Varcoe: Oil prices climbing. Oilpatch spending not so much.

As benchmark crude prices climbed toward US$63 a barrel on Tuesday, Crescent Point Energy Corp. announced it will boost its capital spending this year, a promising sign from one of Canada’s largest oil producers.

But the sentiment for spending across the oilpatch remains decidedly mixed for 2018, and the expectation for capital expenditures across the sector is pretty much flat from last year.

At Crescent Point, however, the Calgary-based company will increase its capital spending by more than $200 million this year to $1.8 billion, and earmark extra capital to growing its production.

CEO Scott Saxberg said the producer has more cash flow, and with stronger oil prices recently it has the ability to lock in those increases through its hedging strategy.

About 90 per cent of the company’s production comes from oil, so it’s well positioned to take advantage of higher prices that punched through US$60 a barrel in late December.

“We see several reasons why prices could continue to improve — or at least stabilize in this range — and less reasons why it would pull back,” Saxberg said in an interview.

“There always can be something that can trigger prices to come back off again, but more things in the ledger that could push prices higher — or at the very least, stabilize prices in this $55-to-$65 range.”

The decision by Crescent Point comes as crude prices rose $1.23 to close Tuesday at $62.96 a barrel on the New York Mercantile Exchange, hitting its highest point since December 2014 amid expectations of falling inventory levels south of the border.

Yet, even with the recent lift in oil markets, industry analysts don’t expect Canadian petroleum producers to crank open the taps and significantly bolster spending, at least not yet.

A report Friday from investment firm Peters & Co. said the Canadian oilpatch will spend $51 billion on capital programs in 2018, on par with last year.

“While improving oil prices in recent months (have) helped the outlook for liquids activity in 2018, this has been largely offset by weakening gas prices and widening oil differentials,” the report states.

A modest increase in conventional activity will likely be offset by a continued decline in oilsands spending, it added.

The report projects total conventional oil and gas capital spending by the Canadian industry to increase seven per cent to $37.5 billion, up $2.4 billion.

However, as several large oilsands developments, such as Suncor’s Fort Hills mine and Canadian Natural Resources’ Horizon expansion project, wrap up, total oilsands spending will dip by $2.8 billion to $13.6 billion — down about 60 per cent from 2014 levels.

The news also comes as pessimism grows among natural gas producers, who have seen prices slide in Western Canada in recent months due to an array of supply and transportation challenges.

Spot prices at the AECO hub in Alberta closed at $1.77 per thousand cubic feet Monday, and the differential with U.S. benchmark gas prices stood at US$1.54 per million British thermal units.

Among 23 gas-focused companies in Canada, capital spending is projected to fall by 14 per cent, with double-digit cuts expected from Tourmaline Oil, ARC Resources, Peyto Exploration and Development, and Birchcliff Energy, according to Peters & Co.

“Flat is probably the best we can hope for, relative to last year,” said Gary Leach, president of the Explorers and Producers Association of Canada.

“We have two worlds here … Notwithstanding the optimism of oil producers, if you are a heavily gas-weighted production company, it’s a pretty sombre prospect.”

Peyto Exploration CEO Darren Gee noted Western Canadian gas prices for 2018 have dropped by about 40 per cent since many companies initially put together their capital programs last fall.

He expects some producers will consider revising their spending downward as the disconnect between Canadian and U.S. gas prices expands.

“The majority of the industry is losing money at these gas prices,” Gee said.

“It just speaks to how unsustainably low these prices are, and the fact we have to see significant supply and demand rebalancing to get back to a more sustainable price.”

Meanwhile, Encana said Tuesday its capital expenditures this year will be similar to 2017 levels, around $1.8 billion.

Despite the challenges facing the energy sector, there are some promising signs for the year ahead, including the recent surge in crude prices and increased production expected from the oilsands sector.

Analysis by ARC Energy Institute expects a relatively flat year on the spending side for the Canadian oilpatch, but it is predicting total industry revenues to rise by about nine per cent to $105.8 billion.

ARC director of research Jackie Forrest said oilsands producers will underspend their cash flow this year, but in the conventional oil and gas business, the industry will spend about 1.5 times its total cash flow levels.

“We still continue to see some compelling investment opportunities at these prices,” she said.

“And that really is because of the combination of horizontal drilling and fracking that is unlocking these new resources that do make sense at these types of commodity prices.”

It’s still early days in the new year, and there are several counterbalances facing the energy sector today.

But higher crude prices have provided a renewed sense of optimism for 2018, with potentially more oil producers looking to increase spending and exploration in the months ahead.

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