As if low oil wasn’t enough

As if the plunge in oil prices to the lowest levels since 2009 wasn’t enough for Canadian producers, lawmakers have moved forward with planned tax increases.

The New Democratic Party, which won a landslide victory in Alberta’s provincial elections in May, increased the corporation tax rate to 12pc from 10pc, effective 1 July. The move has led to some hefty deferred tax liability charges in the second quarter.

Upstream independent Canadian Natural Resources’ (CNRL) deferred income tax liability increased by C$579mn ($442mn), pushing the firm to a second-quarter loss of C$405mn from a C$1.1bn profit a year earlier.  Continue reading

To drill or not to drill

Things clearly aren’t good when the chief executive of the world’s biggest independent oil and gas producer has to include assurances about his company’s operations and outlook in their earnings call.

“Rest assured ConocoPhillips is laser focused on the things we can control,” chief executive Ryan Lance said.

But Lance’s comments capture the unclear oil market outlook the industry, particularly independent US producers, is grappling with. It also reflects the quandary they are in: Each new barrel they pump brings cash to repay debt and fund drilling, but also adds to the growing supply glut. Benchmark US WTI futures are down by half from year ago levels at around $45/bl.  Continue reading

Scraping the bottom

“Scraping the bottom” is hardly ever a good thing for a business. But for the US oil and gas industry, it could be the best news in nearly a year.

After 28 straight weeks of decline that saw the US rig count fall by more than 50pc since the peak touched in 2014, the world’s biggest oilfield services companies see tentative signs of recovery that may lead to a modest rise in drilling in the second half of 2015.  Continue reading

Brace for turbulence

US crude futures settled below the psychologically crucial $50/bl mark yesterday for the first time in more than three months – pointing to further turbulence ahead.

The dip is validating forecasts by top banks such as Goldman Sachs, Barclays and Bank of America Merrill Lynch (BoAML) that further dips are likely as demand seasonally slows in the third quarter before any sings of the decline bottoming out emerge.

“The sell-off of the past three weeks warns of increased short-term risk to the downside,” UK-bank Barclays said. “The oil market has struggled to get back on its feet since bottoming in the first quarter.”  Continue reading