In the first half of 2022, Alberta’s oil production hit new records. According to a report by ATB Economics, the province pumped out a record setting 3.6 million barrels per day from January to June.
While this may sound like great news, some of Alberta’s leading energy companies have different plans for the industry.
Known as the Big Four, Cenovus, Canadian Natural Resources Limited (CNRL), Imperial Oil, and Suncor earned a total of $23.1 billion in the first nine months of 2022.
But the thing is, these companies aren’t reinvesting into the oil industry.
In order to keep a house plant alive, you need to water it, right? The same is true for just about any industry out there.
The Big Four are doing the exact opposite. Instead of watering the soil that allows the oil industry to grow, these companies are draining the industry dry. How are they doing this?
Well, instead of investing in the industry, these companies are investing in their shareholders. In case investing isn’t your cup of tea, shareholders are people that have invested their own money in exchange for shares of a company.
By purchasing shares, shareholders are essentially buying ownership in a company. So, when a company is doing well, so are its shareholders.
Think of it like horse racing. Each horse represents a company and you are a bettor. If the horse you bet on wins, you could find yourself laughing all the way to the bank.
If they are feeling generous, some companies even offer what are called dividends. Dividends are basically a portion of a company’s earnings dished out to its shareholders.
During the first nine months of 2022, the Big Four served $6.7 billion on a silver platter to its shareholders through dividends. Out of the Big Four, CNRL also bought back $15.6 billion of its own shares from shareholders.
A company does this to reduce the number of its shares that are available on the stock market. This causes the value of existing shares to skyrocket. Its like how hockey cards are more valuable the fewer there are out in the wild.
Normally, rewarding shareholders would be a good thing. But when it comes to Alberta’s oil industry, it’s the exact opposite.
Handing out candy to its shareholders signals that the Big Four have no plans to reinvest in the industry. In other words, these companies would rather pay out to their investors than spend money on new oil developments.
But its not just the Big Four that aren’t reinvesting. Its the Canadian industry as a whole.
In 2015, the Canadian industry reinvested $55 billion into production. Flash forward to 2022 and this number has dropped by almost $10 billion.
Energy companies were reporting record revenues left and right this year, so why are re-investments going down, not up?
This is bad news for Canadians. With less oil being produced, gas prices have inflated more than Kanye West’s ego. To put this into perspective, the cost of getting around is about 16 percent of a household’s expenses in Canada.
In Alberta, the situation is even more grim. The province lives and breathes oil. There are about 140,000 workers in the industry that count on oil developments to keep their jobs.
Duane Sulyma is an experienced rigger who has worked all over Alberta. “Nobody who has a town job wants to come out here, work for a year, get laid off and then have to struggle to find another town job,” he told Castanet.
If these companies aren’t reinvesting in the industry, what happens to their jobs? In most cases, they lose them.
So, what would happen if Alberta’s oil industry disappeared?
For a province that heavily depends on the oil industry, it would be devastating.
