As many among you know, this is in many ways my favourite time of year as it marks the beginning of March Madness, the annual ritual single elimination NCAA basketball tournament. In fact, I have the Duke game live-streaming as I write this (yes – I do that).

Since I have yet to fill out my bracket for this year’s tourney, I have rankings and match-ups on the brain, so I said to myself: “Self, wouldn’t it be cool if there was an energy sector bracket that we could all follow and (not) gamble on?”

While the answer to that question is undoubtedly a resounding “no”, I’m going to do it anyway, so please find forthwith my Energy sector bracket, reduced to a “Sweet Sixteen” so I don’t bore you with all the ridiculous mismatches such as OPEC taking on UK North Sea producers in the opening round.

So what I have tried to do is rank the major themes affecting or expected affect the energy sector 1 through 16 and have them face off against each other in an epic battle for global influence.

Sweet Sixteen

• In the first round, perennial favourite and tournament champion, number one seed OPEC made short work of number 16 seed Drumpf, who, after a number of flagrant fouls and an ejection for unsportsmanlike conduct simply leaves the court, telling everyone they’re fired.

• Supply and Storage continued its dominance, piling up the score, while Oilsands, with its slow motion, ball control offense was unable to mount a comeback in this year’s tournament. However, with the depth Oilsands brings to the table, it is expected that they will be a perennial contender for years to come.

• Emissions (formerly known as CO2, but now including methane, hence the rebranding) made short work Capex which, as a result of a significant amount of suspensions and surprise cuts, didn’t even field a team until the second half of the game.

• Deleveraging managed to eke out a win against China Fears which started strong, but faded down the stretch. Deleveraging looked in many ways to be an unstoppable force.

• Alternative Energy wasn’t able to substantiate its elevated tournament ranking as Demand has the upset of the first round, exposing the lack of depth on the Alternative Energy team, using a full-court press to rattle the core group and reducing this one-time tournament darling to shooting bombs from outside the arc in a vain come-back attempt.

• Access to Capital proved to be a much more powerful theme than the Price Recovery, as recent surprising strength in capital-raising overshadowed the largely freshman Price Recoveryteam, whom many consider one-and-done.

• In another upset, LNG and Pipeline Infrastructure eked out a win over Regulatory Hurdles in a thrilling triple over-time match as the Federal government couldn’t match the relentless free-throw shooting of economic necessity. However, after the game, the result was immediately challenged on the basis of it having been played on a possible fossilized spirit-bear scat pile, so a rematch was scheduled for 6 months hence.

• In the last match of the day, number 8 and 9 seeds Iran and Shale went head to head in a highly anticipated match, with Shale running the floor with the Iran team whose best players faded under the relentless assault of actual production.

Elite Eight

A number of intriguing matchups in this round.

• In what was billed as an epic matchup between OPEC and Shale, it wasn’t even close, as the plucky upstart from the American Midwest couldn’t keep up with the head-fakes, ruses, freezes, runs and sheer numbers of the juggernaut number one tournament seed.

• In another highly anticipated matchup, Cinderella-story Demand managed to outmuscleDeleveraging to advance to the Final Four, using positive energy to overwhelm most of the defenses thrown at it.

• LNG and Pipelines were exposed as nothing more than a regional tempest in a teapot againstSupply/Storage, as the big recruits both domestically and overseas asserted themselves and ran the plucky Canadians off the front page.

• In the final match, which was surprisingly close, highly favoured Emissions fought off a spirited challenge from Access to Capital, setting up a highly anticipated showdown with Supply/Storage.

Final Four

• In the opening game, Demand took it to OPEC, quickly tiring out the larger and less nimble Middle Easterners by attacking at all sides. OPEC pulled out all the stops to try and slow down demand but in the end, its isolation and delay game proved its undoing, as ultimately Demandhad the much fresher legs.

• In another highly contested match, Emissions took Supply/Storage to the wire, but lost it on a last-minute free-throw from a raw freshman from Cushing, Oklahoma. Unfortunately, it has been a war of attrition for Supply throughout the tournament and a number of key components of their strategy sustained significant injury.

Championship

• In a shocking twist, just prior to the game, some members of the Supply/Storage team (known as the “missing barrels”) mysteriously vanished, leaving their shorthanded teammates hopelessly overmatched against a focused and aggressive Demand team and their new recruits from China and India. At the end of the day, it wasn’t even close as Demand always wins the day.

So there you have it – agree or disagree, it’s hard to argue that the metaphor got taken behind the proverbial woodshed and beaten to death.

Go Duke and go Virginia.

Prices as at March 18, 2016 (March 11, 2016)

• The price of oil ended the week up
  • Storage was up less than expected, refinery turnaround season is coming to a close
  • Production was down
  • The US Fed interest rate announcement arrested a mid-week slide
  • The rig count was flat
  • Prices broke $40 but couldn’t hold as the week came to an end.
  • More noise about the freeze and a planned meet date supported prices
• Natural gas rose during the week.

• WTI Crude: $39.41 ($38.47)
• Nymex Gas: $1.890 ($1.811)
• US/Canadian Dollar: $0.7674 ($ 0.7557)

Highlights

• As at March 11, 2016, US crude oil supplies were at 523.2 million barrels, an increase of 1.3 million barrels from the previous week and 74.7 million barrels ahead of last year.
  • The number of days oil supply in storage was 33.0, ahead of last year’s 30.0.
  • Production was down slightly for the week at 9.068 million barrels per day. Production last year at the same time was 9.349 million barrels per day. The decrease in production this week came from the Lower 48.
  • Imports declined but continued at elevated levels during the week
• As at March 11, 2016, US natural gas in storage was 2,478 billion cubic feet (Bcf), which is 48.3% above the 5-year average and about 67% higher than last year’s level, following an implied net withdrawal of 1 Bcf during the report week.
  • Overall U.S. natural gas consumption fell by 10.7% for the period led by residential and power consumption
• Oil rig count at March 11 was up to 387 from 386 the week prior.
  • Rig count at January 1, 2015 was 1,482
• Natural gas rigs drilling in the United States was down to 89 from 94.
  • Rig count at January 1, 2015 was 328
• The continuing massive decline in U.S. rig counts continues to be a somewhat overlooked story given all of the OPEC related noise
• As of March 14, the Canadian rig count was at 72 (11% utilization), 47 Alberta (10%), 19 BC (23%), 6 Saskatchewan (5%), 0 Manitoba (0%)). Utilization for the same period last year was about 25%.
• US split of Oil vs Gas rigs is 81%/19%, in Canada the split is 17%/83%
• Offshore rig count was at 26
  • Offshore rig count at January 1, 2015 was 55

Drillbits

• Final results for Q4 and full year 2015 numbers continue to trickle in.
  • Bonterra Energy reported funds from operations for fiscal 2015 of $118 million compared to $210 million for the same period last year and net earnings of ($9) for 2015 vs $39 million in 2014. Bonterra’s $40 million capex program is designed to maintain production at current levels
• Saw this interesting chart on capex projections for 2016 from Wood McKenzie. Wow.

• TransCanada announced a $13 billion acquisition of US-based Columbia Pipeline as well as a $4.2 billion bought deal financing
• Pembina Pipeline Corporation announced the acquisition of Midstream sour gas gathering assets from Paramount Resources for $556 million, a $300 million bought deal financing and a dividend increase. They must be doing something right!
• The Calgary Stampede Chuckwagon canvas auction was held on March 17. For those not familiar, the drivers in the races sell advertising/sponsorships on the canvas that covers their wagons and the results of the auction are generally considered a bellwether for the economic mood in both the city and for the oilpatch who are typically major buyers. This year’s result was about 15% less in total than the prior year and the worst haul since 2010.
• The Canadian Environmental Assessment Agency is expected to deliver its report on the Pacific Northwest LNG project to Environment Minister McKenna on March 22nd. The Minister is widely expected to refer the matter to Cabinet for a final decision. Western Canada is on pins and needles. The outcome of this decision will be a litmus test of the government’s economic pragmatism against more enviromental selfies
• Drumpf Watch – Won Super Tuesday part 326. Chased Marco Rubio from the race. It is now unclear if the “establishment” can stop his nomination and he in effect threatened riots if he didn’t get the nomination. Assuming he gets the nomination, will he threaten riots if he loses the general election too? At some point the madness has to end. An interesting market side-note, the chief equity strategist for a US firm predicted the S&P 500 might fall 50% if Drumpf is elected.