Oil producer gets payday in Alberta, even with wells shut By Bloomberg | April 24, 2020, 6:26 a.m. | Share:
Delta Stream Energy Corp., a small private-equity backed oil producer in central Alberta, is shutting down all its wells by next month amid the biggest oil rout in history. But zero production won’t mean no income. The company's hedge book means that Delta Stream expects to earn close to C$40 million ($28 million) this year from positions locked in when oil was trading closer to $50 a barrel and higher, chief executive officer Roger Tang said by telephone. The company is winding down production, pumping about 1,000 barrels a day from wells in the Clearwater formation near Slave Lake, less than a tenth of what the company was producing before the downturn, Tang said. "After April, we have nothing," he said. “We are not going to sell oil." Oil futures in New York collapsed this week to an unprecedented negative $40 a barrel as the coronavirus pandemic slashed demand and storage facilitiesfilled to capacity. Before the collapse, Delta Steam would enter into hedging positions on Western Canadian Select crudeand West Texas Intermediate futures every six to eight months at prices of between $45 and $55 a barrel, Tang said. The company is now looking to cash in on those positions. Delta Steam is one of a handful of companies including Cenovus Energy Inc. and Spur Petroleum Ltd. to tap the growing heavy oil play in the Slave Lake area. The region is remote and until a new pipeline is completed, oil must be trucked part of the way to an existing pipeline. Tang estimates that Delta Stream is making as littleas a $1 a barrel at current rates, butis shutting for the time being amid the risk for negative prices. Canadian oil producers are some of the worst-affected by the world-wide glut due to their lack of pipelines and long distances to U.S. refineries. Heavy Western Canadian Select crude traded at about $13 a barrel at Hardisty Thursday, according to NE2 Group. © 2020 Bloomberg L.P.