As for the current royalty review, it sure isn’t optimism on the streets across Alberta!

When speaking with oil and gas industry vets, it’s really kind of interesting most people in the patch feel relatively unprepared or ill informed to speak out on this divisive issue. I suspect if your company is currently struggling to stay onside with your bank covenants the royalty review is the furthest thing from your mind. How can it be when staying in business and operating in survival mode is your number one and only concern? That’s what makes the royalty review look like a red herring in most people’s minds.

Regardless of your perspective and its outcome, any such review smack dab in the middle of a prolonged industry downturn is both untimely and unnecessary. Uncertainty and lower profits in any industry is the death blow to attracting new investment capital. Those problems plus the royalty review is a needless trifecta in these turbulent times of lower commodity prices. Will the outcome of the royalty review result in maintaining the status quo or, in your wildest imagination, royalty relief? Let’s get real… I doubt it!

If you’re an industry insider, or any Canadian for that matter, the notion of paying higher taxes is a bad thing. No one wants to pay more! So, why do so many uninformed people and the politicians who are representing us feel reaching further into the pockets of profitable oil and gas companies is a good thing? The growing pervasive attitude is that as long as someone else is paying the tab then who cares. As long as I get more, I’m happy even if it means mortgaging the future of young Albertans and further crippling the oil and gas industry, which has served this province and our country so well over many decades in both good times and bad. But yet, why are these same people still thinking it’s okay to take more money from those so-called rich oil and gas fat cats because Alberta deserves a bigger share of the pie?

What’s remarkable for me is our current climate of spend, spend, spend in our governments at all levels. We vote out governments that have proven track records
of fiscal responsibility and replace them with those that simply promise instant gratification. Again, lots of new stuff for me as long as I don’t have to worry about whose going to pay for it.

I have yet to see any movement with our civic, provincial, or federal governments of late to cut spending in light of imminent tax revenue declines. Where’s all the buzz around cutting government spending? You can’t spend your way to prosperity. You have to earn it.

Now, I’m not naïve enough to think royalty relief or tax breaks are just around the corner to help out the oil and gas industry in this new economic reality. That would be too much to expect; although, this should also be considered. I guess, in the final analysis, help has to come from those who help themselves.

Hopefully, the royalty review simply won’t make matters worse! Profitable companies pay tax, and they employ people who also pay tax. This industry is a huge rental and contractor-based business, so as drilling activity declines, the ripple effect on the energy services sector and its people is just as devastating. Perhaps even more so as

many of these small to medium sized businesses don’t have the same staying power and capital as many of their clients do.

In this issue of Oilfield PULSE, a number of our clients from our Oilfield HUB online business community have stepped up to the plate to voice their opinions on the royalty review process and potential outcomes. We appreciate their comments and will do our utmost to ensure their voices are heard by our newly elected officials. We will also continue to broaden our sphere of oil and gas companies in our Oilfield HUB service who are currently drilling or plan to drill in the near future. Those companies do exist! They are out there, but they are just that much harder to find these days by an even larger list of service companies hunting for business and project opportunities!

Despite the uncertainty and final outcome of the royalty review, some of these producers and our customers are forging ahead with their drilling programs. Let’s all encourage our politicians to create a business environment in Alberta that encourages investing, generating more activity, and resulting in profits. All with an equitable tax burden that also puts our people back to work!

Kevin Turko
CEO
Leadstone Group
403.537.6561

Originally  published in the 

November 2015 issue of Oilfield PULSE