After last week’s cathartic dumpster fire, there are a lot of directions I could take the column this week. The pickings are truly excellent!

 

As I write, the Alberta government is announcing its much anticipated (though not celebrated) new royalty program and I could have done a premature and uninformed analysis of that, but I prefer to wait until I read the document.

 

Or, I could have easily launched a spirited defense of the Energy East pipeline and dispelled a bunch the myths surrounding it, but I will do that later.

 

The Federal government announced on Wednesday its new rules for pipeline project evaluations which now include greater environmental (including upstream) scrutiny and first nations consultations, further delaying the applications for these projects – fodder for reaction, but really part of a bigger story.

 

But instead… instead… I am going to do a truly dangerous head first dive down a rabbit hole (groundhog hole to be precise) and in honour of February 2nd, I am going to explore what lessons Alberta might be able to learn from one of my favourite movies, Groundhog Day, and how the oilpatch may be similar to its lead character, Phil Connors.

 

It’s going to be a bit of a rough ride though, so I ask for some patience!

 

For those unfamiliar with the movie, Groundhog Day tells the story of Phil Connors, the egomaniacal, self-absorbed TV weatherman trapped reporting from Punxsutawney, Pennsylvania on Groundhog Day who finds himself inexplicably repeating the same day over and over again no matter what he tries to do to alter his situation. Intertwined within this existential dilemma is salvation in the form of the love interest – the sweet and gentle Rita, and we all know that once Phil figures out how to win her over, it will be the perfect ending.

 

For my purposes here, Phil is alternatively the energy sector or Alberta, and Rita is of course the Rest of Canada.

 

Think about some of the doom and gloom that currently dominate the Canadian oil patch discussion: single market price-taker, environmental laggard, royalty reviews, lack of market access… each of these seem to be running on an endless loop with no progress on any front.

 

Ultimately though, the one topic that seems to dominate is that of pipeline projects being proposed and pushed back. Whether it’s Northern Gateway and coastal tanker bans, TransMountain and the BC government, Keystone XL and Obama, Energy East and the Montreal shakedown, or newly announced changes to the NEB process, it seems no matter what we do, pipelines can’t get a leg forward and move to the next step.

 

Much like many sector participants’ current views of our government and politicians, at the beginning of the film, Phil, secure in his superiority, looks down his nose at the traditions and needs of the quaint town of Punxsutawney.

 

Then as the same day repeats and the eternal recurrence deepens and becomes more absurd, his mood changes, his despair grows.

 

When you think of it, the parallels are pretty interesting, from Stephen Harper’s “It’s a no-brainer” through the Keystone rejection to the current state of affairs. Even the quote above could be easily rewritten as an opinion piece from an analyst on the energy sector.

 

After Phil gets over the initial shock he blunders around trying to figure out how he will get out of his mess. He tries to have fun with it and overindulges, he rages, he gives up. He gets rich, he steals, he buys ridiculous amounts of insurance (Bing!) and steps in the same pothole seemingly every day.

He even kidnaps and kills the groundhog (“There is no way that this winter is *ever* going to end as long as this groundhog keeps seeing his shadow. I don’t see any other way out. He’s got to be stopped. And I have to stop him.”) and tries repeatedly to kill himself.

 

And all the while, much like Alberta attempts to court the Rest of Canada, he tries to hit the perfect stride with Rita, but he tries too hard to be his version of perfect, his efforts are contrived and he runs out of time at first and then with each subsequent reliving, he gets more anxious, becomes manic and ultimately pushes her further away.

 

Sounding familiar? This is a lot like the last year or so of pipeline advocacy with supporters (outside of the actual pipeline proponents I might add) coming off as increasingly desperate.

 

But the attraction is really there – Rita actually needs Phil as much as he needs her, much as Canada needs Alberta, energy and pipelines and vice versa. There is a karmic connection, if only the conditions are made right to let it happen…

 

And underneath all of this, Phil is adapting, he is learning. He is starting to understand that what it is that Rita wants is not necessarily what he is projecting on her.

 

So, after finally exhausted every last option and angle to get something for himself and make it happen under his own terms, he lays himself bare, he learns that by giving something of himself and allowing events to unfold without his control, he is finally able to have the perfect day and get the perfect girl – redemption, transmutation, transmogrification, Nirvana… a new day – take that Nietzsche.

 

So is Alberta/the oil patch really Phil? Are we crusty on the outside but with a heart of gold on the inside once we let down our guard? Can it happen like that for us? Can we convince the rest of Canada that we are who they want? Who knows. But the old way wasn’t working so I like to think so.

 

Distilled to its basics, the most applicable lesson to be learned from the film is that the only way out is through and that we can escape from whatever situation we’re in by adopting the correct attitude.

 

To get to the end result we want here in Alberta and for the oil patch and for pipeline proponents, we need to allow the process to happen, no matter how painful and no matter how frustrating or how often it seems like we are back at square one.

 

If the old way isn’t working, there is a message in there.

 

And maybe the clock changes over. Click. I got you babe.

 

Prices as at January 29, 2016 (January 22, 2016)

• The price of oil ended the week up
  • Storage was up, finished product inventories remain high as refinery turnaround season begins
  • Production was down marginally
  • Markets have been selling the storage story for most of the month, but recent noise from Russia about production cuts sparked a rally.
  • The rig count decreased
  • OPEC production declined marginally
• Natural gas gained slightly during the week, as cold weather continued.

• WTI Crude: $33.58 ($32.20)
• Nymex Gas: $2.311 ($2.139)
• US/Canadian Dollar: $0.7135 ($ 0.7072)

 

Highlights

• As at January 22, 2016, US crude oil supplies were at 494.9 million barrels, an increase of 8.5 million barrels from the previous week and 88.2 million barrels ahead of last year. Imports declined somewhat but are still elevated.
• The number of days oil supply in storage was 30.5, ahead of last year’s 26.0.
• Production was down marginally to 9.221 million barrels per day. Production last year at the same time was 9,181 million barrels per day. Based on the numbers and a result of stubborn production levels, it is likely that negative year over year production growth in the U.S. will be delayed to later in Q1. The marginal decrease in production this week came from Alaska.
• As at January 22, 2016, US natural gas in storage was 3,086 billion cubic feet (Bcf), which is 16% above the 5-year average and about 21% higher than last year’s level, following an implied net withdrawal of 211 Bcf during the report week.
• Overall U.S. natural gas consumption decreased by 5.4% for the period led by residential consumption.
• Oil rig count at January 29 was down to 494 from 510 the week prior.
  • Rig count at January 1, 2015 was 1,482
• Natural gas rigs drilling in the United States were down to 121 from 127.
  • Rig count at January 1, 2015 was 328
• As of January 25, the Canadian rig count was at 209 (28% utilization), 133 Alberta (25%), 28 BC (34%), 45 Saskatchewan (34%), 3 Manitoba (21%)). Utilization for the same week last year was about 49%.
• US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 54%/46%

 

Drillbits

• The Alberta government released its much anticipated Royalty review on Friday. Quick highlights:
  • Phew! Nowhere near as apocalyptic as many prognosticators thought
  • No changes in royalty rates for all existing wells drilled up to 2017 for a ten year period
  • Existing drilling incentives to remain in place
  • A panel will be convened to review incentives to encourage more downstream development (i.e. refining/petro-chemical
  • A flat royalty rate of 5% will be applied to all drilling until a pre-determined cost allowance has been recovered at which point a different rate will be used. The new rates are commodity agnostic and are based on producers margins not commodity price. In theory, the more efficient the producer and the higher the price, the higher the royalty payment subject to efficiency incentives which will reduce royalties.
• The Federal Liberal Government in Canada introduced a new framework for reviewing energy infrastructure (pipelines really) qwhich include:
  • An assessment of project related upstream GHG emissions
  • Expanded consultation with first nations
  • Expanded consultation with affected communities
• Some companies are starting to report their Q4 and full year 2015 numbers and the results are not expected to be very good
  • Chevron reported its first loss since 2002, reporting a Q4 loss of $588 million versus a profit of $3.5 billion in the same period last year. Included in this are $1.1 billion in asset write-downs
• Enbridge acquired Montney nautal gas plants and related pipelines from Murphy Oil for $587 million
• Athabasca Oil announced a $475 million joint venture to develop Duvernay and Montney assets
• Trican Well Service sold its US pressure pumping business to US based Keane Group for US$285 million sparking an 80% rally in its shares as the deal is seen giving the company significant breathing room on its credit situation
• U.S. Fourth quarter GDP came in at an annualized 0.7%, weaker than consensus, underscoring the continued fragility of the ecopnomic environment
• Drumpf Watch – Donald Drumpf pulled out of the last GOP debate before the Iowa caucuses because he felt slighted by Fox News and insulted by Fox news anchor and moderator Megyn Kelly. In reality? Drumpf was afraid his poll numbers would suffer if he got back in the same environment where he delivered some of his most egregious personal insults of the campaign so far when he targetted Megyn Kelly who’s only crime was being tougher than the hair. The debate “sans Drumpf” was a refreshing discussion of actual potential policy  right up to the end when the closing statements got a little weird, but overall, Trumplestiltskin wasn’t missed.