I know it has been awhile since this document came out, however it is now time to publish this on a regular basis again. I hope it hasn’t been missed too much.

The big news of the week by far was the election in Alberta of the provincial NDP party led by Rachel Notley, toppling the 44-year reign of the Progressive Conservatives. While the scale of the loss was unexpected, the result had generally been predicted by polls leading up to the vote. The NDP platform pledged to unwind most of the PC budget proposals and pursue a more aggressive tack with regards to certain policy matters, including:

• Increasing the top marginal tax rates for personal income tax
• Raising corporate taxes from 10% to 12%
• Instituting a royalty review for oil and gas
• Being more aggressive on climate change initiatives such as retiring of coal power plants and carbon pricing
• Rolling back health care premium implementation
• Restoring funding for education

As a financial advisory and M&A firm involved in the energy sector, we are mindful of the uncertainties created by a change in government and directional shifts in how key industries are perceived, however our position is to take a wait and see approach. The new governing team requires time to get up to speed on the various files and has pledged to work with industry to achieve pragmatic outcomes to their various policy initiatives. At this point, anything but the benefit of the doubt is speculative. Our advice to both buyers and sellers is to stay the course and proceed with cautious purpose – good deals will always get done.

At the time of writing, the Calgary Flames were still undefeated with a provincial NDP government.

Prices as at May 8, 2015 (May 1, 2015)

• WTI Crude: $59.43 ($59.10)
• Nymex Gas: $2.866 ($2.776)
• US/Canadian Dollar: $0.82 ($ 0.8226)

Highlights

• The price of oil hit a high for the year early then gave back some gains during the week as conflicting news inserted some uncertainty into prices.
  • Storage declined and lower 48 production declined
  • The rig count continues to fall
  • Speculation about the pace of potential Iranian production increases upon lifting of sanctions held back prices
  • There is some concern that the current rally is too soon as a number of shale producers have indicated they will increase summer drilling activity on the backs of $60 to $65 oil
• Natural gas gained during the week as storage injection lagged.
• As of May 1, 2015, US natural gas in storage was 1.1786 billion cubic feet (Bcf), which is 3.6% below the 5-year average and about 71.1% higher than last year’s level, following an implied net injection of 76 Bcf during the report week.
• As at May 1, 2015, US Crude oil supplies were at 487.0 million barrels, an decrease of 3.9 million barrels from the previous week and 89.4 million barrels ahead of last year.
• The number of days oil supply in storage was 30.1, ahead of last year’s 25.1.
• Lower 48 production declined from 9.369 million barrels per day from 9.373
• Oil rig count was down to 668 from 679 the week prior, the lowest since November 2010
• Natural gas rigs drilling in the United States was unchanged this past week at 221.
• As of May 4, the Canadian rig count is 75 (10% utilization) (51 Alberta (10%), 20 BC (24%), 4 Saskatchewan (3%)). Typical utilization for this time of year is about 30%.

Drillbits

• Earnings season fallout continues as companies continue to post disappointing results as operating earnings decline dramatically due to lower prices and, for many Canadian operators, decreased cash flows are exacerbated by mark to market losses on currency and production hedges leading to outsize quarterly losses
• Service companies reporting during the week reported quarterly earnings off between 50% and 75% of last year’s result as reduced activity and an early break-up contributed to poorer results.
• Repsol completed its acquisition of Talisman