Canada Holds A Bright Future For Oil – Just Ask AOC - BP (NYSE:BP), Advantagewon Oil (OTC:ANTGF)

Big companies dominate the sector with companies like BP BP, Chevron CVX, ExxonMobil XOM, and Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B). The fundamental landscape of the Canadian oil and gas sector has undergone significant changes during the last five years.

And now there are very positive signs that serve as good evidence of the continued commitment to high environmental standards and focus to sustainability. Moreover, case studies show the adaptability and resilience of the Canadian oil and gas sector to this landscape that has changed dramatically over a very short period of time. Moreover, according to Deloitte Canada, Canadian crude oil prices are expected to strengthen and natural gas prices are expected to continue to improve in 2020 and even more than during 2019.

AOC Is Putting All Its Eggs Into One Basket In Canada

Advantagewon Oil Corp., ANTGF has identified numerous opportunities in Canada over the course of the last six months. And they have just announced the company has sold all of its remaining US assets to Emerald Bay Energy Inc., EMBYF. The assets mainly comprise of 30 oil and gas leases currently producing approximately 15 bbs/day of oil. The company has received both a cash payment of Fifty Thousand Dollars ("50,000.00") CDN and the Corporation Sixty Million ("60,000,000") common shares of EBY which are valued at Three Hundred Thousand Dollars ("$300,000.00") CDN. But going into further details of the deal, these shares will be held in trust by the Corporation's assignee until the last day of the year at which point, or prior to the deadline, EBY will purchase them back for a pre-set price of $300,000.00 USD.

Moreover, if EBY would choose not to purchase back the shares it issued, all of the 60,000,000 Common Shares will then be returned to EBY's treasury and a Royalty Structure will be formed to debut on Jan 1st, 2021. This royalty structure will pay the Corporation a maximum of Four Hundred Thousand Dollars ("$400,000.00") USD and once the Corporation has received the $400,000.00 USD from EBY, the royalty interests will revert fully to EBY.

Additionally, the Corporation will also receive the return of Two Hundred and Fifty Thousand Dollars ("$250,000.00") USD from the Railroad Commission of Texas. Namely, this is due to a bond the Corporation had to post to the Commission as otherwise it could not commence operations in the State of Texas.

The Corporation intends on using the funds it will receive from the Railroad Commission of Texas to secure another Canadian based well and for general working capital purposes. On the beginning of the month, the company already announced it is expanding and advancing its Canadian operations by entering into an agreement whereby it acquired a working rights interest to a former operating well that has a historic production record of between 20 and 30 Barrels of Oil Per Day ("BOPD").

Along with this agreement, the company is also committed to funding and implementing a workover program with the purpose of recommissioning the well that it is acquiring. Once this initiative is complete and the well is both recommissioned and restored, the company's working interest becomes the entire pie, 100 percent to be exact.

Why Is AOC different?

When it comes to the oil industry, the majority of your business models exploit the resource and then run away. And in today's world that is putting an emphasis on sustainability as we only have one planet to live in, this is nothing more than a poor business model. And no company should be drilling those wells if they don't have the financial capacity to take care of the obligations they themselves created. For that reason, Canada's Supreme Court ruled last year that insolvent or bankrupt companies must clean up their wells before paying back creditors. It is really no different than kids playing with their toys and going and starting something else without cleaning up what said they've already made a mess of. But not AOC.

During 2019, Advantage achieved several important milestones in its focused transition phase, as demonstrated by its results that met expectations. These achievements have positioned the Corporation for a step change in oil and condensate production in 2020, enhancing the company's portfolio of investment opportunities while preserving its low-cost and low-risk business model.

It is thanks to its expertise that the company is continuously building consistent cash flow from low cost and low risk oil wells. And after its uniquely enhanced recovery strategy is successfully applied, AOC will repeat the process throughout the oil pool to maximize output and minimize cost and risk. So it sure seems it has made all the right preparations for a good year ahead, in Canada!

US Sector Is Eyeing New Legislative Sanctions Regarding Climate Change

The oil and gas sector contributes to around $1.5 trillion to the US gross domestic product, employing about 880,000 workers. But the most important fact is that the US recently moved from being a net importer of oil and petroleum products and natural gas to a net exporter as a part of a global seismic shift in world oil and gas markets. Unfortunately, this also triggered the fact more than half of US greenhouse emissions. In 2017, a study found that only 100 companies were responsible for 70% of greenhouse emissions, we can only imagine how far this number has gone.

Oil companies are forced to take actions regarding climate change but legislation, if stricter, will surely make them do it more quickly. This is also creating a problem for recruitment as more and more young people are willing to make a positive difference and for that reason shift away from the oil and gas industry due to poor practices. It is no secret the legacy of old and idle oil wells are California's toxic multibillion dollar problem potentially threatening the health of all those nearby and handing over taxpayers quite a clean-up.

But for now, the giants are managing to stay well above water despite quite heavy industry headwinds. ExxonMobil COM shares have lagged behind their peers lately but its optimal integrated capital structure and status in the energy space have helped it come up with industry leading returns. Although the company's chemical business underperformed with significantly lower than expected returns, it still owns some of the most prolific upstream assets globally.

America's second energy company's, Chevron CVX, shares have also struggled lately along with other energy stocks but they still did better than their peers as a whole. But Chevron at least earned a status as one of the most suitable globally to achieve a sustainable production ramp-up as its existing project pipeline is the among the best in the industry. And they managed to achieve a 40% reduction in expenses since 2014. But by the looks of it, making oil companies more responsible for their footprint with stricter legislation can do quite a bit of harm to both of their upper and bottom lines.

Outlook

Canadian oil and gas companies are adapting to the new landscape as they are forced to focus on being leaner and becoming more efficient by adopting new technologies and ways of designing, structuring and operating projects, all while reducing greenhouse gas emissions in support of environmental sustainability.

In April last year, report entitled ‘Four Years of Change' came out by business information provider IHS Markit, showing that between 2014 and 2018, operating costs fell by more than 40 percent on average with reliability improving even up to 50 percent in some cases, and the price of oil required to cover the costs and earn a return on investment on a non-mining oil sands project was reduced from approximately US$65/bbl to the mid US$40/bbl.

So, it seems that Canada might indeed be the new promised land for oil companies. And AOC is already one step ahead by adopting this awareness perspective that is clear from its strategy and consequent efforts.

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