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February 2021

PJVA EMS – CO&O Draft #2
PJVA JV Certificate Program - Analyst 2 begins February 23, 2021
"75 Facts About Canadian Oil and Gas: A Reference Guide" - Research Brief by Canadian Energy Centre (CEC)
Natural Gas and Oil Industry Investing in Canada's Economic Recovery: CAPP forecasts an increase of more than $3 billion in planned upstream spending for 2021
With Keystone XL Pipeline permit rescinded, does 2021 hold promise for WCSB drillers?

PJVA Early Morning Session - CO&O Draft #2

There was an early morning discussion of Draft #2 of the Model CO&O on January 27. Draft #2 has incorporated some changes as a result of industry comments on Draft #1. It was presented by EMS Director, Douglas Klug and Richelle Lindsay, PJVA Past-President.

As our Model Agreements are one of our key pillars, the discussion addressed the following:

current industry needs; and
if this model would be an acceptable and more importantly, adopted model for use by industry?

Many aspects such as the use of the 2011 Accounting Procedure were discussed.

PJVA would like to thank both the diligent Committee who worked tirelessly on this Draft #2, and everyone who provided comments on Draft #1.

The following links highlight the current changes:

Therefore, this once again highlighted the value of investing in the future of Joint Venture business.

Peter Mitchelmore
PJVA Newsletter Editor

PJVA JV Certificate Program - Analyst 2 course begins February 23, 2021

Joint Venture Analyst Certificate

Joint Venture Analyst Certificate
Prerequisite: Successful completion of the JV Administration Certificate above

Course Name	Schedule	Pricing
Joint Venture Analyst Level 2 (25 hours)	Reading Week Feb 16 Classes run Feb 23 - Mar 25, 2021 Tuesdays, Thursdays Times: 4:30 pm - 7:00 pm	Members $545 +gst Non-members $575 +gst
Introduction to Facilities (12 hours plus exam)	Reading Week Apr 5 Classes held: Apr 12, 13, 14, 15 Times: 1:00 pm - 4:00 pm Exam - Thur, Apr 22, 2021 Time: 1:00 pm	Members $545 +gst Non-members $575 +gst

"75 Facts About Canadian Oil and Gas: A Reference Guide" - Research Brief by Canadian Energy Centre (CEC)

Written by Deborah Jaremko and published by the Canadian Energy Centre (CEC), December 14, 2020

The Research Brief (available here) highlights 75 key facts about Canadian oil and gas using data compiled from the seven Research Briefs and 23 Fact Sheets that were released by the CEC in 2020.

The broad themes explored in the CEC's research catalogue include the enormous economic contributions generated by the oil and gas sector and how Canadians benefit; how oil and gas creates jobs and fuels the economy from B.C. to the Maritimes; Canada's place as a global leader on environmental, social and governance measures; and how Canada's First Nations are achieving prosperity through their involvement with energy projects.

Highlights from the Research Brief include:

Canada's energy industry paid over $672 billion in federal, provincial and local taxes, royalties and fees since 2000 - enough to pay off the currently projected federal deficit almost twice over.
In Ontario, the industry supported over 68,000 jobs, directly and indirectly, paying more than $2.1 billion in wages and salaries. The sector also was responsible for adding $7.3 billion in nominal GDP to Ontario's economy.
Despite producing only 0.3 per cent of global GHG emissions, Canada's oil and gas sector accounted for 52 per cent of environmental protection spending by all Canadian industries between 2000 and 2016.
Indigenous people in Canada's oil and gas sector have lower unemployment rates and higher incomes. As well, the oil and gas industry pays Indigenous Canadians better than any other major industry.

A PDF of the fact sheet "75 Facts About Canadian Oil and Gas: A Reference Guide" is also available on the Canadian Energy Centre's website at: https://www.canadianenergycentre.ca/75-facts-about-canadian-oil-and-gas-a-reference-guide/

The CEC's previous Fact Sheet "27,000 jobs and $15 billion: The impact of oil and gas (and Alberta) on Atlantic Canada's economy" can be found here. A column on that Fact Sheet can be found here. All of the centre's research is available at canadianenergycentre.ca/research.

The CEC's Executive Director of Research Mark Milke is available for interviews or to answer questions about the analysis.

Deborah Jaremko

*The newsletter may contain material sourced from to third party websites. The material is provided solely as a convenience to you and not as an endorsement by PJVA of the contents on such third party Websites. PJVA is not responsible for the content of third party sourced material and does not make any representations regarding the content or accuracy of materials on such third party Websites, or the availability of such Websites. If you decide to access third party Websites, you do so at your own risk.

Natural Gas and Oil Industry Investing in Canada's Economic Recovery: CAPP forecasts an increase of more than $3 billion in planned upstream spending for 2021

Written by Jay Averill and published by EnergyNow Media, January 15, 2021

CAPP Logo

CALGARY, AB, Jan. 13, 2021 /CNW/ - The Canadian Association of Petroleum Producers (CAPP) is forecasting a 14 per cent increase in upstream natural gas and oil investment in 2021. Capital spending in the sector is expected to be around $3.36 billion higher this year, reaching $27.3 billion, compared to an estimated total investment of $24 billion in 2020.

The planned investment for 2021, while increasing from the lowest levels in more than a decade, would halt the dramatic decline seen since 2014, when investment sat at $81 billion. This year's forecast represents a stabilizing of industry investment and the beginning of a longer-term economic recovery.

The additional spending is primarily focused in Alberta and British Columbia, while numbers in Saskatchewan show modest improvement and offshore investment in Atlantic Canada is expected to remain relatively stable compared to 2020.

Conventional oil and natural gas capital investment for 2021 is forecast at $20 billion, up from an estimated $17.2 billion last year.

Capital investment in the oil sands is forecast at $7.3 billion in 2021, up from an estimated $6.7 billion total in 2020.

One year ago, CAPP's initial forecast for 2020 expected investment to reach $37 billion; however, a crude oil price war between Russia and Saudi Arabia in March of 2020 and the global economic impacts of the COVID-19 pandemic contributed to an unprecedented 31 per cent drop in investment, wiping out more than $12 billion of planned spending.

The expected 2021 increase of investment into the Canadian economy is partly due to the availability of COVID-19 vaccine globally, which should lead to higher economic activity and increased energy demand. The International Energy Agency (IEA) projects the global economy will return to pre-COVID levels in 2021 while global energy demand is expected to reach its record high pre-crisis levels in early 2023. This growth offers significant opportunity for Canadian natural gas and oil producers as their access to global markets expands.

Other contributing factors to the capital spending increases are government supports introduced in 2020, including many at the provincial level.

In Alberta, upstream investment is expected to increase 18 per cent to total $11.8 billion in 2021 from an estimated $10 billion last year.

In 2020, the Government of Alberta announced municipal tax relief for new wells drilled, eliminated the municipal Well Drilling Equipment Tax (WDET), and accelerated its corporate income tax reduction plan.
The province released its first annual red tape reduction report, continuing its commitment on red tape reduction and helping to strengthen investment competitiveness by lowering the bureaucratic burden and reducing costs on industry.
Alberta invested $1.5 billion in the Keystone XL pipeline, which lead to the starting of construction on the project. Keystone XL, along with the Trans Mountain expansion and Enbridge Line 3 pipeline projects also under construction, offer expanded market access for Canadian oil to global markets.

In British Columbia, growth in upstream investment for 2021 is forecast at about 29 per cent; up to $3.9 billion from an estimated $3 billion in 2020.

The province's support for Liquefied Natural Gas remains a driver for investment with the LNG Canada project under construction - one of the largest capital projects in Canadian history.
B.C. took a step in addressing competitiveness concerns for trade exposed industries by setting benchmarks for its CleanBC Industry Incentive Program which recognizes industry's leadership and will refund a portion of the provincial carbon tax (above $30/tonne). This is a first step to help better enable B.C. commodities to compete.
In 2020, BC hydro reduced industrial electricity rates by one per cent and the province delayed its scheduled increase of the provincial carbon tax.

In Saskatchewan, 2021 upstream investment is forecast at a five per cent increase, up to $2.8 billion from an estimated $2.7 billion in 2020.

Saskatchewan's vision 2030 goal of increasing oil production by 25 per cent to 600,000 barrels per day, along with fiscal incentives that enhance investment attractiveness have laid a solid foundation for the industry.
The province also implemented a Saskatchewan-wide rebate on electricity bills; a policy which assists companies with liquidity and signals to the investment community that the province is committed to the economic recovery of the business community.

All three provinces - Saskatchewan, British Columbia and Alberta - have also reached equivalency agreements with the federal government on methane emission reduction regulations, providing industry with predictability and a regulatory framework that allows for a solutions-focused approach while enabling industry to advance technological innovation.

In Newfoundland and Labrador, offshore investment is expected to remain flat in 2021 at approximately $1.5 billion.

In 2020, Newfoundland and Labrador introduced a new offshore exploration initiative that allows all future bid deposit forfeitures to be reinvested in exploration activity.
The province expanded allowable expenditure criteria and implemented an accelerated bid deposit write-down program to help operators recoup their deposits faster and incent early work on exploration licences.
The province also developed an Oil and Gas Industry Recovery Task Force to make recommendations on policy and regulatory changes to support recovery and develop parameters for distribution of the $320 million in federal funding provided to the province for the offshore industry.

In addition to provincial efforts to sustain resource development, the federal government's Business Credit Availability Programs introduced in 2020 are now providing some companies with liquidity support. The Government of Canada also created a $1.7 billion fund focused on the remediation and reclamation of inactive and non-producing wells in Western Canada which is contributing to the increase in investment while accelerating efforts to clean up legacy assets.

CAPP quotes Tim McMillan, president and CEO:

"It is a positive sign to see capital investment numbers moving up from the record lows of 2020. This can be read as the start of what we expect will be a long road to economic recovery for the natural gas and oil industry and the Canadian economy as a whole."
"A more than three billion dollar increase in planned upstream natural gas and oil spending signals that producers are invested in Canada's economic recovery. With some hard work, we can build momentum from this positive news, and position Canada for success as economies around the world recover."
"As one of the largest private investors and employers in the country, the natural gas and oil industry can be a foundation for national economic recovery. The industry is committed to working with governments, at all levels, to create an environment where businesses can thrive and attract investment back to Canada. This is how we will maintain jobs and create new opportunities for Canadians."

Supporting information:

CAPP forecasts 3,300 new wells to be drilled in Canada in 2021, up from 3,000 drilled in 2020 but significantly lower than the 4,250 drilled in 2019.
Capital spending in the United States upstream natural gas and oil industry fell approximately 45 per cent in 2020 and is expected to increase by 4 per cent in 2021.
Natural gas and oil are Canada's biggest export commodities by value. According to Statistics Canada, exports of crude oil, bitumen, natural gas, natural gas liquids and refined petroleum products generated more than $112 billion, or about 19 per cent of revenue from all of Canada's exports combined.
Global demand for Canadian natural gas and oil is expected to grow.
- In its Stated Policies Scenario, the International Energy Agency (IEA) projects global oil demand will increase five per cent by 2030 and six per cent by 2040 - reaching 104 million barrels per day.
- Demand for natural gas is also strong, projected to increase 15 per cent by 2030 and 30 per cent by 2040 - reaching 5,221 billion cubic metres.
- Together, oil and natural gas meet 53 per cent of global energy demand in 2040
The IEA projects heavy oil and bitumen demand will grow 23 per cent by 2040, reaching 4.42 million barrels per day.
- Canada is expected to supply approximately 79 per cent of that total.
The IEA report recognizes Canada as a leader in climate action.

The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and oil throughout Canada. CAPP's member companies produce about 80 per cent of Canada's natural gas and oil. CAPP's associate members provide a wide range of services that support the upstream oil and natural gas industry. Together CAPP's members and associate members are an important part of a national industry with revenues from oil and natural gas production of about $116 billion a year. CAPP's mission, on behalf of the Canadian upstream oil and natural gas industry, is to advocate for and enable economic competitiveness and safe, environmentally and socially responsible performance.

Source: Canadian Association of Petroleum Producers
Jay Averill, CAPP Manager of Media Relations

With Keystone XL Pipeline permit rescinded, does 2021 hold promise for WCSB drillers?

Written by Syed Kamran Ali and published by BOE Report, January 27, 2021

The year 2021 started with a bad omen. A reported 30-minute conversation between US President Joe Biden and Canadian PM Justin Trudeau resulted in the issuance of a statement by the White House indicating acknowledgment of Canadian PM's disappointment on the US President's decision to rescind the permit for Keystone XL pipeline. The statement included a futuristic commitment from US President to maintain an active bilateral dialogue regarding (energy) co-operation with Canada.

Over the course of 2020, the worst year in a decade for oil and gas drilling activities in South Western Canada, only 2,336 well licenses granted, down 59% from 5,716 well licenses in 2019. Province-wise, 1,228 well licenses were granted in Alberta, 900 well licenses in Saskatchewan, 148 well licenses in British Columbia and 60 well licenses in Manitoba. Alberta topped the list with 364 wells spud in 2020. The Viking formation that extends over practically the entire Western Canada Sedimentary Basin stood second with 357 spud wells. The total number of wells spud was 2,327 out of which 844 flowed oil, 254 flowed gas while 1,229 went dry.

BOEReport Graph

Year-wise Comparison of Drilling Licenses Granted in WCSB for Last 10 Years. Source: BOE Report's M&A Database

WTI prices remained steady above USD 40 per bbl for most part of 2020. An exception was the panic trading activity close to doomsday, April 20, 2020, when WTI traded negative due to non-availability of storage. A rising trend for WTI price was witnessed starting from November 2020 with WTI closing the year above USD 48 per bbl.

Under the clean energy transition scenario, as witnessed recently by US President Joe Biden's decision regarding Keystone XL pipeline and COVID-19 pandemic, there are chances that 2021 may witness a continuation of decline in drilling activity. Decline could be severe if crude prices fall from current levels.

This data was collected using the BOE Report's M&A Database