Oil and gas companies curtail production as fires continue to blaze in Alberta

Some oil and gas producers in Alberta are temporarily shutting in production as wildfires rage across the energy-producing province.

With more than 100 active fires burning across Alberta and a provincial state of emergency in place, oil and gas companies with operations in the western and northwestern parts of the province have relocated workers and halted operations.

Crescent Point Energy Corp., which has significant operations in the Kaybob Duvernay light oil play, said Monday it has temporarily shut in production of approximately 45,000 barrels of oil equivalent per day in the affected areas.

Vermilion Energy Inc. has shut in about 30,000 barrels per day of production, while Paramount Resources Ltd. said Sunday its operations in the Grande Prairie and Kaybob regions are being affected and that it has temporarily curtailed about 50,000 barrels per day of production.

Rafi Tahmazian, a portfolio manager with Toronto-based investment firm Canoe Financial, says while this temporary halt in production might seem like bad news for energy companies, it's ultimately a positive for them. With supply down, prices will go up.

"It's a blip in the life of the company's production," he said.

"We're on such a thin razor's edge of availability that it's going to generate opportunity for pricing." 

Tahmazian says he doesn't see the current wildfires as causing any medium- or long-term effects on energy prices. And for consumers, he believes it's unlikely a small spike in price will actually affect costs at the pump.

Unclear when production will resume

Tourmaline Oil Corp., Canada's largest natural gas producer, said Monday that members of its staff and their families have been safely removed from certain operated facilities and homes in the Edson area. Tourmaline has shut down nine gas processing facilities in the region.

Cenovus Energy Inc. said in an email it has safely shut in production and brought plants down in some areas of its conventional business.

Other companies that have shut in production include Pipestone Energy Corp., which has temporarily curtailed approximately 20,000 barrels per day of production in the Grande Prairie area, and Kiwetinohk Energy, which has shut in the majority of its Placid operations "in response to downstream third party interruptions" that are in proximity to the Alberta wildfires.

Most of the affected companies have reported no damage to their infrastructure or assets so far. Vermilion Energy said its assessment to date indicates "minimal" damage to key infrastructure.

It is unclear when oil and gas companies will be able to resume operations in the affected areas.

Scotiabank analyst Jason Bouvier said in a morning note to clients that Crescent Point alone could see its 2023 cash flow per share decrease by about four per cent due to the impacts of the fires, assuming the company's Kaybob Duvernay production is shut in for the remainder of the second quarter.

About 29,000 people have had to leave their homes due to the wildfires.

Alberta Premier Danielle Smith declared a provincial state of emergency on Saturday.