After racking up debt in 2020, the Canadian oilpatch is enjoying a rebound so far this year as major oil producers are gushing profits as oil prices are near a seven-year high.
This week, many energy companies based in Calgary unveiled their latest earnings reports and for the second straight quarter, the industry showed hefty profits.
The pandemic pain of last year appears to be firmly in the rearview mirror.
“We’re seeing a renewed optimism in the industry,” said Liam O’Brien, a Calgary-based analyst with Sproule, an energy consultancy.
Companies were forced to cut costs and find efficiencies as the sector has struggled since the oil price crash began in 2014. Oil prices reached historic lows last year because of a global supply glut combined with reduced fuel demand during the pandemic.
“Finally, commodity prices are coming around to the point where that combination of higher prices with improved financial health are resulting in these increased earnings results,” he said.
Crescent Point Energy had an adjusted profit of $117.6 million, up from a loss of $27.9 million in the second quarter of 2020.
In the Olympic spirit, Desjardins analyst Chris MacCulloch said Crescent Point had a “gold medal quarter,” in a note to clients.
Suncor, Canada’s second-largest oil producer, posted net earnings of $868 million, compared with a loss of $614 million during the same quarter last year.
Cenovus had net earnings of $224 million in the quarter, compared to a $235-million net loss a year earlier.
Many oil and natural gas producers are focusing on using surplus revenue to buy back shares, pay dividends and try to lower debt levels after they swelled last year.
Cenovus, for instance, had debt of $13.3 billion as of March 31, but cut it down to $12.4 in the second quarter and has a target of reaching the $10 billion mark by the end of December.
“We’re seeing a focus within the Canadian oilpatch broadly on reducing debts that have been accumulated over the last couple years,” said Rory Johnston, managing director and market economist at Price Street in Toronto.
North American oil prices have jumped by about 75 per cent in the last year and increased by about 50 per cent since the beginning of the year.
Despite the volatility the sector has faced, many analysts say the market seems pretty stable across North America, despite the spread COVID-19 variants.
“You look at [airport] check-ins, you look at road traffic, you look at gas prices, and just travel — the demand is all there for oil,” said Philip Strebel, chief market strategist at Blue Line Futures in Chicago.
The price of West Texas Intermediate, the North American benchmark, was just under $74 US per barrel on Friday. Sproule is forecasting the price to average more than $70 US for the remainder of the year.