Oilpatch better able to weather low crude price than in past, industry players say

The last time prices were this low in 2021, when the COVID-19 pandemic was still dragging on the global economy, and industry balance sheets and cost structures were in worse shape than they are now, said Cenovus Energy chief executive Jon McKenzie, who also chairs the Canadian Association of Petroleum Producers. 

“This is an industry that got religion on capital structure and low levels of debt and making sure your cost structure is competitive globally some time ago,” McKenzie said from Toronto, where the BMO CAPP Energy Symposium is taking place this week. 

“These industries are built to be resilient to prices far lower than this.”

Even if prices drop further, McKenzie isn’t expecting it to be long-term. 

“The best cure for low prices is low prices, and that tends to rebalance the market.” 

Randy Ollenberger, head of oil and gas research at BMO Capital Markets, said the mood at the energy conference was upbeat despite crude’s downward slide. 

Companies there were fielding more questions about their share buyback programs than their ability to sustain operations, he said. 

“It’s about, ‘How does it impact your surplus cash that you don’t know what to do with?’” he said. 

“It’s a much different environment (from past downturns) and so I think for that reason, you’re seeing a lot more calmer minds, if you will, both from investors and from the corporates themselves.”

Future growth coming from the oilsands involves retooling existing plants to pump out more crude, not building from scratch, said Ollenberger. Some of those “debottlenecking” projects can work at US$30 oil while some require US$55, he said. 

A research report from Enverus on Tuesday said expansions to existing projects that use steam wells instead of mining for extraction are viable with low oil prices, but brand new ones would need stable prices of US$80 or higher to be greenlit.

Tourmaline Oil Corp., which is active in northeastern B.C. and western Alberta, has been feeling the near-term pain from the crude price drop, said CEO Mike Rose. 

“Our stock price has gone down and that doesn’t make shareholders happy,” he said. 

“Of course, we’re concerned about it. What we don’t know at this point is, is this a short-, medium- or long-term issue and that will dictate what our response would be.”

However, the timing of the downturn works in Tourmaline’s favour, as drilling in Western Canada normally takes a pause during the spring when the ground is still too muddy for rigs to operate — “spring breakup,” in industry parlance. 

“We’ve got a bit of a breather here naturally,” Rose said, adding the second quarter is when the company may re-evaluate its capital plans for 2025. 

That would coincide with one bright spot on the horizon for Tourmaline, whose production tilted toward natural gas — the startup of Canada’s first liquefied natural gas terminal on the B.C. coast mid-year. 

Rose said he expects a “dramatic effect” on the pricing of western Canadian natural gas once cargoes are able to depart from LNG Canada in Kitimat, B.C., for sale in Asian markets. 

“We’re very excited. We’re right at the cusp where it’s finally going to take off — and it is really going to take off.” 

The industry is focused on the long-term outlook for demand, said CAPP president and CEO Lisa Baiton. 

Despite the trade strife, the U.S. will always be a major customer for Canadian energy, she said, adding growth in artificial intelligence data centres, which are known for being voracious energy users, is expected to drive demand well into the future. 

“The entire planet is dealing with the current market volatility and certainly oil and gas is no exception to that,” said Baiton

“But I would say generally speaking … we’re looking through that and seeing that the fundamentals for Canadian oil and gas are still very, very strong.”

This report by The Canadian Press was first published April 8, 2025.

Companies in this story: (TSX: TOU) (TSX: CVE)