What is the fiscal health of the Canadian oil patch this year? It is a mixed diagnosis. While commodity prices, equity values and capital spending are weak, some of the key industry metrics – revenue and cash flow – are still relatively healthy at first glance. ARC’s “Fiscal Pulse” model tracks trends in product volumes, prices, costs, money flows, profitability and capital efficiencies for the Canadian upstream oil and gas industry. Figure 1 shows our estimates for the most important metrics in the fiscal cycle for 2019. The Fiscal Pulse starts when oil and gas is produced and sold for revenue. This year we expect total industry revenues will reach over $C 114 billion. Revenue is used to pay expenses, including the general and administrative (G&A) costs, interest payments, royalties and taxes. Operating costs are the biggest expense and should reach nearly $C 43 billion this year. Operating expenses include all the activities to keep production flowing from the existing facilities, including employees to run the operations, energy costs and money for maintenance work. The magnitude of these expenses is significant, making them an important driver of economic activity in Western Canada. After all the expenses are paid, the […]
