How Ottawa is providing a financial lifeline to the oilpatch
Layoffs and spending cuts continue, despite several funding programs from the federal government
This story is part of The Big Spend, a CBC News investigation examining the unprecedented $240 billion the federal government handed out during the first eight months of the pandemic.
When the oilpatch was sideswiped by a pandemic and an international oil price war, a warning went out that the industry had been pushed onto "life support" as crude prices and company share values both plummeted.
Ottawa pledged to help, ultimately rolling out a variety of funding programs economy wide — and some specifically for the oilpatch — in an attempt to get dollars flowing to the struggling sector and limit the damage.
Now, in the months since the programs have been introduced, there's a clearer picture of where and how the programs are working, with billions of dollars of support finding their way to the industry just as higher crude prices have also brought some stability.
Yet, despite the financial aid, businesses have still shuttered and thousands of workers have lost their jobs as oilpatch spending plunged. The oilpatch is expected to have its slowest year for drilling activity ever recorded — and next year is only expected to be marginally better.
Still, industry leaders say the federal aid has indeed helped limit the carnage in 2020 caused by a price war to begin the year, followed by the pandemic which sent oil prices to historic lows as demand for fuel decreased amid work-from-home measures.
The Canada Emergency Wage Subsidy (CEWS) has been particularly popular, according to Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors.
All of the companies belonging to the association accessed that program, said Scholz, which helped retain key employees and prevent further foreclosures.
"We're very encouraged that the federal government actually has decided to continue this program into 2021 because there's no doubt about it, it has saved jobs and companies, for that matter."
Data gathered by CBC News provides a glimpse into some of the financial help that publicly traded companies in the oilpatch have accessed from the CEWS program.
The data does not include all companies that received such funding. For example, there's no obligation for private companies to publicly report such information. Some public companies also didn't state how much funding they'd received in their financial reports.
The snapshot shows 23 publicly traded companies identified in the CBC's analysis of the oilfield services sector, as well as drillers, have received more than $140 million, pre-tax, in CEWS funding, between them, including more than $23 million to ClearStream Energy Services and $16 million to Precision Drilling.
"The CEWS program has benefited Precision and our employees as it has allowed us to retain a higher employment level for Canadian positions within our organization," Precision said in its third-quarter financial filings.
"As a result, we are highly supportive of this effective government program and are encouraged by the recent commitment of the Government of Canada to extend the program to June of 2021."
Three utilities and pipeline companies received CEWS funding totalling roughly $58 million, pre-tax, according to the data.
The analysis also indicates that more than $250 million in pre-tax funding from CEWS flowed to 35 publicly traded oil and gas producers.
That includes $120 million to Imperial Oil and $70 million to Husky Energy. During 2020, Imperial Oil maintained its dividend payments to shareholders, while Husky slashed its dividend by 90 per cent. Cenovus Energy has received $40 million from the program.
The total figure does not include two of the largest companies in the Canadian oilpatch as both Suncor Energy and Canadian Natural Resources have not disclosed the amount of CEWS funding they have received from the federal program.
Contacted by CBC News about the funding, Canadian Natural Resources wouldn't comment beyond saying it did qualify for the program, while Suncor said it welcomed the federal support during a period when it took on $4 billion in debt.
Oil and gas producers have so far received more than $500,000 in funds from the loan program known as the Canada Emergency Business Account (CEBA).
There were loud calls from the sector and the Alberta government in the spring for Ottawa to provide help to the struggling sector, including some pointed criticism about whether those concerns were being met with the required urgency.
The loan programs from the Business Development Bank (BDC) and Export Development Canada (EDC) were slower to help than some had wanted, but are now assisting some small and mid-size companies such as oil and gas producers, oilfield services firms, and refineries.
By the beginning of December, the EDC had provided more than a billion dollars in support including:
- About $852 million in bonding support for 43 companies
- About $350 million in loans either approved or in the process of approval for 10 companies
- About $15 million in credit insurance for 32 companies
Those programs are often overlooked, but are having an impact, said Tristan Goodman, president of the Explorers and Producers Association of Canada, during an industry event last month.
"It looks like those are starting to take hold and some credit has to be given there," said Goodman, while also praising the federal government for its support of the Trans Mountain expansion pipeline and the LNG industry in B.C.
One source of federal funding specifically for the oilpatch is $1.7 billion to clean up old oil and gas wells and $750 million toward reducing methane emissions. Together, the programs are expected to create about 10,000 jobs across the country, according to the federal government.
The well cleanup funding is split between British Columbia ($120 million), Alberta ($1 billion) and Saskatchewan ($400 million), with an additional $200 million loan for Alberta's Orphan Well Association, which remediates aging infrastructure leftover when companies go bankrupt.
The cash for cleaning up wells and the wage subsidy program are helpful, but Alberta's energy minister is waiting to see what types of funding the federal government will provide to help stimulate the economy.
"We'll need the money to go to jobs now and support jobs now, not jobs that would be decades, down the road in the future," said Sonya Savage.
For its part, Ottawa is trying to assure the oilpatch of its importance to the country, despite stern criticism from environmentalists that the federal government should not bail-out the industry amid growing concern about the impact of climate change.
"Our government wants your industry to succeed. We are proud of what you're doing," said federal Parliamentary Secretary for Natural Resources, Paul Lefebvre, during an event organized by the CAODC last month.
"If the Canadian oil and gas industry doesn't recover, Canada will not recover. Period. After all, energy is our family business."
For Alberta, the federal government has sent $5 billion to help the half a million people in the province who lost their jobs this year, according to the prime minister.
Further struggles are expected as drilling activity and spending in the sector remains low, largely due to the ongoing pandemic. In addition, potential job losses announced by some of the largest companies are expected to take effect in 2021.
And, while the federal funding for the sector is in the billions of dollars, the figure can seem quite small considering the size of the industry and how many people it employs.
Further government aid may be needed as many players are still not in a position of financial strength to begin reinvesting and the ongoing pandemic is impacting global energy demand.
"We're hopeful that if more companies need liquidity they'll be able to access it through the government programs, potentially as far as spring 2021," said Ben Brunnen, vice president of fiscal policy with the Canadian Association of Petroleum Producers.
While the steps Ottawa has taken during the pandemic have been helpful on balance, the oil and gas sector would also like to see other support too.
"Ideally, we'd like to see the government take a more supportive stance toward our sector in terms of the role that we play in the economic recovery and our future in the Canadian energy mix and the Canadian economy as we seek to achieve net zero emissions by 2050."
With files from the CBC's Tony Seskus