The number of active oil and gas producing companies in Western Canada declined by nearly 17.5 percent between December 2014, when oil prices were already crashing, and December 2018, a new report from XI Technologies, a Calgary-based research company for the Western Canadian energy industry, showed.
According to XI Technologies, the number of active oil and gas companies with reported production in the Western Canadian Sedimentary Basin (WCSB) dropped from 1,616 in December 2014 to 1,334 as at the end of December 2018-a drop of 282 companies. Most of the decline could be attributed to industry consolidation, which is typical of any downturn in an industry, the research company said.
"Industry consolidation is a natural occurrence in any downturn, and this is certainly not the first time Canada's oil and gas sector has experienced it. Some weaker players fail and disappear," XI Technologies said.
"Juniors and mids merge to combine their strengths, solidify balance sheets, and grow. Majors acquire companies of all sizes in an effort to grow their asset base, gain economies of scale, and enhance their cashflow and market position in preparation for the inevitable market rebound," the company noted.
The companies that ceased activity between 2014 and 2018 are likely small oil and gas firms who lacked funding to produce oil and gas from expensive unconventional oil and gas wells, Tom Pavic, senior vice-president with Calgary-based Sayer Energy Advisors, told The Canadian Press.
Earlier this week, a report by PetroLMI-the labor market information service for Canada's oil and gas industry, a division of Energy Safety Canada-found that Canada's oil and gas industry could shed another 12,500 and more jobs this year, which would bring the total job losses over the past five years to 23 percent of the 2014 total, which stood at 226,500. The reasons PetroLMI lists for the job losses expected for this year contain few surprises, and include "low commodity prices, a decline in capital spending and uncertainty over market access."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More