- Crescent Point CEO sees sub-$50 not enough to spur drilling
- Birchcliff CEO says cost-cutting is focus at current prices
The rebound in U.S. crude prices from a low of about $26 a barrel this year hasn’t been big enough for Canadian energy CEOs to start celebrating.
Oil is up about 67 percent from the February doldrums, at just over $40, after falling from a high above $50 in June. The current price is not enough to spur growth in the North American oil and gas industry, the chief executive officers of producers Crescent Point Energy Corp. and Birchcliff Energy Ltd. said in interviews on Thursday with Bloomberg TV Canada’s Pamela Ritchie.
“The industry is in a tough position,” said Jeff Tonken, of Birchcliff. While Birchcliff is one of the least levered producers after closing an acquisition and equity financing, it, too, will have to keep an eye on costs at current prices, Tonken said. “Oil is at $42 and gas is very weak and we need to focus on driving costs down or we’ll have a problem as well.”
Oil has fluctuated after falling more than 20 percent into a bear market last week. On Thursday, crude closed at a three-week high amid speculation that producers could agree on moves to support prices at September talks. It’s still down about 60 percent from a mid-2014 high of about $107 a barrel. Some companies have boosted drilling, adding to concerns that a glut may ease more slowly. The U.S. added rigs for a sixth-straight week, the longest streak of expansion since last August, according to Baker Hughes Inc. data released Aug. 5.
Crescent Point is targeting cost cuts of 15 percent this year and has high per-barrel profit margins but would still rather see crude prices in the $50s or $60s, said CEO Scott Saxberg. While the company’s cash flow isn’t as affected as peers by the low prices, Crescent Point would see a cash flow increase of C$50 million ($39 million) for every $1 rise in the price of crude, he said.
“Anything sub-$50 for the whole industry is tough,” Saxberg said. “For the entire market, $60 is where guys start to drill and grow production in North America. Between $50 and $60 you stay steady and between $40 and $50 you’re being more protectionist on your balance sheet and capital programs.”