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Originally Posted by lorenavedon
I keep hearing stuff like this and how there are companies that are profitable at much lower prices. A few major producers that can still turn a profit at low prices will not sustain the Alberta economy and the tens of thousands of people moving here every year for these mythical million dollar zero experience jobs everyone thinks is out here. Job creation in Calgary is not because of a few major companies. It's the thousands of small companies that depend on other small companies consistently feeding them small jobs, projects, pipelines, wellsites etc. If you think a few major producers in the oil sands is going to sustain a city of 1,300,000 people and $600,000 average house prices you have another thing coming. A profitable company in tough economic times will still scale back to increase efficiencies. These few companies will still lay off as many people as possible and run on skeleton crews while smaller EPCMs will continue to lay off until they go bust due to lack of small projects. Around Calgary right now there is nothing but layoffs. Just because you know of an engineer that has it good working for Suncor is not a reflection of the economy right now among small EPCMs that are laying off staff all over the place. I don't think there is room at Suncor or EnCana for 50,000 new people that no longer have work. The economy moves slow, just wait until next year when these laid off people start to run out of savings and EI and have to chose between putting food on their table and paying off their $600,000 mortgage. People need to remember that a profitable company keeping things stable does not create or sustain jobs. To sustain jobs at engineering companies you need a constant stream of NEW projects. There are no NEW projects. Everything has been put on hold or canned altogether.
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Tough to take this seriously when there isn't 1 drop of grey in your palette. The world rarely operates in such a black and white manner despite our best wishes it would be for ease of understanding. What do you do for a living? Are you in oil and gas?
The reality is that the energy sector that bolsters the Albertan economy isn't only predicated on the price of oil. The WCSB is primarily a natural gas rich basin. Many of the juniors, intermediates and drilling going on in this province is for natural gas which, from what I saw today, was showing December futures at over $4. This was on news of a colder winter. Since nobody can really predict the winter, and since nat gas is basically a moving benchmark based on existing storage levels and cold weather forcing heating use, not the price of oil, many companies that primarily produce natural gas aren't really all too bothered by the price of WTI dropping. Spoke with the president and CEO of a small public start up, they are profitable at $2. Maybe not drilling immediately, in certain areas and in certain ways (ie. maybe not long reach laterals but maybe in cheaper shallow vertical, with stacked multi-pay plug and perf competions that you can bang out in a day per well).
The reality is that if this sector suffers a correction, and I think you're right in that we are facing a cooling of the economy, it will force our raping cost structures to lower and services will be forced to reduce prices until they can get work and development can start again. In fact, I believe a service correction on pricing is absolutely necessary in this province because things were getting too noncompetitive vs our competing plays and jurisdictions like the Eagleford (Texas) or Marcellus (Pennsylvania / East US). Producers may get hit, they may lay off some (not all, like you like to predict) and things will correct and it will be back to normal.
The long term concern of the province, however, is not this little price war spurred by foreign politics but the longer term and ultimate decline of hydrocarbons as a primary energy source. I believe the UN released some pretty damning information that points at the oil and gas industry specifically, with respect to quite literally the human race's survival requiring the slow down of oil and gas. That will become an issue more and more as climate change continues to worsen. If you want to play Nostradamus you should start to focus on things like this. Meanwhile, you're act needs a bit more grey and balance in order for people to take you seriously, because while yes things aren't looking amazing, it really is not going to be the end of the world or 1.3MM people on the street looking for jobs.
I can tell you right now, we just got our budget for next year. Is it reduced? Yeah, a little... but we're still planning on drilling several wells. The company needs people to do that.