Lauren Krugel, THE CANADIAN PRESS

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CALGARY - Tumbling commodity prices and wobbly credit markets will likely cause major shifts in the oilpatch, with some players reconsidering their plans and analysts predicting more consolidation in the sector.

"With the oil price falling, there's a lot of concern about whether or not we continue to see expansion in the oilsands, which a lot of these companies are tied to in terms of their future growth," Edward Jones analyst Lanny Pendill said.

"And I think there's also some concern of whether or not these companies are able to finance that growth, given the tightness that we've seen in the credit markets."

Crude oil closed at US$74.54 per barrel on the New York Mercantile Exchange on Wednesday - a little more than half of its all-time high of US$147 reached in July and its first close under US$75 in 14 months.

While the economics vary from project to project, a fully-integrated oilsands project is usually considered viable with crude oil prices staying in the US$70 to US$80 range for an extended period.

"We believe economics for a typical Alberta upgraded mining project has become so marginal that we will start to see further project deferrals, joint venturing activity with U.S. refiners and consolidation in the oilsands space," wrote UBS Investment Research analyst Andrew Potter in a third-quarter earnings preview this week.

On Wednesday, EnCana Corp. (TSX:ECA) suspended its plan to split into separate oil and gas companies "given the uncertainty and volatility in the global financial markets."

It said it would not hold a shareholder vote on the restructuring, originally set for mid-December, "until clear signs of stabilization return to the financial markets."

Some analysts had warned that Cenovus - the integrated oil spinoff - could easily be picked off by a major like ConocoPhillips (NYSE:COP) if the split were to happen now.

Concerns about rising costs in the oilsands intensified last month, when the partners in the Fort Hills oilsands development - Petro-Canada (TSX:PCA), Teck Cominco Ltd. (TSX:TCK.A) and UTS Energy Corp. (TSX:UTS) - announced the project's price tag had swelled from around $14.1 billion to nearly $24 billion.

"While cost increases are not new, what is different this time is that oil prices are moving down and access to capital is becoming difficult, if not impossible, for some players," UBS's Potter wrote.

The Fort Hills project, whose first phase is targeted to produce 140,000 barrels of synthetic crude oil a day by 2012, will likely still go ahead - just not in its current form, said Edward Jones' Pendill.

For example, Pendill said he would not be surprised to see construction of a planned upgrading facility near Edmonton - the most expensive component of the project - delayed until the cost environment improves.

The Fort Hills cost increase has had the biggest impact on UTS, the project's smallest partner, which is on the hook for $3 billion more in financing than under the original plan.

"From a UTS standpoint, they've got a big chunk of money that they've got to come up with in a very tight credit market," Pendill said. "I think they're going to be challenged to come up with that financing."

If UTS, whose stock price has dwindled to 74 cents from more than $6 a year ago, can sell its 20 per cent stake in Fort Hills to a bigger player, it would be a good outcome, Pendill said.

"I think their interest as a whole is probably on the table for some people out there. There's probably people looking at that right now."

While small players like UTS might easily get scooped up, Salman Partners analyst Dragan Trajkov said most big producers don't need to start panicking yet.

"At these levels I think they're still OK. Obviously their returns are not going to be as good as if the oil was US$100, but the big companies can make it happen at these levels," he said.

"We don't like to go any further than this, but somewhere in between US$70 and US$80, I think they can still make a profit."

If funds remain as scarce as they are in the current market, Trajkov said he expects "considerable consolidation" ahead.

"But I think it's going to have to be after the market calms down. Right now I think there's so much uncertainty," he said.

Junior oil and gas producers are worse off than their bigger counterparts, since they have higher costs on a per-barrel basis, said Joanne Hruska of Aston Hill Financial.

The bulk of those companies are weighted toward natural gas, which has been languishing around the US$7 per thousand cubic feet mark - about half of its summer levels.

However, Hruska put the commodity price plunge in perspective, noting that 15 years ago natural gas was worth 90 cents per mcf and oil was worth US$15 per barrel.

"We're kind of back to where we were last December. Not a panic," she said.

While some companies are likely to be stuck with limited access to credit, others have "war chests of cash" at their disposal to finance growth, Hruska said.

"Acquisitions are quite a vital part of Canadian oil and gas sector and always have been and I don't see it slowing down," she said.

"I bet you that as soon as we see markets stabilize .. you're probably going to see the most (merger and acquisition) activity you've ever seen in the energy sector."