MEDICINE HAT, AB -- City Council approved the natural gas and petroleum resources (NGPR) operating and capital asset budget for 2019 to 2022 during their meeting Monday.
However, the business is still in the red, and although they have a plan, the current state of oil and gas is causing more struggles.
Combined with an expired contract, the deficit for 2018 is predicted to be $33 million dollars in 2019.
“It’s a culmination of both the current state of commodity pricing which is depressed to put it lightly, and we had an expiry of a long term marketing contract where we received the fixed price from many years which was greater than what the actual price was,” says Bradley Maynes, general manager of NGPR. “So we received revenue that otherwise we would not have received, so when that expired it caused a significant gap in our revenue.”
The budget for 2019 is $26.3 million, an increase of $100,000 from 2018.
$10 million of the budget is being dedicated to the growth strategy, meant to allow the business to thrive and bring it out of the red.
$8.1 million of the $10 will be used to drill and complete five exploration and five development oil wells.
Maynes says the future of NGPR’s growth stradegy is dependent on how the current plans go.
“Some of the options are dependent on success or lack there of on the second part of the growth strategy,” says Maynes. “So we’ll get those wells drilled, evaluate it through the first quarter and then we’ll start to bring the various options forward through the second quarter of 2019.”
Budgets for utilities, environmental utilities and electric generation (GENCO) were also set.
GENCO is one area of the overall budget that looks very positive, projecting earnings of $28.2 million in 2019.
It’s also expected to pay a $22.9 million dollar dividend to the city.
Mayor Ted Clugston says the City’s gas and electric companies even each other out when one isn’t doing as well as the other.
“That’s what I’ve been talking about here is the natural hedge that the city of Medicine Hat has,” says Clugston. “Imagine if you didn’t have an electric generation company and just a gas producer, how difficult this environment would be.”
Although the profit from GENCO nearly events out the deficit from NGPR, Clugston says the City owning and managing its own utilities is a tough situation.
“It’s a risky business,” says Clugston. “We know it, we knew it going in and it will be long term as well.”
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