A couple of key thematic takeaways emerged from the Canaccord Genuity
Global Resources Conference in Miami last week, an event that drew 25 domestic and international E&P companies to make presentation, writes Canaccord Genuity in its Morning Coffee report.
The investment firm’s energy analyst Phil Skolnick continues to believe now is the time to be long heavy oil. Both Baytex Energy Corp. (TSX: T.BTE, Stock Forum) and MEG Energy Corp. (TSX: T.MEG, Stock Forum) confirmed the view that we are on the verge of seeing an improvement in heavy oil fundamentals due to pipe (Flanagan South in particular) and rail advancements as well as increased heavy oil demand from new coking capacity at BP’s Whiting refinery.
While pipeline is the best mode of transportation, both companies acknowleged that rail will continue to make up a part of their respective long-term strategies due in part to the market flexibility that rail provides.
Skolnick continues to believe that once Flanagan South comes on line, MEG will have the greatest flexibility amongst oil sands and heavy oil companies to ship its oil to the highest-priced markets.
The netback improvement potential from this provides upside to Street cash flow estimates in our view; and
A key theme to many of the Canadian presentations was a resource capture driven strategy that is moving towards cost effective exploitation and development. This was especially true for companies such ARC Resources Ltd. (TSX: T.ARX, Stock Forum), Crew Energy Inc. (TSX: T.CR, Stock Forum), Crescent Point Energy Corp. (TSX: T.CPG, Stock Forum), and Whitecap Resources Inc. (TSX: T.WCP, Stock Forum), which all focus on large hydrocarbon storage reservoirs and resource plays and economic and cost-reducing exploitation efforts.
Additionally, drilling and completion improvements such as pad drilling will have meaningful impacts to go forward economics and F&D costs.
Sustainability was a key theme, especially for dividend players that need to balance resource development and pace of growth against overall base decline rates.
Secondary recovery techniques such as waterfloods have had an increasing level of importance for ARX, CR, CPG and WCP given the attenuation of decline rates, with the benefit of low cost reserve additions.