Oct

17

Smaller Oil Producers may Sell Out

Filed Under News Articles, Oil Exports, Oil Sands 

Right now with some economic uncertainty, some smaller players in the oil industry may look at selling vs. pushing through this time.  We may see take-overs starting to happen more frequently in the months ahead.  Some of these companies who would rely on outside investment and capital to run their business, might need to look for funds elsewhere.

But overall, Canada’s oilpatch comes out of the market meltdown relatively unscathed with the exception of some battered share prices.

That’s because the industry has traditionally relied on internally generated cash flows to fund growth.

Hal Kvisle, president of pipeline giant TransCanada Corp. said “If you go back to the start of my time in this job, we were generating about $1 billion a year in cash flow, of which the first $400 million went to the payment of debt. Now we generate $3 billion and the first $700 million or $800 million goes to the payment of a dividend, so we have five or six times as much available financial strength.”

There is a ton of money in the larger companies right now.  The revenue they have generated over the last couple of years, plus having majority of budgets based on the $70-$90 per barrel price, they will be able to weather the economic uncertainties in the coming months.

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