IPC Alberta says it can weather oil prices at ‘zero’ in Western Canada

By Medicine Hat News on April 3, 2020.

IPC Alberta says that it has financial capacity to weather oil prices at “zero” in Western Canada for more than a year.

The company that has major operations inland around CFB Suffield drilling block, as well as northern Alberta, gave no price forecast in a corporate update Thursday regarding the impact of collapsing world prices and the Coronavirus pandemic.

IPC restated that its cost to produce in Canada remains in the US$13 per barrel range, and has substantial credit facilities available while it continues to adjust operations.

The global producer had announced in early February that it would continue an exploratory drilling program in Southeast Alberta as part of its 2020 guidance, but gave no specific breakdown on lower capital spending this week.

It will reduce capital expenditures across the global company’s operations by between US$40 million and US$105 million over the next year as it evaluates pricing environment.

“IPC is taking decisive action to reset our 2020 expenditure plans in order to maximize the financial flexibility of the corporation,” stated CEO Mike Nicholson.

Output is still predicted to range between 30,000 and 45,000 barrels per day, depending on pricing and resulting operational changes.

World oil prices plummeted in March as Saudi Arabia and Russia touched off a supply glut that sent the prices spiralling down by more than half.

The Alberta benchmark, Western Canada Select, was below US$5 per barrel as trading began Thursday.

Pembina plant on hold

A new electricity co-generation plant in Empress is among construction projects totalling $1.1-billion postponed by Pembina Pipelines in late March in response to falling world energy prices.

Spared, however, is “advanced work” to build a propane fractionation facility at the company’s facility near the Saskatchewan boundary.

The planned $120-million electricity upgrade was to move ahead this year, adding the ability to generate power internally at the natural gas straddle plant.

It is now deferred, according to a company release, until market conditions improve, along with three expansions of the Peace Pipeline system, an expansion of the Prince Rupert export terminal; as well as reduced spending on propane upgrading facilities and a polypropylene plant, itself a $2.7 billion project.

A number of projects will proceed, given the “advanced stage of construction”, including an initial phase of the Prince Rupert LNG export terminal.

Overall the capital budget for 2020 is cut about in half – the deferrals total up to $1.1 billion, while $1.3 billion will be spent to complete major projects this year.

Also this week, U.S. federal regulators approved Pembina’s proposal to build the Jordan Cove LNG export terminal in Oregon, though that state is planning to appeal.

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