Oil and gas industry CEOs pen open letter to Ottawa asking for financial help

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WATCH ABOVE: The oil and gas industry has released a letter to Canadians and the government asking for help. As Lisa MacGregor reports, experts say urgent financial support is crucial for the industry's survival. – Apr 6, 2020

Several CEOs of companies involved in Canada’s oil and gas industry made a plea for financial help from the federal government on Monday through a letter published in the Financial Post.

The opinion piece, titled “An open letter to Canadians from oil and gas workers,” asked Prime Minister Justin Trudeau to introduce a payroll relief plan.

“We’re also asking the federal government to purchase our accounts receivable — at a discount,” the letter reads. “Doing this would give our companies instant cash flow.”

Mark Scholz, president and CEO of the Canadian Association of Oilwell Drilling Contractors, said any and all help is critical right now.

“We need more liquidity assistance within our businesses if Canada is going to have a functioning oil and gas sector,” Scholz said. “We need to ensure that our companies are going to be paid by the customers that we work for, which are the oil and gas producers.”

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Kevin Neveu, the president and CEO of Precision Drilling Corp., said he’s hearing from workers on the ground that they’re really fearful right now for their health and future.

“People are really afraid — they’re not only afraid for the health risks of COVID-19 — trust me, people are very afraid of that — but they’re also afraid of supporting their families, paying their mortgages, paying their bills,” Neveu said.

“I think the industry right now, while it’s not strong, it’s lean and mean, but it needs some level of work.”

More than a dozen CEOs penned the letter and Neveu noted that just one-third of rigs normally working are in the field at this time.

“So the industry is running at a really low level, certainly well below survival level,” he said.

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Richard Masson, executive fellow at the University of Calgary School of Public Policy, said because the demand for gas and fuel is way down, refineries are processing less and the tanks are filling up.

“Oil companies have a lot of production that’s coming out of the ground one way or the other, and they have no place to put it,” he said. “So in the next two or three weeks here in Alberta, we’re running out of storage and customers, and the prices are likely to get very ugly.”

Joseph Doucet, the dean at the University of Alberta School of Business, said oil and gas companies need to be able to continue to produce and operate in the sector notwithstanding the fact that they’re not profitable today.

“We do need to be able to support them so that they are able to produce at a time in the future when oil prices return to a profitable level,” he said.

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The letter also stated that getting the requested help from the government would give the industry a fighting chance to survive as it waits for the construction of pipelines like Keystone XL and the Trans Mountain expansion.

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“Our Western Canadian Select would have been around $35 to $40 [per barrel] and now we’re seeing lows of $2.50, and one of the concerns that we have going forward is whether or not we get into negative pricing,” Scholz said.

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