kilroy04 Posted December 20, 2015 Share Posted December 20, 2015 Seems there could be a ton of opportunity and or a ton of risk.... Some of this has been discussed but thought it might be worth revisiting in various ways. Macro – Tide Out Tide in tide out investing vs finding a needle in a haystack (as mention by Brian Spectre outgoing Baupost exec). It is likely we are going through a tide out situation. Supply: It appears that excess supply is not more than 1.5mm boe/day (about 1.5-2% and not the severe excess of the 1980’s). There is risk for further increased production in Libya, Iran, Iraq, Canadian Oil Sands, Gulf of Mexico……and perhaps others. Current excess oil in storage in the OECD. – about 250mm barrels according to the IEA (essentially 33 days of supply vs the usual 30 days globally). Consumption: Growth has been healthy at > 1.8mm boe this year. If there were a global slowdown – that would obviously be important. So far the China “slowdown” with respect to oil has actually been a substantial increase daily consumption Long Term Green Energy: At some point unknown (but I’d guess very incremental for at least 10 years) fossil fuel will be a less dominant form of transportation energy. Though the IEA number still show similar usage as today out for 25-30 yrs. Marginal cost of production is 50-60? Coming down further? Cash lifting costs? Full cycle cost of production is thought to be a bit higher Core Question: Who can survive a few years at ongoing spot prices – whatever they are – including in the 20’s? (without the benefit of hedges that are coming to an end) Some broad ideas below Low Cost Producers and or low debt Survive with oil in the 20’s - 30’s for 2-3 yrs Upside 1.5-3x Bonterra (can be cash positive at WTI 35) Surge Energy(low debt) Peyto ( mostly gas - long history of doing well through cycle) Low to medium cost with debt or other issues Survive with oil in the 40 -50s for 2-3 yrs Upside 5x + Bellatrix? PennWest (requires further asset sales- if possible) Gear (maybe) (netback getting close to zero at these prices) Survive with oil 60-70 - need it soon! Lottery ticket Sandridge (trading for debt at discount) Twin Butte (pennies and a junior) Lightstream (Trading for debt at discount) Thoughts? Link to comment Share on other sites More sharing options...
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