Projections of oil and gas earnings across Canada are likely to be surpassed and second half growth is also forecast to be stronger than anticipated. The good word according to figures released by Dundee Capital Markets and The Globe and Mail.
What's driving the unexpected growth?
The report indicates that it was a combination of factors including mild weather in the east that led to increased drilling and fewer road closures impacting shipping and equipment transfers. All that made for a very active drilling season that has come in, thus far, well above the norms for this time of year. That paired with good oil pricing and a potential influx of capital from a variety of sources prompted the uptick, said The Globe and Mail.
Upward trend could continue through the end of the year
So how long will we continue to see gains in the sector? A recent MarketWatch article quoted a Deloitte survey that showed that Canadian oil and gas had the strong national prices continuing through the first of the year and the report shows the trend is continuing. Deloitte's Andrew Botterill said confidence is high among investors and producers alike.
"April through June has seen a strengthening of Canadian oil and gas prices as the U.S. work[ed] to refill their massive storage volumes and satisfy strong domestic demand," explained Botterill, "This has increased our confidence in a stronger second half of 2014. But the long-range futures markets still indicate both oil and gas will remain softer for 2015 and beyond without increased exports to markets other than the U.S."
While Alberta and other provinces in the west are benefiting from the oil sands boom, The Dundee Capital report indicated that strong oil prices could lead to dividend increases for investors which will continue as long as optimum drilling conditions hold.
Some operations are performing maintenance on their equipment. Replacing tools, heavy machinery and drilling apparatus quickly and effectively are all tied-in with the increase in earnings. If the weather does not hold out then the projected second half numbers could change but analysts remain optimistic that the predicted gains will be there, as forecast, at the end of the year.
A wild card in the equation is the Atlantic Basin hurricane season which runs through November. Any storm that impacts the Gulf of Mexico or the east coast could skew the projections in a large way. Investors and oil and gas companies are keeping a watchful eye on that scenario even as work continues in the nation's oil fields unabated.