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Cabot Energy update on Alberta production & Edmonton oil price

Published by
Oilfield Technology,

Cabot Energy, the AIM quoted oil and gas company creating predictable production growth in Canada balanced with high impact exploration in Italy, notes the planned oil production cutbacks by the Alberta government and has confirmed that these do not affect the Company’s current level of oil production where netbacks remain positive compared to operating and development costs.

On 2 December 2018, the Alberta government announced its intention to begin a mandated short-term reduction of oil production by 325 000 bpd, representing an 8.7% reduction, until excess oil in storage is drawn down. The cuts, which are due to begin on 1 January 2019, will not impact Cabot Energy due to an exemption each producer receives for their first 10 000 bpd of production.

Research published by Macquarie Capital Markets (Macquarie) on 3 December 2018 estimates that the restriction on Alberta oil production should lead to a rapid narrowing of the West Texas Intermediate (WTI) – Edmonton spread, tightening by US$5 - 10/bbl from the current US$20 - 25/bbl range.

Whilst the exact impact and timing of the spread tightening estimated in the Macquarie report is difficult to quantify, the Alberta mandated short-term reduction of oil production is expected to accelerate the return of the WTI-Edmonton benchmark price differential from the current divergence to normal levels. This, in turn, is expected to lead to an improvement in the average sale price per barrel of oil received by the Company.

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