Canadian oil and gas companies are expected to increase spending in 2023, but analysts say it will be another year of modest growth and not a return to boom times.

For CanadaB次元官网网址檚 energy industry, 2022 was the year that finally snapped a decade of weak commodity prices and brought prosperity back to the sector. With the lifting of global pandemic restrictions, the war in Ukraine, and the cumulative impact of years of under-investment in oil and gas, energy prices hit record highs in 2022 and Canadian companies reaped record profits.

But most of these profits went to paying down debt and rewarding shareholders, not into major construction or infrastructure projects. And even though commodity prices are expected to remain healthy in 2023, that theme is likely to remain.

B次元官网网址淭he oil producers have become far more financially disciplined over the last six or eight years,B次元官网网址� said Philip Petursson, chief investment strategist at IG Wealth Management, adding the threat of a looming recession in 2023 is one factor preventing oil and gas companies from getting carried away with spending plans.

B次元官网网址淲hat we know is that in an economic downturn, oil demand falls,B次元官网网址� Petursson said. B次元官网网址淪o I think (companies) are going to want to be a little more measured and not say B次元官网网址榟ey, oil prices are just going to trend higher B次元官网网址� letB次元官网网址檚 go all in in 2023.B次元官网网址� B次元官网网址�

In Alberta alone, over the first 10 months of 2022, crude production averaged 3.7 million barrels per day B次元官网网址� an all-time record thanks to surging global demand, according to ATB Financial.

Experts say production will be even higher in 2023, based on the already released capital budgets and production guidance of oil and gas companies. Many companies were able to pay down large amounts of debt in 2022, so will have more cash flow available next year as long as commodity prices hold around that US$75 per barrel mark.

In addition, the Trans Mountain pipeline expansion is expected to be complete by the end of the year, offering additional transportation capacity for oil companies and increasing the potential for export growth.

The Canadian Association of Petroleum Producers says it also expects investments in natural gas and liquefied natural gas to grow through 2023, as the LNG Canada export facility near Kitimat, B.C. continues to progress toward a 2025 completion date.

Petursson said he expects Canadian oil production in 2023 will exceed 2022B次元官网网址檚 record B次元官网网址� but only by a hair.

B次元官网网址淚 think it will nudge a little higher because of projects already in place,B次元官网网址� he said. B次元官网网址淏ut I donB次元官网网址檛 think youB次元官网网址檙e going to see the B次元官网网址榙rill, baby, drillB次元官网网址� mentality of decades ago.B次元官网网址�

Jonah Reznick, a senior research analyst with Wood Mackenzie, said the 2023 capital budgets unveiled thus far by Canadian oil and gas companies show B次元官网网址渟ignificantB次元官网网址� increases in expected capital spending B次元官网网址� in the range of five to six per cent on average B次元官网网址� year-over-year.

But he said much of that is due to smaller projects, and canB次元官网网址檛 be compared to the mega-projects and rapid industry expansion that took place during the boom years of pre-2014.

B次元官网网址淚f you take it net of inflation, I donB次元官网网址檛 think weB次元官网网址檙e seeing tremendous capital spend,B次元官网网址� Reznick said. B次元官网网址淧roducers arenB次元官网网址檛 responding with historical types of responses, even though weB次元官网网址檙e seeing robust commodity fundamentals.B次元官网网址�

In 2023, the industry will likely continue to focus on shareholder returns and keeping their companies financially viable, Reznick said. He added that in addition to global economic uncertainty, CanadaB次元官网网址檚 oil and gas sector is facing increasingly aggressive greenhouse gas emissions reduction targets. The federal government is currently in the process of developing a legislated cap on emissions from the sector, something the industry opposes.

Mike Belenkie, CEO of Advantage Energy Ltd., B次元官网网址� a mid-sized producer heavily weighted towards natural gas, with assets in the Montney region of Alberta B次元官网网址� said his company is planning to grow at a rate of 10 to 12 per cent over the next several years.

B次元官网网址淲eB次元官网网址檝e probably never been in a stronger position than we are today. Our debtB次元官网网址檚 very low, our production is growing, our team is steady and in very stable execution mode,B次元官网网址� Belenkie said.

But he added that he blames years of federal government policy B次元官网网址� including a carbon pricing system that he says puts Canadian producers at a competitive disadvantage to their U.S. counterparts, and a regulatory and political environment that makes it difficult to build major projects B次元官网网址� for constraining the overall industry and putting an end to the era of large projects.

B次元官网网址淥ver the last decade, most of the companies that were weak have died off and fallen away. And the companies that are left behind are fairly strong and have the ability to weather a lot of volatility,B次元官网网址� Belenkie said.

B次元官网网址淏ut most of the industry has almost given up on the notion that we will ever be able to deliver more energy to the world,B次元官网网址� he said, adding he doesnB次元官网网址檛 understand, for example, why the Canadian government isnB次元官网网址檛 working to develop LNG capacity on the east coast to help address natural gas shortages in Europe and reduce reliance on coal.

B次元官网网址淲e now operate within a heavily constrained industry. And weB次元官网网址檝e abandoned almost all illusions that those constraints will come off.B次元官网网址�

Amanda Stephenson, The Canadian Press

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