Crude Observations

A Stampedean Metaphor

One of the best and most annoying things about living and working in Calgary is navigating the annual all-consuming celebration of fun and cowboy hats that is the Calgary Stampede. Whether it’s surviving deep-fried French fries coated in Oreo batter, boiled corn rolled in ground-up spicy Cheetos, mainlining mini-donuts or running the gauntlet of corporate gatherings, Stampede is a unique event in our city.


For people who live in Calgary, the Calgary Stampede, while a well-known international tourist attraction is also a combination of rite of passage and a (mud-spattered) window into how the local economy is doing. It’s both a lagging and leading indicator of the mood of the city and province’s business community, more specifically the energy sector.


In boom times, Stampede parties and celebrations tend to be lavish, garish and quite often over the top – a true bacchanalian homage to the excesses that everyone associates with the energy sector.


In down years, the mood is decidedly somber, with many low key events. The focus is on restraint and charitable contributions and many of the invitations (even the emailed ones!) will be in black and white.


In between, in what I will call the “transition years”, the party struggles to find its footing. And quite often it rains.


Added into the mix is a whole kabuki theatre sideshow of municipal, provincial and federal politicians and leaders of national and provincial parties all vying for the attention of the media and public at large by trying to prove their cowboy bonafides by flipping tasteless pancakes, exposing for all to see their astonishingly poor fashion choices and delivering tired political messages in a cowboy metaphor infused version of a western drawl.


Seriously though, it just wouldn’t be Stampede without some federal Liberal controversy or another stiff and awkwardly dressed conservative flipping pancakes and posing for pictures with some children and First Nations people (all in one if possible!) before dashing off to have important closed door conversations with who knows who about whatever. Although interestingly, most politicians fail to grasp that not much gets done during Stampede except parties and that the person they are talking to is most likely on their way to getting drunk or is still that way from the night before.


At any rate, no amount of politicians flitting around, hosting breakfasts, building up or tearing down the economy and buying boots (seriously, is there anything more annoying that politicians doing their photo op boot purchases and sticking on their market study determined cowboy look?) can change the reality on the ground. The midway, the parties, the attendance, the rodeo, the chuckwagon races, the tarps for sale on the chuckwagons, the grandstand show – these all tell us what may or may not be going on.


So what is this year’s Stampede telling us?


Well I don’t know about the rest of Calgary, but for me, I am finding it hard to get a real grasp on what this year’s Stampede is all about and what it has to tell us about the state of the energy sector. It’s as confusing and full of conflicting messages as the OPEC/NOPEC inventory situation.


I spent some time on the grounds and the crowds were sizable – they seem bigger than the last few years, they were having fun and in general whooping it up as they are supposed to do, but ultimately it felt a little restrained and lacked direction and cohesion. Those events I was able to attend seemed more subdued than usual, but also a bit bigger and better attended. Spending time walking the midway and sampling the overwhelming amount of fried food, activity levels definitely seemed up, but I didn’t get that rush of excitement or buzz that I typically do when confronted with poutine, chicken wings and a giant pickle on a stick. Even the beef on a bun seemed forced. At times it felt like everyone was there, but they were going through the motions because they had to, hoping for something a little better to come along.


And the prices were high – inflation was readily apparent in costs for everything pretty much across the board.


On the other hand, we went to the chuckwagon races and the grandstand show and notwithstanding the out of control electrical storm and torrential rain that cut short both the chucks and the show, the attendees seemed engaged and ready for fun. There was even singing.


So outside of the midway moshpit, you could feel something different. Parties and get togethers were marked by measured fun and shared experience. “How was last year? A train wreck. But it can’t get any worse!” And the mood was neither panic nor capitulation. It was more tongue in cheek – “can you believe this is year 3 of this sh**?”


It’s hard to get a solid read on what is happening, it really felt like it could go either way.


Which I guess is kind of where the Alberta economy and more specifically the energy sector currently sits.


Politically we are at true cross-roads. We have an NDP government at the midpoint of their mandate, running up massive deficits in the face of a brutal industry recession and a fractured opposition that is currently pursuing the herculean task of knitting together two right of centre parties to form a united front and, (in theory for them) wrest back control of the provincial legislature. But really no one knows what is going to happen and for that reason, the politicians are heavily invested in seeming to be “present”. Even Justin Trudeau, who couldn’t remember Alberta on Canada Day, managed to rearrange his schedule to come to town tomorrow for a full-on selfie fest.


On the energy side, we’ve got a commodity market that is somewhat adrift – a Goldilocks scenario that is neither too hot nor too cold. Rig counts are up, but not too much. Pockets of the industry are flat out busy while others can’t turn a wheel. The Permian in Texas is seemingly sucking the investment blood out of the oilsands and every other major play in the world, but, so I am told, the less heralded Montney play here in Canada has the second highest per basin rig count on the continent after the Permian. That’s good, isn’t it?


Headwinds are strong in terms of pipelines to any coast, energy mega projects, the oilsands and development of critical infrastructure such as LNG. Obstructionist, unmandated governments are trying to block 15% of our economy at every turn. Yet at the same time, it seems like the momentum has never been stronger to actually get something done.


It feels like something wants to happen, like the sector wants to bust out of its stupor and race ahead but it’s still shackled to low prices and a lack of confidence in the market turning around.


I have never before been confronted by this conflicting sense of optimism for the future and pessimism about our prospects, often in the same day, sometimes even in conversation with the same individual!


And I feel the mood at this year’s Stampede reflects that – it’s similarly adrift, floating in its bubble of parties, some of which are genuine expressions of fun, some of which are just going through the motions and mailing it in.


I am of course in no way suggesting that the Greatest Outdoor Show on Earth is anything but – I love Stampede, warts and all. Instead, the reality is, and always has been, that the Stampede is a reflection of the mood of the city and that, as the city gets larger and more “sophisticated”, its personality and that of the Stampede gets more complicated and nuanced. Yet under it all is a manic and barely restrained energy – the dynamic, entrepreneurial, get it done spirit that is Calgary at its finest – just waiting for a spark. An attitude of “enough of this crap, time to get busy.”


Case in point, since moving here in 1998 (yes, yes, I’m an import too), I have never (EVER) gotten any serious or actual work done during Stampede. People who hate the event regularly leave. Clients and advisors are unavailable or not in any condition to talk. Vacations are in full swing. This year though, it’s a little different. Less play, more work. The phone has been ringing. Conversations have been real. Deals are getting advanced. It’s promising. It’s down to business, headwinds be damned.


Where does this all lead? Well, based on my rather unscientific observations, I feel the city and the energy sector is ready to break out or already is. The fuse has been lit – we just missed it. It’s Canadian firms stepping up in the oilsands. It’s unconventional basins that rival anything in the US. It’s a political environment that is fluid and dynamic. It’s young, energetic management teams taking over in the service sector. It’s deals getting done. It’s Calgary waking up from close to 36 months of being downturned, downsized and downtrodden and saying enough is enough. It’s a Stampede seemingly adrift but getting its legs under itself for the next extended run.


It’s all good. I have a party to get too.


See you next week. Yahoo!


Prices as at July 14, 2017 (July 7, 2017)

  • The price of oil rallied during the week on solid US inventory draws.
    • Storage posted a large decrease
    • Production was up
    • The rig count in the US grew marginally
  • Natural gas was relatively flat on the week. This $3 range combined with fairly tame injections feels kinda bullish for summer.
  • WTI Crude: $46.60 ($44.31)
  • Nymex Gas: $2.983 ($2.862)
  • US/Canadian Dollar: $0.7915 ($ 0.7772)


  • As at July 7, 2017, US crude oil supplies were at 495.4 million barrels, a decrease of 7.5 million barrels from the previous week and 4.2 million barrels ahead of last year.
    • The number of days oil supply in storage was 29.0, behind last year’s 31.4.
    • Production was up for the week by 59,000 barrels a day at 9.397 million barrels per day. Production last year at the same time was 8.485 million barrels per day. The change in production this week came from an increase in Alaska deliveries and Lower 48 production.
    • Imports fell from 7.742 million barrels a day to 7.610, compared to 7.841 million barrels per day last year.
    • Refinery inputs were up slightly during the week but still strong at 17.244 million barrels a day
  • As at July 7, 2017, US natural gas in storage was 2.945 billion cubic feet (Bcf), which is 6% above the 5-year average and about 9% less than last year’s level, following an implied net injection of 57 Bcf during the report week.
    • Overall U.S. natural gas consumption was up 6% during the week – with increases in power offsetting declines in retail, industrial and commercial demand
    • Production for the week was down 1% and imports from Canada were up 6% compared to the week before. Exports to Mexico were flat.
  • As of July 10, the Canadian rig count was 180 (27% utilization), 118 Alberta (27%), 22 BC (31%), 37 Saskatchewan (32%), 3 Manitoba (20%)). Utilization for the same period last year was just above 10%.
  • US Onshore Oil rig count at July 14 was at 765, up 2 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States was down 2 at 187.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count was flat at 21
    • Offshore rig count at January 1, 2015 was 55
  • US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 56%/44%


  • Slow news week.
  • Wildfires continue to rage in British Columbia. Please consider a Red Cross donation if you can. It’s simple, easy and it helps.
  • Trump Watch: Don Jr. Is it possible the will is being rewritten? That’s all I have to say.
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