With earnings season coming to a close, and only a handful of companies yet to announce their results, it’s high time for an assessment of how the year closed out in the Canadian oilpatch. Using our dataset that covers over 40 companies, we have performed an in-depth assessment of Canadian producers’ performance on a number of measures in Q4 2022 including production volumes, costs, and cash flow generation. This article, the first of a two-part series, will focus on production volumes and operating cash flows. While recent quarters have had their challenges including higher costs and easing commodity prices, a number of producers were able to buck these trends and put out record results to wrap up a historically productive year in Canadian oil and gas. Production was modestly higher industry wide in Q4, both for oil and natural gas, while financial metric outcomes varied between different corporations. We’ve prepared summary tables covering key metrics and figures, all of which were created using data from the BOE Intel platform.
1. Natural Gas Production
Compared to Q3, average production increased by 4.1%, reflecting growth in aggregate natural gas production. The top performer relative to Q3 was Headwater Exploration, whose natural gas production grew by 167.4%. This still represents only a very small percentage of its corporate production, with the company’s Clearwater oil assets the main focus. This natural gas growth in Q4 was driven by Headwater’s New Brunswick gas assets, which are brought online annually in November in order to take advantage of premium winter pricing in the northeast US. These volumes are expected to be shut-in again in April. Other proportional natural gas production growth leaders include Kiwetinohk Energy (52.0%) and Whitecap Resources (29.4%). In September 2022, Kiwetinohk announced the closing of a C$58.3 million asset consolidation in the Montney that added an additional 30 MMcf/d in natural gas production. Whitecap’s Q4 production growth was underpinned by the company’s incorporation of assets obtained through the acquisition of XTO Energy Canada in early Q3 2022. With respect to absolute increases in production volumes, Tourmaline produced a group-leading additional 135.82 MMcf/d in average daily production in Q4 compared to Q3. This increase was driven largely by successful exploration and production programs, in addition to the company’s acquisition of Rising Star Resources Ltd. in mid-Q3. A portion of this increase was also related to increased withdrawals from storage facilities, with Tourmaline reporting that 3,968 BOE/d in Q4 natural gas production came from the withdrawal of stored product.
* Data unavailable.
** Data for Imperial Oil’s Q3 natural gas production is not available. As such, they are not included in the average calculations for either quarter.
2. Liquids Production
Average liquids production increased by 1.6% in Q4. The top performer was Petrus Resources, who achieved 83.2% growth in average daily liquids production. Petrus ramped production up rapidly through 2022, driven by two rigs that were fired up in June 2022 and an ambitious capital program that funded an additional 14.8 net wells. Much of the new production for the year was brought on in the end of September 2022, positioning the company for a very strong fourth quarter. Other leaders in proportional liquids production growth include Tamarack Valley (60.1%) and Kiwetinohk (47.8%). Tamarack Valley’s output growth in 2022 was fueled by transformational acquisitions, the most recent being the company’s October 2022 acquisition of Deltastream Energy Corporation. The C$1.425 billion deal saw Tamarack take ownership of assets that produced around 19,500 BOE/d when the acquisition closed. Kiwetinohk’s Q3 asset consolidation in the Montney, which was referenced in the natural gas section above, was estimated to add an additional 1,200 BOE/d in production from liquids-rich assets. Cenovus saw the greatest absolute increase in production in Q4, with an increase of 31,800 bbl/d over Q3. The corporation’s August 2022 Sunrise Acquisition offset asset sales that closed earlier in the year, which positioned Cenovus for a productive Q4.
* Data unavailable.
** Data for Imperial Oil’s Q3 liquids production is not available. As such, they are not included in the average calculations for either quarter.
3. Total Production (BOE/d)
Including both liquids and natural gas, average production growth between Q3 and Q4 was 2.9%, reflecting a modest uptick in industry activity. Appearing as a top-three performer for the third time in this article, Kiwetinohk led the pack in total production growth, outstripping Q3 levels by 50.1%. Other companies that saw strong proportional total production growth include Tamarack Valley (48.0%) and Petrus Resources (37.3%). Suncor Energy achieved the greatest increase in absolute production, with Q4 levels that exceeded the previous quarter by 39,000 BOE/d. This was highlighted by record quarterly production from the company’s Firebag oil sands assets.
4. Operating Cash Flow
Operating cash flow was down across the industry in Q4 2022. Compared to Q3, average operating cash flow dropped by 15.0%, largely on account of lower realized prices for oil and natural gas. Of the 37 companies in our dataset with Q4 results available, only 7 saw cash flow growth with Paramount Resources leading the group at 23.3% over Q3. Paramount’s increased cash flow was underpinned by more than 50 new wells that were brought onstream in 2022, along with the consolidation of assets acquired in Q2 and Q3. Other companies that saw strong proportional cash flow growth in Q4 include MEG Energy (21.2%) and Surge Energy (14.2%). MEG Energy also performed strongly in absolute terms, leading the pack with Q4 operating cash flow that was $92 million higher than Q3. This growth in cash flow is tied to improved bitumen production, improved steam-oil ratios and the corporation’s successful delivery of its 2022 capital program. Surge Energy’s cash flow growth was tied primarily to recovered realized natural gas and crude prices in the fourth quarter, as well as the successful integration of assets from various acquisitions in 2021 and 2022. Their most recent acquisition closed in December 2022 and bolstered Surge’s position in its core SE Saskatchewan areas.
Stay tuned for Part 2, which will provide in-depth analysis on changes in operating costs, transportation costs, royalties and netback. In the meantime, you can find much more data and reporting on BOE Intel.