Falling oil prices could hurt Canada's O&G sector, S&P report says

Standard & Poor's Ratings Services

Overall, Standard & Poor's Ratings Services believes that the outlook for the Canadian midstream, unregulated power, and regulated utilities sectors is stable heading into 2015. However, in a report released Dec. 17, Standard & Poor's notes that falling oil prices could challenge growth in the oil and gas sector and pressure profitability for oilfield services companies.

Canada's National Energy Board estimates the economic threshold for developing new in-situ steam-assisted gravity drainage oil sands production to be at a West Texas Intermediate (WTI) price in the range of US$50-US$80 a barrel. Standard & Poor's published new oil price assumptions on Dec. 17, with WTI at US$65 for 2015 then regaining some strength in 2016 and 2017.

In the report titled "Falling Oil Prices Could Spell Trouble for Canada's Oil and Gas Sector, Although Downstream Credit Conditions are Largely Stable," Standard & Poor's credit analyst Nicole Martin commented, "We expect capital spending to contract in 2015 by 20% or more, based on our latest price assumptions."  


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