Proactive Investors - Run By Investors For Investors

Cabot Energy eyes better oil sales prices as a result of Alberta’s mandated production cuts

An order from the Alberta authorities to cut out 325,000 bopd of production in the region could support an improvement in crude prices
oil and gas operations
A company's first 10,000 bopd of output will be untouched by the measures

Cabot Energy Plc (LON:CAB) has told investors that new measures by the Alberta authorities to cut-back crude production in the short-term won’t impact its business.

The regional government has this week revealed it will mandate a reduction in oil production by 325,000 barrels of oil per day, which represents a clip of about 8.7%, in order to address surpluses in the local market.

Cabot noted that the order includes an exemption on each producer’s first 10,000 bopd of production, which means its operations will be unaffected.

READ: Cabot Energy reveals upgrade to reserves and resources

It, in fact, highlighted that the measures should support the business as it is expected to help improve the price of oil in Alberta.

Broker Macquarie estimating that the spread between WTI crude and the Edmonton oil price would tighten by US$5 to US$10, from the currently spread which range between US$20 to US$25 per barrel.

For context, the West Texas Intermediary crude price averaged around US$67 per barrel over the ten months to the end of October, whereas the crude price available in Alberta averaged US$44.45 per barrel in the same period.

“Whilst the exact impact and timing of the spread tightening estimated in the Macquarie report is difficult to quantify, the Alberta mandated the short-term reduction of oil production is expected to accelerate the return of the WTI-Edmonton benchmark price differential from the current divergence to normal levels,” Cabot said in a statement.

“This, in turn, is expected to lead to an improvement in the average sale price per barrel of oil received by the company.”

Cabot’s group crude oil sales averaged 767 bopd in the first half of 2018, up from 233 bopd in the comparative period of the previous year. It generated some $7.5mln of revenue in the first half.

View full CAB profile View Profile

Cabot Energy plc Timeline

Related Articles

oil and gas operations
November 12 2018
The second well at Verbier has the potential to significantly upgrade the size and commercial potential of the presently undeveloped oil field
oil rig
November 19 2018
The core of the portfolio is in the East Midlands Basin, which includes the Wressle-1 oil discovery, a share of production from the Keddington oil field and a raft of drill-ready exploration and appraisal targets
oil wells
November 22 2018
Highlands has been undertaking fracking operations at its East Denver acreage recently

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use