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Capital spending in oil and gas slides lower

Capital spending in oil and gas slides lower

Posted on: 12/6/2018 | Author: ATB Financial's Economics + Research Team

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Canada’s oil and gas sector has seen better days. This year started off with whispers of guarded optimism but, after rising back above $12 billion in the final quarter of last year, capital expenditures have once again slumped. It’s a familiar story in Alberta.

Total capital spending on oil and gas extraction in Canada was $9.3 billion in the third quarter of this year. That’s the second lowest quarterly total in the last five years and the third consecutive quarterly decline. From the recent peak at the end of 2017, capital spending is down 22 per cent. From the all-time peak at the end of 2014, spending has been cut by more than half (-58 per cent).

Statistics Canada notes that part of the reason for the decline is the completion of major projects. Clearly, the low price environment and the gaping differential between the West Texas benchmark price and the Western Canadian select price is also to blame.

The data are for the entire Canadian oil and gas industry, so other energy-rich provinces like Saskatchewan and Newfoundland and Labrador are also feeling the pain. But Alberta is the heart of Canada’s oil patch. If prices and the investment climate don’t improve soon, the declines this year could be followed by more in the future.

OnG Capex, graph​​​​​

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