In the battle for market share of Canada’s natural gas industry Seven Generations Energy (TSE:VII) and Tourmaline Oil Corp. (TSE:TOU) are coming out on top even as prices are the lowest in 18 years. These two companies from Calgary, along with Arc Resources Ltd. and Peyto Exploration & Development Corp. are ranked in the top 20 producers. With costs still below commodity prices, Tourmaline, Peyto Exploration and Seven Generations are winning market share and Canadian Natural Resources, despite cutting back some production, is still the largest heavy crude and gas producer in the north as it expands its oil-sands project.
Canada’s Gas Producers Battle
Canada’s gas producers are more competitive than even the cheap U.S. suppliers and when prices are depressed, their lower costs and clean balance sheets give them an edge. Despite oil prices rising after hitting bottom in February, the overall slump has been ongoing since June 2014, and gas prices fell to 88 Canadian cents per gigajoule on March 31, making them the lowest since October 1997. In fact, oil price prospects now look stronger than gas.
Record Storage Volume
After the end of the heating season in Canada, the stored volume of gas is about 511 billion cubic feet, which is 90 percent up from a year ago. The market can only stabilize once storage level normalize, which may take until December this year. However, gas producers such as Seven Generations Energy (TSE:VII), Birchcliff Energy Ltd. and Tourmaline still look like the strongest energy stocks this year, with Seven Generations’ share price up 46 percent.
Tourmaline Oil Corp increased its output by 37 percent in 2015 and reduced capital costs by 25 percent. It has targeted another 10 percent in cost reductions for this year. However, overall Canadian gas output is constantly dropping. Canadian Natural, which is cutting costs and has slashed gas production in half to around 40 million cubic feet a day, is struggling to stay afloat. If the production slump continues, despite some of the stronger players performing well, it could cause real tremors throughout the industry.