Finance Minister Bill Morneau made it clear to a Senate committee how dire the financial situation is in the oilpatch and how quickly his government is ready to act to provide some sort of relief to the beleaguered sector to keep companies afloat.
The relief was apparently coming quite quickly, as Morneau told the senators, “I’m not talking about weeks. I’m talking about hours, potentially days.”
That was more than one week ago and the federal government has yet to unveil how it plans to help the oil and gas sector.
In recent years, the oilpatch in Western Canada hasn’t had a lot of good things to say about the federal government. But executives around the sector these days are voicing few complaints — and even expressing words of encouragement.
As the federal government assembles some sort of relief package, oilpatch leaders are saying how well Ottawa is handling the situation and how communication about the issue has abundant and positive.
Several board members of the Canadian Association of Petroleum Producers are in weekly conversations with Natural Resources Minister Seamus O’Regan and calls with provincial government leaders.
“They’ve all been really just excellent in understanding the size of this crisis, and they’re all over it and they’re basically saying, ‘We’re making plans and we need your input to get it right,'” said Jonathan Wright, chief executive of NuVista Energy, a Calgary-based oil and gas company with a focus on northwest Alberta.
Wright wouldn’t get into the specifics of those conversations, to respect the confidentiality, but said there is no secret about what the oilpatch wants.
“At a time like this, the number one thing is liquidity. The first three things are liquidity,” he said.
When commodity prices are so low, oilpatch companies often struggle to obtain financing from banks, investors and the broader finance community.
“The last thing you want to see is, for example, your bank line shrink at a time like this, even though you’re a strong company,” said Wright. “Where the government can step in is ensuring they are providing liquidity and encouragement to the banks such that we don’t get an undue compression of liquidity for strong companies.”
The oilpatch is struggling because of three main factors right now: The decision by Saudi Arabia and Russia to flood the market with oil, problems with accessing funding from equity markets, and COVID-19, which has resulted in demand for oil to plunge.
Oil prices in Alberta are at record lows with a barrel of crude selling for about $4 US this week.
Still, any talk of financial help for the oilpatch will enrage critics who would much rather see government money used to promote renewable energy sources, instead of aiding the fossil fuel sector. If money goes to the oilpatch, they say, it should be aimed at helping workers, not companies.
This federal government has said it needs a strong oil and gas industry to help with the transition to cleaner energy.
The oilpatch doesn’t want a handout or bailout from Ottawa, according to Grant Fagerheim, the chief executive of oil producer Whitecap Resources. Instead, industry leaders want the federal and provincial governments to look at ways to reduce expenses for the industry such as providing funding for debt and lowering royalties.
“Then you are not picking winners and losers, you’re actually doing it overall for the energy space to help drive down their costs to make it more competitive with other places around the world,” he said.
Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy and chair of the World Petroleum Council of Canada, said Ottawa could provide financial relief in many forms such as loans with flexible repayment terms.
“We need to allow the companies to have enough cash so they don’t get so much debt on their balance sheets that the creditors won’t continue to support them,” he said.
“They need enough financial capacity that they can continue to pay all these operating costs, even if they’re losing money, and get through to the other side.”
Tristan Goodman, president of the Explorers and Producers Association of Canada, which represents junior and mid-sized oil and gas producers, said the sector is also looking for relief in other ways, such as regulatory changes that reduce costs while the industry deals with its current struggles.
“Anything around regulatory support to make sure we can continue to move forward during times of cash flow crisis, as well as making sure the fiscal side of that is also taken care of, meaning taxes and anything on that side,” he said.
Goodman said help for the sector will help other industries across the country as well that it does business with, from technology firms to steel manufacturers to finance companies.
“It’s really not just about the oil and gas business,” he said.
“It really is about the broader Canadian economy and all those sectors, whether they’re professional accountants and lawyers, finance people or IT people.”
In the past, the federal government has provided funding for the cleanup of orphan oil and gas wells, which provides jobs for the oilfield service sector, and it may look to support more of this type of work.
Morneau’s office did not immediately return a message seeking comment.