E&P | Canada | FY24 Outlook

Key Takeaways:

• Among the twenty (20) Canadian-based E&Ps researched, I have analyzed and modeled the quarterly results and guidance for D&C activity, production and capital expenditures following 4Q23 releases. Highlights among the Canadian E&Ps include:

  • Capex: FY24 Canadian upstream Capex is guiding to an aggregated total of ~$24.5B, a 4.5% YoY increase. When Capex extends to include downstream spend and international/US upstream capital spend FY24 Capex is estimated to reach ~$29.8B

  • Total Production: FY24 estimated average daily production is guiding to ~5.7MMboepd, a 5.0% YoY increase.

  • Production by Product: Daily liquids (oil & NGLs) production is estimated to reach ~3.9MMboepd, a 5.0% YoY increase, while gas production is expected to increase 500MMcfpd to 10.9Bcfpd.

The completion of the 4Q23 earnings season provides a clear line of site on Canadian-based production and capital spend for 2024 among the twenty E&Ps researched. While the majority of E&Ps reiterated their 2024 guidance targets, minor E&P adjustments have been made to align the cadence of Capex and D&C activity. Material adjustments included Ovintiv’s (OVV) Capex estimate being reduced for its Montney BC drilling program, with completions reduced to 65 TILs alongside a 3-4 rig program. Whitecap Resources (WCP) initial Capex guidance has also been reduced $100MM+ following its 4Q23 results. The E&P formerly known as Crescent Point Energy (CPG), (to be changed to Veren Inc. following the May 10th annual meeting), has also been revised down $100MM. This adjustment was due more to further definition of D&C activity and reducing cost inflation.

Capex by Region

Through growth and sustaining capital spend, oil sands and in situ projects are expected to drive regional Capex across Canada with ~$10.9B forecasted for FY24 among E&Ps researched. This is predominantly sustaining capital spend following $10.8B in 2023, though growth Capex is includes:

• SU has expansion activities at Mildred Lake ($250MM), and downstream capital spend for coke drum replacements at its U1 upgrader ($500MM).

• CNQ is planning in situ development for the back-end of 2024 at Primrose and Wolf Lake with SAGD pads expected to come onstream in 1H25. CNQ is also planning debottlenecking activities for its Scotford upgrader in 4Q24, while its Naphtha Recovery Unit Tailings Treatment (NRUTT) project will begin this year with $48MM of $350MM planned for 2024.

Growth in 2024 is forecasted in the Heavy Conventional region along the AB/SK corridor near Lloydminster where Capex is expected grow 27% YoY and totaling upwards of $2B, driven predominantly by CNQ. Similarly in the Montney AB region, CNQ is forecasted to spend upwards of $1B, alongside Whitecap (WCP), Nuvista (NVA), Paramount Resources (POU), Tourmaline (TOU), Tamarack Valley (TVE) and Birchcliff (BIR). Aggregated FY24 E&P Capex in Montney AB is forecasted at ~$3.7B, a 15% YoY increase.

Similar in scale, though forecasted to see less YoY growth the consolidated Duvernay & Deep Basin regions are guiding towards ~$3.6B in aggregated E&P Capex for FY24. CPG and ARX will lead the D&C activity in these regions, accounting for over 50% of FY24 Capex. TOU, Peyto Exploration (PEY), Cenovus (CVE) and VET round out the leading E&P activity in these regions.

The Montney BC region is also anticipated to grow with 6% YoY growth and aggregated E&P Capex forecasted at ~$3.3B. TOU and ARC Resources (ARX) represent ~70% of the aggregated E&P Capex, while notable D&C activity is forecasted by OVV, Vermilion Energy (VET), Murphy Oil (MUR) and ConocoPhillips (COP) who will ramp activity this year by adding a second rig.

Not all regions are forecasting YoY Capex and production growth. Based on the E&P guidance for CPG, WCP and BTE D&C activity in the Viking and Bakken regions are expected to decline on a YoY basis. This is driven in part by CPG’s migration to the Duvernay region as a focal point for production growth, while BTE focuses its FY24 Capex in the Duvernay, Eagle Ford and Clearwater/Mannville heavy oil regions. The aggregated E&P Capex total for the Viking & Bakken regions is estimated at ~$0.8B, down -25% from FY23.

Interested in the E&P and Nation-level Datasets?

The information compiled and discussed in this note is based on detailed, operations-based modeling that I have compiled myself. Additionally, with the historical E&P results I have also extrapolated the data to calculate nation-level D&C activity, Capex and production. The data is compiled quarterly, annually and categorized by region and D&C activity. In effect, you will have forecasts on E&P and region-specific rigs/wells drilled, frac spreads/TILs and non-D&C activity from 2022 to 2025. If you are interested in purchasing the Canadian (and/or United States) E&P and national-level datasets feel free to contact me directly at [email protected].

_{Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Patrick Enwright accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Patrick Enwright makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.}