project FID wouldn’t send product to the coast until 2020, it would show investors, producers and overseas markets, that yes, Canada is not only the world’s fifth-largest producer of hydrocarbons, but it is expanding and breaking out of North America to become a global player.

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