Global Opportunities: International Resilience During A Crisis
If there was an area of the Western Canadian Sedimentary Basin (WCSB) where a Calgary-based oil and gas company could sell its gas production for triple what it can fetch now, and its oil production for as much as double, it’s not hard to imagine there would be a line-up of companies wanting to go there.
We all know that’s not possible now in the WCSB, but there are areas of the world where those kinds of prices are commonplace — and that is why a group focused on making Canadian producers aware of the international oil and gas opportunities they can tap was formed in 2012.
The Canadian Global Exploration Forum (CGEF) strives to help Canadian producers discover and access opportunities outside of Canada and the U.S. They host dynamic events in Calgary and attend international events to promote the Canadian industry globally.
Kevin Broger, president of CGEF, said all producers, facing record low North American pricing, should be seriously considering international opportunities.
“We think this is the right time for companies to be looking overseas,” said Broger, a geologist with over 15 years of international experience with the former PanCanadian and others, who has worked in Brazil, Namibia and elsewhere. “The economic incentives for people to be looking abroad are obvious.”
He said producers are selling their natural gas today for as much as C$6 per mcf in Brazil and Colombia, and C$9 in Turkey, with few of the problems Canadian producers have marketing their oil and gas in North America.
The COVID-19 lockdown has significantly impacted CGEF’s activities but he said it is striving to remain relevant to its 20 members and others who have attended its live events in the past.
It is accomplishing this through online events such as webinars and through its Global Opportunities (GO) Program focused reports. The first of these focused reports, released in June 2020, is essential reading for explorers and producers looking for global opportunities.
The GO Program highlights for all Canadian producers — even those that are domestically focused — the abundance of international E&P opportunities that await Canadian-headquartered E&Ps. Broger said that “Alberta has always been a hub for international E&P.” Now more than ever, Broger says, “Albertans and the city of Calgary need to focus on opportunities abroad to help sustain and grow the province’s critical mass of human and technological resources tied to the energy sector.”
The recently released 23-page GO report — International Resilience During A Crisis: How International Exposure Can Help Canadian Oil & Gas Companies Weather Volatility — which follows the release of an introductory report this past December, offers a compelling argument for pursuing global opportunities. Click here to download this free report.
Adjusted for a pandemic, this GO Report focuses on how Canadian companies are operating successfully abroad, and how diversification to global interests can support operational and financial resilience.
For instance, the report tracks the share prices of Parex Resources Inc. and Canacol Energy Ltd., two Colombian-focused producers, which are the top one and two performing oil and gas companies for shareholder capital gains over the last five years on the TSX exchange.
Even amid the red ink that overwhelmed the industry when the COVID-19 epidemic caused oil and gas prices to tank, four internationally-focused companies the study examined only saw their shares decline by about 15 per cent from February, while WCSB-focused companies saw their shares drop by 60 per cent or more.
Broger said international exposure offers Canadian companies a diversification option they can’t achieve by remaining focused on Canada.
The newly released report estimates that Canadian-based companies already have a large international presence, with an estimated C$35 billion of international oil and gas value managed out of Calgary. Those companies with an international presence have created thousands of jobs.
The authors of the report say that value, based on an analysis of the proved and probable reserves of TSX oil and gas listed companies, compares favorably with onshore Western Canadian oil and gas (excluding oilsands) production-based value creation, which is about C$75 billion. The oilsands sports a value of C$196 billion.
The report also illustrates that the value of those international reserves, on a unit basis, far exceeds the value of reserves in Canada, because prices fetched internationally are so much higher.
The report goes on to point out that international exposure gives companies stability, commodity price diversification, higher margins and other advantages.
In many cases, producers in countries such as Colombia, Brazil and elsewhere receive product sales agreements that give them virtually a guaranteed return. In addition, because producers are often partnered with national oil companies, governments often assume a higher proportion of the lower price risk.
The report, like the December study, provides case studies of companies that operate successfully internationally. The focus of the latest report is on Alvopetro Energy Ltd., a growing midstream and upstream operator in Brazil, where the company is developing onshore natural gas assets. Brazil is currently developing huge offshore oil reserves and yet, as a country, lacks adequate gas reserves. As a result, it receives a floor price of C$3.70/mmBtu, which escalates with inflation.
Broger said CGEF has reacted to the COVID limits on activities by providing its members, 60 per cent of whom are publicly listed, with plans for more webinars, the new series of focus reports and continued outreach. “Our member companies currently have ongoing activities in over 20 different countries outside Canada and the U.S. They come to us from the more than 100 Canadian-based, internationally focused companies that are either private or publicly traded. The CGEF Leadership Team, alone, has had direct E&P experience in over 84 of the 105 oil and/or gas producing countries of the world, so it’s fair to say that CGEF’s global footprint is everywhere that an interested E&P might like to be.”
In the past it has sponsored a forum dealing with international opportunities linked to the Global Petroleum (Energy) Show but, of course, that was not possible this year. But Broger believes CGEF, which works closely with Alberta’s Ministry of Economic Development, Trade & Tourism and with federal agencies to help Canadian companies identify and finance global initiatives, can still continue to play a helpful role in assisting companies to make the leap internationally.
Despite the difficulties the Canadian oil and gas industry has endured, he cites a pre-2014 report that showed that a 63-block area of downtown Calgary had the highest concentration of oil and gas related professionals in the world. That is a strategic experience-based asset that can be successfully utilized toward international opportunities.
CGEF prides itself on being the ultimate networking machine; a volunteer run organization that advocates for Canadian international oil and gas companies working abroad. We facilitate communication amongst our member E&P companies, oilfield services, governments and academia, through the sharing of expertise, technology and opportunities. We utilize a variety of tools to achieve this, including bimonthly lunches, annual conferences, specialty conferences and industry socials.