Well folks, here it is. That time of year where we all hopefully are starting to wind down. Kids are coming out of school, people are getting excited for their upcoming vacations, even if the US isn’t as popular for Canadians as it once was, and all of Calgary is preparing for Stampede in their own unique way. Whether that is dusting off the cowboy costumes for another year of fun or high-tailing it out of town doesn’t really matter – I’m all about tradition.

Another tradition this time of year is the ritual bloodletting for people foolish enough to invest in energy stocks. Like me. The last few months have been a rollercoaster. Lots of stocks that hit highs during the heady days of the Iran Excursion are seeing their market cap challenged through a combination of relentless cease fire optimism, jawboning, tariffs, tariffs and more tariffs, OPEC swamping the market when Hormuz reopens, the lack of any discernible risk premium in prices and Donald Trump’s ongoing efforts to make the US energy independent by taking all the policy positions necessary to discourage any actual drilling.

Meanwhile, of course, demand for oil and gas continues to blow the doors off everyone’s forecasts, the US refuses to recess, China is China and, the last time I checked, the only actual spare capacity for oil is OPEC+, Saudi Arabia and (ironically) Iran to be specific, who many think will soon be Hormuzing their way to a glut.

The result? A two-week bloodletting! Underperformance for the sector versus tech again. Just sluggishness all around while the likes of Tesla and SpaceX see multi-percent gains based off of Elon thought bubbles and Reflecting Pool Algae blooms

Fortunately (ugh), this may turn around thanks to Israel refusing to play ball in the ceasefire and the reality of physical markets becoming more prominent as the chattering class moves off the 14 point France-Iran MOU. Wait, not France? But it was a surrender, so I figured it had to be the cheese-eating surrender monkeys….

As a result of the uncertainty, prices have stabilized in the last week. And with commentators turning to betting websites to predict whether the Strait of Hormuz will ever truly open and who has the key, there is now apparently a 37% chance that 20% of the world’s oil exports will remain unable to reach their destination.

To be clear, that’s bad.

Ironically, last year at this time, we were having the same conversation, but Iran hadn’t pulled out the big stick yet. Now they have.

Speaking of last year…

Another tradition of course is the gratuitous trip down memory lane. Which I do every year at this time, mostly because I’m lazy and I tend to do a fair amount of blog repetition, but also because summer is coming and it is, in fact, time to slow down a little bit. Plus, as some of you no doubt know….

It was my damn birthday this past Monday, so you get the birthday blog.

I started the birthday blog when I hit Freedom 55, which as anyone who works in the energy industry knows is an absolute pile of horse-hockey.

This year I am sadly turning 61. The big Six-One. Otherwise known as at least a decade away from retirement.

Looking back to when I officially joined the Freedom 55 cohort and thought that the pandemic was over and all talk of COVID done, I was giddy at the prospect of all the goodies and super-cool seniors’ benefits and discounts that I was suddenly qualified for such as 20% off at Golden Griddle (excludes alcohol); 20% off at Shoppers and 20% off at Value Village.

Not to mention the best senior’s discount. The ability to put 20% less effort into the blog anytime I want, freeing up time to tell people to get off my lawn.

At any rate, true to tradition, each year I throw together a lazy list of energy and/or random thoughts. This year there are, of course, 61 of them. Holy crap. My daughters think I am super-old. And they may be right, but you only feel old thinking about Canadian teams winning Stanley Cups. It’s been that long.

1. Just like last year, we are depending on OPEC+ and regional conflict to help us out with the price of oil. Where last year we were dealing with $60-$80 oil, $2-$4 gas, looming supply issues, persistent inflation, war in Europe, tariffs and compulsively negative market sentiment, this year we are dealing with closed Straits, shaky cease fires, jawboned prices, physical/paper market disconnects, inventory depletion. inflation, was in Europe and oil in the $75 to $150 range. The more things change…
2. The natural gas industry in Canada has actually been a beacon of stability now for seven years, is attracting international capital and interest and is about to go into hyperdrive with even more LNG coming on stream and/or FID’d. Go figure.
3. Up until the Strait was closed, the Saudis have run OPEC+ like the true masters of the oil industry they are. After successfully throttling the US shale industry, the KSA has overseen the longest period of OPEC+ solidarity ever seen and successfully deflated the oil inventory bubble that threatened the industry. And made a bazillion dollars in the process. Now they are waiting to pump up production up to deal with internal cheats and crush Iran. Well played.
4. North America has more than 3 million miles of oil and gas pipelines, split roughly 80/20 between the United States and Canada. 1800 miles of Keystone XL will never be part of this.
5. Since I was born in 1965, there have been 5 major oil price shocks including exactly one day when prices were negative and the ongoing one orchestrated by Donald Trump. Each time the market recovered. Go figure.
6. I am older than OPEC
7. Having achieved Freedom 55 SIX (!?) years ago and planning to work until I’m at least 102, I am reminded that one of my daughters’ teachers played an investment advisor in one of the old time classic Freedom 55 ads – he’s also younger than me. I guess I could have learned a thing or two from that ad.
8. In 1965, the American’s closest ally in the Middle East was Iran
9. The first real frac job ever recorded was in 1865 (100 years before I was born!) in Titusville Pennsylvania when Civil War veteran Col. Edward A.L. Roberts (not a real colonel!) lowered a torpedo into an oil well, covered it with water and detonated it, vastly improving the well’s yield.
10. The first commercial hydraulic frac was in 1950.
11. Since that time, frac’ing has significantly improved, but the process is still the same – jam something (water, sand/mud, explosives) under massive pressure into a well until the rock cracks (fractures) and the molecules/liquid flow to the surface. Biggest difference between now and then? Efficiency. Safety. Less explosives. I guess we can’t forget that. Boom.
12. The longest horizontal frac on record is about 18,500 ft, drilled in the Utica Shale, which is a natural gas play. Total depth was about 27,000 ft. 1.5 miles down and 3.5 miles horizontally. 124 frac stages. Holy cow.
13. The largest frac job ever utilized close to 50 million pounds of sand or proppant in a Haynesville shale well in Louisiana. The lateral length of the well was about 10,000 ft. As a point of reference, the Eiffel Tower weighs 14 million pounds and is just under 1,000 ft tall.
14. “Frac hits”, a phenomenon where laterally drilled wells start to run into vertical and horizontal wells belonging to other operators continue to plague large scale drilling operations in the United States. This is leading to much legal work. Seriously folks – 5 miles of drilling in multiple directions from a multiwell pad and held open by 3 and a half Eiffel Towers worth of drill pipe, sand and water – is anyone really surprised companies are running into each other?
15. Canada has the 3^rd largest reserves of oil in the world and the 10^th largest reserves of natural gas
16. Canada is the only country in the world that basically has only one customer for its largest export. Well at least until the TransMountain Expansion was finally done.
17. The energy sector, broadly speaking and all in, represents between 10% and 15% of Canadian GDP.
18. Put another way, 15% of our national wealth depends on the exploitation of these reserves, our 500,000 miles of pipeline and the goodwill of one country
19. In 2019, Canada was recognized as having one of the most stringently regulated oil and gas industries in the world. The jury is still out in 2026 as to whether we still have that position – something about leaky ponds. Not to mention the Federal government has made it illegal to talk about that stuff.
20. It is estimated that in Russia the equivalent of 50,000 bpd of oil is spilled annually (5% of production). That would be like half of the production of the massive Surmont SAGD facility in Fort Mac being dumped into the Athabasca River every day!
21. Venezuela is an environmental and societal basket case, has the actual largest oil reserves in the world but saw production collapse from 3.5 mm boepd to less than 0.5 mm and recently required black market refined fuel imports from Iran.
22. The environmental degradation of Venezuelan oilfields and facilities from lack of investment and little to no regulation is likely to never be cleaned up… I repeat, never. Ever. You can light Lake Maracaibo on fire. But hey, Canada is a bad guy. https://www.caracaschronicles.com/2020/11/25/swimming-and-fishing-in-a-sea-of-oil/ https://www.caracaschronicles.com/2020/10/20/venezuela-is-on-the-brink-of-its-worst-oil-spill/ https://www.caracaschronicles.com/2019/09/07/how-oil-killed-lake-maracaibo/
23. Notwithstanding the preceding two points, the Trump Administration, in an effort to curb gas prices and appease some Miami based expats, kidnapped Venzuela’s dictator and installed a puppet so that they can steal Venezuela’s oil until the rebel groups and cartels there realize what is happening and fight back. I guess it’s easier to score some cheap heavy oil rather than, you know, let a friend build a new pipeline.
24. Global spend in the oil and gas sector averages about $2 trillion a year, about $200 billion more than Canada’s annual GDP. Of that, about $400-$600 billion is typically spent on exploration and new production
25. Global E&P capex in oil and gas is expected to be about $636 billion in 2026 with about $500 billion of that invested in production and 40% of that in maintenance. This is how we catch up to more than a decade of underinvestment everywhere except the US. This is about $150 billion short of where we need to be. Oops!
26. In Canada, upstream capital spending (not including maintenance) in the oil and gas sector is expected to dip to about $40 billion this year. In Federal government terms, that’s 1.3 pipelines.
27. Of the $11 billion spent on environmental protection in 2012 (last year data available, gotta love government), 43% was spent by the oil and gas industry. The next closest industry spent 12%
28. Total spending on tangible environmental protection by Canada’s environmental lobby groups since I was born in 1965 has been about $0.
29. The first politician whose name I ever heard and recognized at age 3 was named Trudeau. Now, a mere 58 years later (freedom!), he and his progeny are finally no longer in charge. Instead we have a banker. Go figure. And instead of Margaret Trudeau hanging with the Stones, we have Justin bopping around with Katy Perry.
30. Western alienation is a big deal that I most assuredly didn’t understand when I was 3. Oddly enough, this guy got it https://www.cbc.ca/archives/entry/trudeau-not-worried-about-western-alienation
31. The oil and gas sector is one of the largest employers of First Nations people in Canada.
32. Suncor employs more First Nations people than the Federal Government.
33. In 1965, global consumption of oil was just over 30 million barrels of oil a day. In 2019 it was about 100 million barrels a day. In 2020, it fell to about 91 mm bpd at it slowest. It took a pandemic and global economic shutdown to stop this growth. In 2021, consumption closed the year at 96.5 mm bpd. In 2026, consumption is expected to fall to 104 million barrels due to Middle East melodrama but is expected to resume it’s 1% a year growth for… who knows how long. I sure don’t, so don’t believe anyone who says they do.
34. In 1965, North America (Canada/US) produced about 10.9 million bpd (32% of global production of 34.5mm bpd) and in 2026 that number is expected to be about 20 million (19% of global consumption)
35. In 1965, the Middle East produced about 9.4 million bpd (27%) and in 2025 that number was about 31 (30%). Total all-in OPEC production is currently about 33% of total global production. 2026 will obviously be different.
36. There are currently more than 300 million vehicles in the United States. At current rates of production, it will take about 100 years to replace all of them with electric vehicles.
37. Alternatively, annual vehicle sales in the US are about 17 million. If all vehicles sold from this day forward were EV’s, it would take about 60 years to replace the fleet. And you’d still likely have about 150 million gas powered vehicles on the road. People like to own and drive multiple vehicles. I own 5 – all are ICE.
38. In the early 2000’s, total fossil fuels’ share of the energy market was about 85%. Since then, trillions of dollars have been invested in renewables such that fossil fuels current share of the energy mix is… Yup, you guessed it, 85%.
39. Pre-COVID, no country was on track to meet their Paris Accord emissions targets, except France. And maybe the US, which has seen major reductions in emissions, ironically thanks to accelerating gas production edging out coal for power. Ironically, the whole pitch behind exporting Canadian LNG to Asia
40. Post COVID, no country is on track to meet its Paris Accord emissions targets. Except maybe France and the US. Although the rapid de-industrialization of major European economies due to the gas crisis caused by the Ukraine/Russia war may impact that.
41. 40% of the world’s ocean cargo is oil
42. It took more than 100 years and trillions of dollars to build out our current fossil fuel-based infrastructure
43. There are more than 1.75 million active oil and gas wells in the United States.
44. There are more 225,000 active oil and gas wells in Canada
45. In the United States it is estimated that the oil and gas industry supports around 10 million jobs or 5% of the labour force. Of this, close to 800,000 are directly employed in the services sector.
46. In Canada, the similar employment number is 250,000 direct oil and gas jobs and probably another 300,000 indirect jobs. The auto sector by contrast employs 125,000.
47. Expanding production in North America is going to be very difficult since a lot of the jobs lost post COVID will not be coming back. There is still a massive labour shortage. And yes, illegal immigrants are a large part of the US labour force. Landman got that right. And they are leaving.
48. In 2019, the US drilled some 22,000 and completed about 10,000 wells. In 2020, the US drilled less than half that. In 2026, the number of wells drilled is expected to number just a bit below 15,000. In 2019, in Canada, about 5,000 wells were drilled and/or completed. Activity fell by 50% in 2020. It is expected that close to 5709 wells will be drilled in 2026 in Canada.
49. On this date in 2019 there were 789 rigs drilling for LTO in the United States. Today there are 433. Production is higher.
50. Joe Biden dropped as much of a hammer as he could on the US energy industry. Aside from KXL being cancelled, Joe was bullish for Canadian production. That said, under Biden, US production hit record highs. My. Brain. Hurts.
51. Donald Trump ran on a platform of energy independence and Drill Baby Drill. Since assuming office, rig counts are down, he has captured Venezuelan oil and launched a war in Iran that is now in a ceasefire that will allow Iran to sell oil to the USA. Oh, nd the consensus is that shale may have peaked. Not syre Texas should be pleased with this.
52. Saudi Arabia still decides where the energy industry is going to go. And they like money. So, oil prices aren’t likely to drop much further unless they want them to. For the last few years, instead of crushing shale, they have decided to target sports but now LIV Golf is no more. Watch out Texas.
53. Only half of a barrel of oil is used for gasoline, the rest is used in more than 6,000 common products including hand lotion, football helmets, insecticides, fertilizer and fidget spinners
54. In 2012, Peter Tertzakian, one of the smartest energy dudes around published a book called 1000 barrels a second, which was what global consumption was at that time – by the way it’s about 14% higher now (and still increasing). To put that in perspective, the average Permian well produces about 750 barrels of oil a day in its first year, so you would need 1.3 Permian wells to meet a second of daily oil consumption. There are 86,400 seconds in a day, so you would need close to 90,000 fully producing wells to meet one day’s worth of consumption every day. Factor in the decline rate of close to 30% and you can start to appreciate the treadmill we are on. The energy sector isn’t going anywhere, anytime soon.
55. The countries with the highest use of energy per capita also have the highest life expectancy, demonstrating that access to cheap and plentiful energy is critical to increasing life expectancy and pulling people out of poverty
56. The energy industry is one of the most important industries in the world and touches virtually all aspects of our lives, every day, so maligning the energy industry and blocking projects is hypocritical and denies the reality on the ground that our privileged lifestyle depends on a healthy energy economy
57. Notwithstanding Coronavirus, in 2026 the private and public sector in Canada will likely be involved in the construction of close to $50 billion in energy infrastructure including thousands of kilometres of oil and gas pipeline and massive investments in LNG and petchem processing facilities. Not bad for a country mired in regulatory gridlock, led by a central banker that hates the province he grew up in, a sector facing an existential crisis, inflation, supply chain and labour issues, non-stop elections, separatists around every corner and, let’s face it, an indifferent population. Imagine what we could do if anyone cared!
58. That said, Mark Carney, our shiny new prime minister, was swept into office on a wave of patriotic “git’ er done” frenzy in response to tariffs and threats to our sovereignty by Donald Trump. He has promised to trample over property rights to get “the right” projects built all while giving everyone a veto and not repealing the moronic laws that are holding back investment.
59. This is the (hopefully) backside of my fourth energy cycle as an industry participant. It’s a soul-crushing grind but it also makes you eternally optimistic. I truly believe the future is bright for Canadian energy in all its forms and am proud to play my part in helping it grow. Regardless of whether we are Stormont Capital or Stormont Energy, the companies and people who produce the energy, service it, deliver it, maintain it and clean it up when it’s been used remain our key constituency and we are committed to being part of their team for the foreseeable future, or as I like to call it – Freedom 95 (only 35 more years of blogs! 1820 in total. Whatever will I write about? I really need to start using ChatGPT (maybe I have, you’ll never know and I’ll never tell).
60. Second to Last One – I can’t believe it! Notwithstanding the hostility shown towards it by the Canadian federal government, the oil and gas sector is a larger net contributor in tax and royalty revenue to federal, provincial and municipal governments – more so than Canada’s favourite oligopolies: the financial (banking) sector, the telecoms sector, airlines, railways, supply-managed agriculture, media, grocery and pharmaceuticals. Yet the government, in its wisdom, has for ten years done everything in its power to curtail, impede and restrict its growth. And yes, I know they overpaid to build a pipeline. Your tax dollars at work, people.
61. The energy sector is essential to Alberta and Canada’s economic growth and our future prosperity. Can we please, please, not f it up with boneheaded legislation and investment killing separatist nonsense until one of two things happens – my SpaceX stock comes out of lockup or I finally retire in 34 years. Then you are free to do what you want.