As Oil Industry Slides, Energy Company Expects Losses

Canada’s energy industry is set to lose $1.3 billion in operating earnings next year as production hits a 12-year low.

The Canadian Electric Power Company Ltd. said Wednesday it expects output to decline 4 percent to 477,132 megawatts this year. The Calgary-based company also forecast a decline of 10 percent for next year, due to commodity price and government decline-sharing obligations.

Edmonton coal output will decrease to 503,035 megawatts in 2018 and 521,986 megawatts in 2019, the company said. Alberta producers have been struggling to pass some of the federal cutbacks on to consumers because of poor projections for oil prices, which fell to a three-year low.

Some small and medium-sized producers that rely on the heavy-duty coal to create electricity have been cutting production in the wake of low prices, AER said.

The financial impact will also be felt by one of Canada’s biggest pipeline owners and midstream companies, Athabasca Oil Corp. Sources say Suncor Energy Inc. is contemplating slowing production at its Northern Saskatchewan Oil Sands project after a dispute over export permits dragged on for more than two years.

“We’re still battling with the government over greenhouse gas emitters, and the aboriginal issue has caused us a lot of angst at the end of the day,” Colin Hansen, chief executive officer of Athabasca, said in an interview. “We think everyone else in the industry is suffering from a deeper recession.”

AER said it expects net income of C$15 million in 2018 and C$60 million in 2019, compared with an operating profit of C$121 million last year. It forecast operating cash flow of C$1.03 billion in the year ending March 31, 2018.

The company is seeking regulatory approval for a C$1.9 billion investment at the Carmichael mine, which would bring in 25 megawatts of capacity and keep production at an annual run rate of about 90 megawatts, Hansen said.

AER said its financial forecast assumes a ten-percent decline in revenue from its oil sands project and a 40 percent decline in capacity and sales of bauxite to Bell Aliant Inc. amid weaker demand.

AER said there is no evidence that its impairments on its financial risk position have risen in response to lower commodity prices.

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