kilroy04 Posted October 5, 2014 Posted October 5, 2014 Various costs of oil production by source according to Morgan Stanley Research. http://www.businessinsider.com/crude-oil-cost-of-production-2014-5 (can't seem to load the image - it's in the link) Middle East avg about $27/barrel. Russia about 50 and as high as 70. Oil sands as high as 80-85.
yadayada Posted October 5, 2014 Posted October 5, 2014 isn't it pretty easy to predict the price of oil if you assume that demand will probably go up at least a little bit in the next 10 years? You look at the cost curve and at some point to supply enough oil the price needs to stay above 90$. Wether the guys who dig up oil for 30$ now have to pay 40$ to get the same amount does not affect the price much. It seems the guys at the top of the curve really affect the price here. If you look at this: http://3.bp.blogspot.com/_QxBGECHecpA/TQ18QvDCwCI/AAAAAAAABa4/_XDVDrY-mVs/s1600/murphyfig_1.png If part of oil needs are supplied by fields that cost like 80$ a day, the price can't really move below that. There will be a oil shortage if the price goes below that because they will go offline. Hence price goes up again, unless somewhere else there was some oil field being held offline with lower extraction costs. In the end if production on the low end of the curve falls away it has to be replaced by low cost demand to sustain lower prices. So I guess a threat would be if there is a replacement of oil on the horizon and low cost providers who are now keeping their supply offline to make more money in the long run all start pumping those fields, because they don't want to be holding their dicks with large low cost oil fields that are now being worth a lot less when everyone is driving battery cars :) . In that case you have to look at the cost curve and at what the next lowest step is? And how much low cost fields are not being extracted now that can come online. If there are not a lot of low cost fields like that kept offline to keep oil prices high then it seems oil pretty much has to go up from here.
EliG Posted October 5, 2014 Posted October 5, 2014 Great article on oil sands pricing. Diluted oil sands bitumen is actually worth more than it was four months ago http://www.macleans.ca/economy/economicanalysis/why-falling-global-oil-prices-arent-hurting-alberta/
Fat Pitch Posted October 6, 2014 Posted October 6, 2014 Has anyone looked into Suncor or Canadian Oil Sands Limited? Syncrude looks like a monopoly on the best oil sand reserves in Canada. If they can maintain costs then 5-10yrs out this might become a very valuable asset, assuming the marginal cost of oil keeps increasing like it has for the last 20yrs...
dutchman Posted October 6, 2014 Posted October 6, 2014 Ted or todd (not sure who) seems to really like suncor. Not Not sure if any reasoning has been discussed.
Aberhound Posted October 6, 2014 Posted October 6, 2014 US is likely to allow crude exports soon which should help eliminate all the irrational price differentials. Maybe the reason for the cheap shares is that investors rationally know that the free market is not being allowed to reallocate resources efficiently. For instance in BC there is a stupid policy not to allow private sector generators above 20MW except where subsidies are allocated like we are part of some Soviet 5 year plan. The policy causes stupidity like a pulp mill shutting down and the 40MW generator being sold to Korea instead of continuing to burn the massive pile of wood waste with an Aluminum smelter next door. Meanwhile operating pulp mills get grants and lucrative power contracts so they now burn pine trees. Instead let the oil producers install the new raw gas generators and sell power. Build a new grid using the new aluminum - carbon nanotube transmission wires from NE BC and across the north from the BC coast to The oil sands and sell power cheap then watch the new industries come in. Mining, including oil sands is massively cheaper with electricity vs. diesel. At night use the cheap power to pump water and sell it instead of wasting it all by letting it flow into the ocean. Why aren't super-tankers moving water from BC to California? Or use the night power to pump water up into the existing hydro dams to convert night power to day power. Revelstoke dam has 5 massive generators with capacity for eight and Ericopoly is paying 47 cents per KWH for peak power. That way the US gets the pumped water for free down the river. BC already exports electricity to California. There is no free market so we are stuck with price distortions including Canadian oil and gas shares. Maybe investors expect more Soviet 5 year plans instead of more free markets?
alertmeipp Posted October 6, 2014 Posted October 6, 2014 Wti and brent gap is collapsing. OPEC needs to show the world that they can and want to protect the price. Many producers are hitting year low day after day. Train wreck and huge constrast between now and just few short months ago Have the oil supply and demand fundamental change this dramatically in this short period of time? We will see many Canadian producers go up dramatically when they are assigned similar metrics to US.
SmallCap Posted October 6, 2014 Posted October 6, 2014 Chevron sells stake in Canadian Duvernay shale field to Kuwait http://www.reuters.com/article/2014/10/06/us-chevron-assetsale-idUSKCN0HV0SU20141006 It values Chevrons stake in Duvernay at 5 bil PennWest has some holdings in Duvernay, can'r remember exactly how much.
alertmeipp Posted October 6, 2014 Posted October 6, 2014 They have 100k plus acres. 1.5 billions usd if u apply the same sale price. But obviously can be more or less than that depending actual quality of the assets. But i believe Pennwest is in the oil window there
plato1976 Posted October 7, 2014 Posted October 7, 2014 Why canadian oil companies are selling cheaper than U.S. peers? They have 100k plus acres. 1.5 billions usd if u apply the same sale price. But obviously can be more or less than that depending actual quality of the assets. But i believe Pennwest is in the oil window there
Myth465 Posted October 7, 2014 Posted October 7, 2014 More buyers in the US. US capital likes US securities. I have followed oil and gas for 4 years, and didnt realize how cheap Canada was. You can get securities for 2-4x cf in Canada with debt to cash flow less than 1.5 times. You can get yields of 6% which are sustainable. Good market. US investors were just coming back and now we have almost a repeat of 2008 from a decline perspective in O&G. Good time to buy, if you werent already overweight... I was a bit overweight...
Zorrofan Posted October 7, 2014 Posted October 7, 2014 Wti and brent gap is collapsing. OPEC needs to show the world that they can and want to protect the price. Many producers are hitting year low day after day. Train wreck and huge constrast between now and just few short months ago Have the oil supply and demand fundamental change this dramatically in this short period of time? We will see many Canadian producers go up dramatically when they are assigned similar metrics to US. The problem with OPEC is that they need a certain amount of revenue to fund their budgetary spending. Typically OPEC has counted on the Saudis to act as the swing producer, cut output and rebalance supply and demand. No one else wants to cut production because they need the money. If the Saudis don't cut production and prices fall, the other OPEC countries try to pump more oil to make up the shortfall, driving prices lower in a vicious circle for them. Eventually they will cut back, its in their own self-interest, but prices can still fall further in the meanwhile...... My prediction is that we have not seen the bottom in oil prices. I am hoping to see PWE below $5, then things get interesting.... cheers Zorro
alertmeipp Posted October 7, 2014 Posted October 7, 2014 Saudi has a lot to lose if they mismanaged this. The safest path for them is to cut soon.
gordoffh Posted October 7, 2014 Posted October 7, 2014 Lets see the way things are going LTS will be selling at one times cash flow with oil at 80 along with a few other CDN oils. Encana should have held onto there 7 billion and scooped up the assets here.
fareastwarriors Posted October 7, 2014 Posted October 7, 2014 Did people add more today? PWT ? LTS? Awilco ?
plato1976 Posted October 7, 2014 Posted October 7, 2014 I changed half of my SD holding to PWE today let's see if tomorrow SD will be acquired Did people add more today? PWT ? LTS? Awilco ?
yadayada Posted October 7, 2014 Posted October 7, 2014 Wti and brent gap is collapsing. OPEC needs to show the world that they can and want to protect the price. Many producers are hitting year low day after day. Train wreck and huge constrast between now and just few short months ago Have the oil supply and demand fundamental change this dramatically in this short period of time? We will see many Canadian producers go up dramatically when they are assigned similar metrics to US. The problem with OPEC is that they need a certain amount of revenue to fund their budgetary spending. Typically OPEC has counted on the Saudis to act as the swing producer, cut output and rebalance supply and demand. No one else wants to cut production because they need the money. If the Saudis don't cut production and prices fall, the other OPEC countries try to pump more oil to make up the shortfall, driving prices lower in a vicious circle for them. Eventually they will cut back, its in their own self-interest, but prices can still fall further in the meanwhile...... My prediction is that we have not seen the bottom in oil prices. I am hoping to see PWE below $5, then things get interesting.... cheers Zorro The other opec countries have it in their best interest too to have high oil prices. They make more money with oil at 100$ then at 60-70$. Even if they sell more oil. So game theory states that this should not be true if it means much lower prices. If oil does go down, they will cut out production untill it goes up again if the Saudi's don't do it.
alertmeipp Posted October 7, 2014 Posted October 7, 2014 Wti hits yet another new 52 weeks low, geo risk and a few bullish eia draws on us crude were all getting ignored. Saudi not even making much comment with brent dropped 15 percent last few months. All they have to say if they will cut if it drops further. Price will stablize but they dont do even that as far as i know. Lots of conspiracy theories out there.
alertmeipp Posted October 7, 2014 Posted October 7, 2014 Lets see the way things are going LTS will be selling at one times cash flow with oil at 80 along with a few other CDN oils. Encana should have held onto there 7 billion and scooped up the assets here. Some of the producers were holding up well when the general markets and wti were down less than one percent in the morning. All hell break loose when markets get into heavy selling mode. Wti remains weak which is troubling. But it is still hard to believe LTSs price cut in half in few short months. The successful asset sales are all ignored then some. Hope their Swanhills update will be positive. I think we will see buyback announcement soon.
alertmeipp Posted October 7, 2014 Posted October 7, 2014 I changed half of my SD holding to PWE today let's see if tomorrow SD will be acquired Did people add more today? PWT ? LTS? Awilco ? Dont own any SD now, was browsing their presentation. They claim to be able to double their ebitda in 3 years with 30 percent growth per year. I think they used to guide only 15 percent growth. What changed? Well cost? That is very respectful growth. I can see it double in couple years if they deliver. Still like Pwe more on their assets. I think we will soon see pwe debt to cash flow ratio swing down to near one with limited impact on current cash flow.
gordoffh Posted October 8, 2014 Posted October 8, 2014 another article re value of LTS - not sure i like the dividend cut scenario but of course if stock jumped 3 dollars then fine by me- http://seekingalpha.com/article/2547145-recent-asset-sale-metrics-point-to-300-percent-upside-for-lightstream-resources?app=1&uprof=45
phil_Buffett Posted October 8, 2014 Posted October 8, 2014 http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/us-billionaire-wilbur-ross-eyeing-canadian-us-energy-sectors/article20967614/
Cardboard Posted October 8, 2014 Author Posted October 8, 2014 Looking at the charts this morning, might as well commit suicide. Cardboard
gordoffh Posted October 8, 2014 Posted October 8, 2014 Perhaps the thread should be renamed CDN oil patch giveaway. The way these stocks are falling if we do see 70dollar oil they, ll be at zero. Anyway added more LTS this morning. Feel like I am poker table ready to go all in
fareastwarriors Posted October 8, 2014 Posted October 8, 2014 Encana to Sell Alberta Natural-Gas Assets Energy Company Continues Shift Toward Production of Oil, Gas Liquids http://online.wsj.com/articles/encana-to-sell-alberta-natural-gas-assets-1412778597?mod=WSJ_LatestHeadlines
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