yadayada Posted January 11, 2015 Share Posted January 11, 2015 Thanks for your input, you make some good points :) . Here is how I see it: http://www.indexmundi.com/energy.aspx This keeps going up. North america produces 10m of those, so more then 10%. There is no way that will fall away over a sustained period. Also crisis or not, odds are, 5 years from now we probably consume a 100m barrels a year. There is still Africa that is now booming, other parts of Asia etc. Just look at how much of an effect China had on those numbers. And meanwhile, costs of getting oil out of the ground go up every year, so oil from oil sands, fracking and shallow and deep water is not going away. Add in natural gas that still has a very inneficient market because of a lack of infrastructure, and Im not too worried on the long term. Likely 2015 will be rough, maybe 2016 too, but I think 2017 and on will be good. And if you put a 8x multiple on let's say 20m$, that is still a very nice return with little risk for MCR. HOS is in a better spot because they can allocate ships elsewhere. I mean if NA oil falls away, that means -10m barrels, which is huge. That has to come from somewhere... If it doesn't then we will see a major spike in oil prices due to shortage, which will trigger a lot of investments, which is really good for service firms. And that will happen within 2 years because most of those shale wells will be dried up before that. Basicly boils down to this: http://www.energytrendsinsider.com/wp-content/uploads/2012/06/Oil-Consumption.png?00cfb7 That will not reverse. The west is only a fraction of world population, and the rest of the world is catching up. They will need a lot of oil, and that is only possible (barring some black swan event breahtrough) if oil trades around 100$ or higher, and if North America produces a significant part of that. The only reason production is not down is because producers need cash flow to pay debt. Note also that oil consumption in the west went down because we were all driving inneficient gas guzlers. But Asia started driving cars from the beginning that are quite efficient. So there is not a lot of room to cut down in mileage as we had. Unless ofcourse we all drive battery cars 5 years from now. But even that is unlikely if there is a break through. Because it has to go from laboratory to mass adoption. Which takes time Link to comment Share on other sites More sharing options...
Liberty Posted January 12, 2015 Share Posted January 12, 2015 Saudi prince: $100-a-barrel oil 'never' again http://www.usatoday.com/story/money/columnist/bartiromo/2015/01/11/bartiromo-saudi-prince-alwaleed-oil-100-barrel/21484911/ Interview with saudi prince Prince Alwaleed bin Talal on oil. Sorry if it has been posted elsewhere. Link to comment Share on other sites More sharing options...
Valuebo Posted January 12, 2015 Share Posted January 12, 2015 Good reminder that commodity prices are nothing to bet the farm on. At least one lesson learned these last few years! I feel for those with substantial positions in the sector but would on the other hand like to learn how they deal with it. Partly hedged with weaker juniors, oil itself? Sold some at a loss or holding until the bitter or glorious end? TIA if anyone wants to share his experiences... Link to comment Share on other sites More sharing options...
txlaw Posted January 12, 2015 Share Posted January 12, 2015 Pretty interesting presentation from Director of North Dakota Department of Mineral Resources. https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf Basically projects that production in the Bakken stays flat at around $55 per barrel. Link to comment Share on other sites More sharing options...
investor-man Posted January 12, 2015 Share Posted January 12, 2015 Good reminder that commodity prices are nothing to bet the farm on. At least one lesson learned these last few years! I feel for those with substantial positions in the sector but would on the other hand like to learn how they deal with it. Partly hedged with weaker juniors, oil itself? Sold some at a loss or holding until the bitter or glorious end? TIA if anyone wants to share his experiences... I have (had) about 10% direct'ish exposure to oil via MCR.V and about 15% indirect exposure via GNCMA. I dealt with it by watching MCR.V sh*t the bed, and I've reduced my GNCMA exposure by 2/3. I feel comfortable hanging onto MCR.V because of its strong balance sheet. I may add to it a bit if oil hits $40, $35, $30, so long as the share price continues to shrink along with oil. GNCMA has been going up and continues to, but I felt uncomfortable holding such a large percentage of my portfolio in a state with an economy so exposed to oil. I should add that I felt my exposure to GNCMA was to large regardless of oil, and I'd have reduced it a bit anyway. This info is not helpful. But I'm not going to do anything cute (hedging), mostly because I don't feel confident in my ability to do so. Link to comment Share on other sites More sharing options...
Jurgis Posted January 12, 2015 Share Posted January 12, 2015 Saudi prince: $100-a-barrel oil 'never' again This is like the "Death of Equities" cover page. :) Capitulation and panic. My guess is that 'never' is shorter than 5 years. Link to comment Share on other sites More sharing options...
Jurgis Posted January 12, 2015 Share Posted January 12, 2015 Good reminder that commodity prices are nothing to bet the farm on. At least one lesson learned these last few years! I feel for those with substantial positions in the sector but would on the other hand like to learn how they deal with it. Partly hedged with weaker juniors, oil itself? Sold some at a loss or holding until the bitter or glorious end? TIA if anyone wants to share his experiences... 10% of portfolio in oil now. Will get to 20%+ if/when it goes down to $35. Will go to 30%+ if it drops to $20 as Barron's now predicts. Might vary the mix depending on risk/price/quality/etc. Link to comment Share on other sites More sharing options...
undervalued Posted January 12, 2015 Share Posted January 12, 2015 Oil will take a while to recover and will never go back to $100 again.. I guess we'll see.. Pickens says it will recover right away (end of this year), while others says it will stay low for a while. What do you guys think? Link to comment Share on other sites More sharing options...
Liberty Posted January 12, 2015 Share Posted January 12, 2015 Saudi prince: $100-a-barrel oil 'never' again This is like the "Death of Equities" cover page. :) Capitulation and panic. My guess is that 'never' is shorter than 5 years. Or maybe $100+ oil was CISCO in the dot-com bubble. What is the intrinsic value of a barrel of oil? I certainly don't know :) Link to comment Share on other sites More sharing options...
rpadebet Posted January 12, 2015 Share Posted January 12, 2015 Oil will take a while to recover and will never go back to $100 again.. I guess we'll see.. Pickens says it will recover right away (end of this year), while others says it will stay low for a while. What do you guys think? Here is my expert finger in the air prediction. I expect 40$ oil on average this year. Stays around there longer than people think i.e. more than 2-3 years at least assuming there is no large scale global supply reducing conflict. I think it is very low probability event that oil goes back up soon, even if it does 60-70 seems like a cap. I expect a story similar to Natural Gas to play out here, except I expect the price slump to be relatively shorter (Cheap Nat gas couldn't be exported economically so the price slump was longer there) To be honest. I have no clue and not much oil exposure except for NOV (5%) in my portfolio. I hope NOV's pipeline of projects last. They use the cashflow to make some good acquisitions when prices are depressed. Link to comment Share on other sites More sharing options...
yadayada Posted January 12, 2015 Share Posted January 12, 2015 I think you gotta look at costs of north america if you want to know what oil is worth. As their costs go up or down, oil goes up and down. Because other countries try to control their output, so the high cost guys stay in. But if a bunch of shale producers who make half decent returns at 60$ a barrel get in the market, they will just pump out as much as they can if they can make a profit. Because without North America, OPEC has quite a lot of room to set prices. But those 10m barrels of North american oil (or 15m if OPEC cuts) could make all the difference. If half of them fall away, they will not all filled in by the rest of the world (and OPEC), and you will see high oil prices. But if they can be filled in at low cost, then you will see oil at a low price. And that would be bad for oil sands if the US can do it cheaper. Because they will not be disciplined. I think Saudi arabia could probably produce all the oil for the world for several years? And you would see 20-30$ oil. But that would be really dumb, because they would lose enourmous profits. They have discipline, but NA does not have that discipline, because it is a lot of smaller players just wanting to make money right now. It would make a lot more sense for North America to only produce just enough where some 90-100$ break even guys are still in the market. But they dont function as a cartel. http://snbchf.com/global-macro/shale-oil-oil-sands/ Ill make a prediction :) , just to read back 2 years from now. Between 6-18 months from now, oil will start shooting up again to at least 70$+. But it can go lower before that happens. Link to comment Share on other sites More sharing options...
opihiman2 Posted January 12, 2015 Share Posted January 12, 2015 Pretty interesting presentation from Director of North Dakota Department of Mineral Resources. https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf Basically projects that production in the Bakken stays flat at around $55 per barrel. Holy crap, slide 4 on that presentation is really telling. Even adjusting for inflation, I've read that we're at higher oil prices now than during the late 70's oil crisis. But, still, not by terribly much. But look at how much well permits were issued then and now. Maybe it's because we have better technology for extraction nowadays with fracking, and there are much more areas that are feasible for extraction. However, it still seems like a huge bubble in extraction that is going to pop big time soon. Link to comment Share on other sites More sharing options...
mankap Posted January 12, 2015 Share Posted January 12, 2015 Slide 10 shows that at $55 production will not change from 2015 to 2016 and decrease slightly in 2017. If the oil stays at >$55 production in US could increase. If the oil industry is able to cut cost the $55 breakeven oil price can even go lower. Now I understand that Al Awalaeed's statement that we may not see $100 oil. If the oil price goes that oil the US production will show a significant increase thus bringing oil price down. Link to comment Share on other sites More sharing options...
alertmeipp Posted January 13, 2015 Share Posted January 13, 2015 >>Now I understand that Al Awalaeed's statement that we may not see $100 oil. Never says Never. I am surprised he said they. Link to comment Share on other sites More sharing options...
kfh227 Posted January 13, 2015 Share Posted January 13, 2015 No time to rad this but thought I should ink it: http://snbchf.com/global-macro/shale-oil-oil-sands/ Link to comment Share on other sites More sharing options...
kfh227 Posted January 13, 2015 Share Posted January 13, 2015 Slide 10 shows that at $55 production will not change from 2015 to 2016 and decrease slightly in 2017. If the oil stays at >$55 production in US could increase. If the oil industry is able to cut cost the $55 breakeven oil price can even go lower. Now I understand that Al Awalaeed's statement that we may not see $100 oil. If the oil price goes that oil the US production will show a significant increase thus bringing oil price down. AS long as some countries need to produce well over $55 ($80) to make money, I'd think that we'll be back to about $100 in 2 years. If not, OPEC will have to step production up to make for hte supply gap that will be created over time. I don't see these levels lasting a year. I'd be shocked if we were not north of $80 in 2 years. The only thing I don't understand this: 1) Oil on the world markets are traded in US dollars 2) The US dollar is very strong right now. and: 3) I don't see the US dollar getting weaker. But if this is true, wouldn't some of the oil price decline be tied to a strong US dollar? If it is strong, oil should cost less. Worth reading ... it is quick: http://en.wikipedia.org/wiki/Petrocurrency#Currencies_used_to_trade_oil Link to comment Share on other sites More sharing options...
yadayada Posted January 13, 2015 Share Posted January 13, 2015 http://www.freenpv.com/?p=457 Link to comment Share on other sites More sharing options...
SmallCap Posted January 13, 2015 Share Posted January 13, 2015 Oil Sands will be increasing production not decreasing it. http://www.wsj.com/articles/as-oil-slips-below-50-canada-digs-in-for-long-haul-1421114641 “It’s not well understood just how robust the oil sands are. If you stopped expansion of the oil sands tomorrow, you would have no decline in the production base for decades,” Cenovus Chief Executive Brian Ferguson said. “What we do is design for 30-year flat production lives” at oil-sands fields, he said Link to comment Share on other sites More sharing options...
yadayada Posted January 13, 2015 Share Posted January 13, 2015 yeah i think the main difference is that they are longer term, and US oil falls off a cliff at low oil prices, since those wells dry up quickly. They are even lower cost according to some analysts http://business.financialpost.com/2014/02/20/oil-sands-retain-competitive-edge-over-u-s-tight-oil/ Link to comment Share on other sites More sharing options...
undervalued Posted January 13, 2015 Share Posted January 13, 2015 Does anyone have any information on how long before oil companies start M&A after oil prices reached bottom in the past? Link to comment Share on other sites More sharing options...
Cardboard Posted January 13, 2015 Share Posted January 13, 2015 It is funny now that this board has so many experts on global oil production or mainly that it will only go up forever no matter what is the price! Where were these people when oil was above $90? It is back then that a prediction about a coming collapse due to an oil glut would have resulted in big profits. FYI, there are about 1 million barrels per day coming from stripper wells in NA. These wells produce just a few barrels per day and have been in place for a very long time. Unfortunately, we are now at a price that it does not even pay the electricity, maintenance and transportation cost for them to continue operating. We also have capex cuts ranging from 25 to 75% at most if not all NA producers. A lot of these are occurring at firms where they are seeing 30% decline rates on their existing wells. Globally, the natural decline rates for existing wells is around 7% and I guess logic would dictate that this percentage will only go up if shale is so important. So that is 6 to 7 new million barrels per day that need to be produced just to maintain current production. On top of that, it is forecasted that the world will consume 0.9 million more barrels per day in 2015 or 93.3 million b/d from 92.4 in 2014 or a lowered forecast from the IEA report in December. So you have to add almost Two Canada's per year just to offset the global decline rate and additional demand. We also have a few countries that will face bankruptcy soon: Venezuela, Russia, Nigeria, Libya, possibly Iran. What do you think is going to happen to oil production or even more important oil development in these countries once unstability both political and financial really takes in? Cardboard Link to comment Share on other sites More sharing options...
kfh227 Posted January 13, 2015 Share Posted January 13, 2015 Cardboard, Good points. It really points to the fact that where oil goes is anyone's guess. Probably not down at these levels though. Link to comment Share on other sites More sharing options...
kevin4u2 Posted January 14, 2015 Share Posted January 14, 2015 Cardboard, Good points. It really points to the fact that where oil goes is anyone's guess. Probably not down at these levels though. And no discussion of the forward strip which doesn't see oil getting back to $100. It is under $70 out to 2024. If you think it's going back to the moon it should be relatively easy to make a killing by speculating on futures. I have also yet to see anyone say the words "permanent loss of capital". Link to comment Share on other sites More sharing options...
finetrader Posted January 14, 2015 Share Posted January 14, 2015 I have looked quite extensively at the numbers of a few Canadian oil producers, namely Canadian Oil Sand, Whitecap Resources, Baytex. And if oil averaged 75$ a barrel in the future(5-10 years), those stocks are probably fairly priced. What I want to say here is that, 100$/boe was probably too high because this has led to an oversupplied market. 50$/boe is probably too low because no one is making money (other than the Saudis and few others) That is why I'm coming with price in the middle ->75$/boe. But in this scenario, even if oil stocks have decreased significantly ( 50% and more) they don't interest me because I can't find the 1$ for 0,50$ that a value investor is looking for. So I prefer to stay on the sideline for now. Just sharing my thinking with you here. Ftr Link to comment Share on other sites More sharing options...
opihiman2 Posted January 14, 2015 Share Posted January 14, 2015 +1 on Cardboard's and Kevin's post. Link to comment Share on other sites More sharing options...
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