XI Technologies: What can the oil and gas industry do while waiting for the next “new normal”?

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Each week, XI Technologies scans its unique combination of enhanced industry data to provide trends and insights that have value for professionals doing business in the WCSB. If you’d like to receive our Wednesday Word to the Wise in your inbox, subscribe here.

With our industry currently dealing with the dual challenges of physical distancing due to the COVID-19 outbreak and an oil price crash due to an international price war, it is difficult to anticipate what life will be like on the other side of this fight. What will the “new normal” be like after these upheavals are passed? When will that be? And what are we supposed to do to prepare for this recovery?

In response to the dual crises the Alberta energy industry is currently battling, the Government of Alberta announced three initiatives to help provide economic relief (which you can read more about here):

Funding the Alberta Energy Regulator industry levy for 6 months
Extending the term of mineral agreements expiring in 2020 by one year
Extending a loan of $100 million to the Orphan Well Association.

With these initiatives and the timelines associated with them, it appears that they are doing what they can to ensure companies maximize productivity despite the current situation.

When you combine the Alberta Government’s response with the BDC overview of the economic outlook, it appears that current projections are for a potential start to recovery in approximately 6 months time. This suggests that both the government and financial institutions are preparing us for a new way to work in the weeks and months ahead. While the situations we’re dealing with in Alberta are unprecedented, there are indicators available to suggest when we can plan for a turnaround, chiefly the recovery that is starting in China, where the virus first hit.

Figure 1- Positive economic activities from China suggest that there will be a recovery later this year. This slide is from the BDC presentation “How to cope with the impacts of COVID-19 on your business” from March 23, 2020.

Figure 2- Extrapolating the news out of China with the stimulus response from the Canadian government, here’s a potential forecast for 2020. This slide is from the BDC presentation “How to cope with the impacts of COVID-19 on your business” from March 23, 2020.

For the oil and gas industry, our new way to work means doing what we can to preserve both cash flow and workflow. This means having access to web-based tools that can help companies plan out their operations and M&A activities. This could mean shifting your strategy from production to exploration or shifting from exploration to acquisition to time your activities for the projected turnaround. Companies who take advantage of the extended timing offered by the Government of Alberta’s initiatives with an active employee base will be best positioned to take advantage of opportunities when the tide begins to change and a “new normal” emerges.

For information on how XI’s web-based tools can help you with your M&A activities and analyze potential corporate acquisitions or divestitures with greater certainty, visit our website or contact our sales team. We’re here to help.