NGPR growth strategy encounters some regulatory hurdles

Despite the price changes and the positive gains for oil on the market, the City’s NGPR division is lowering its expectations for the price of oil and gas in 2018.

The city is expecting gas prices will average $2.39/mmBTU this year. It’s expected oil will average $46.81US/bbl. Brad Maynes, the general manager for NGPR said we don’t get market prices for our oil in Canada, because of transport costs and because it’s a heavier crude.

“Most of the oil we sell will be refined and consumed in the US, so there’s a transportation cost associated with getting that oil down there,” Maynes explained. “Right now the price differential is about $20US/bbl.”

NGPR is adjusting it’s budget for the 2018 year. It expects revenue, expenses and capital will all decrease.

The operating budget will see cash flows decrease by around $23 million. The Capital budget will decrease by $10.6 million.

Natural gas volumes are budgeted to decrease due to 2017 divestment, selling off several gas wells. Documents related to the budget revision say total revenues are expected to decrease due to a reduction in volumes and lower forecast commodity prices.

Oil volumes are budgeted to decrease due to modifications to the ‘NGPR Growth Strategy’, while expenses should also decrease due to divestment and changes to the strategy.

Maynes explained there was less production than expected in 2017 due to regulatory changes and decreased drilling activity over all. He said those realities made them re-evaluate their expectations for 2018.

“It’s been a long time since any of us had drilled down in southern Alberta,” Said Maynes. “We used to get a license in six weeks and then we’d be drilling, it’s taken a lot longer than we expected from that side.”

Maynes added it took nearly a year to get a drilling license for one of the oil wells they were trying to drill.

The city plans to drill 30 wells this year. 16 of those will be exploratory drilling and 14 developmental drills.

The 2018 budget also includes money for helium exploration and drilling.

“They are both oil and helium targets. Ideally we like to stack those; by stacking I mean we have that same opportunity in one well bore where you have both oil potential and helium potential,” Maynes explained.

“As we move forward, it will depend on success, but it will probably be a two-third to one-third ratio, with two-thirds targeting oil and one-third targeting helium.”

There’s no money budgeted for future development surrounding helium such as a processing plant. Maynes adds there are investors looking to developing such a business here and says they are the driving force for such a project, but couldn’t share further details.

The NGPR division does not expect to return to profitability in 2018. Maynes said this year will continue to lay the groundwork for the return of an energy dividend and they have high hopes for the future, with a dividend possible in 2019.

“There’s been very little global investment in oil exploration,” Maynes said. “Demand has not dropped from what we can see, matter of fact demand appears to be continuing to rise.”

“We want to be able to take advantage of that period of time when that lack of investment catches up with the globe.”

by Leah Murray

NGPR growth strategy encounters some regulatory hurdles

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