Quote:
Originally Posted by OldDutch
I can say the same thing. I am speaking in the short term. For Canadian owned or heavily weighted companies such as Cenovus or Encana what recovery do you see helping these companies? A recovery to $40/bbl or $50/bbl late this year? That isn't going to help these companies in a meaningful way immediately. Especially when you look at the government stance of slowing market access and introducing new regulations/taxes.
I hope you are right, but I think there is more than a moderate recovery needed for Canadian companies. There is a fundamental regulatory and market access problem unique to our local producers that isn't going away anytime soon. Baring a hockey stick recovery to prices I don't see it getting better for many of these companies still trying to get back to early 2000's costs to align with similar prices from that period. More jobs and losses will happen in near term and that is what I was getting at.
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I agree with the bolded. And your comments in regards to regulation etc.
You have to realize though that this industry can operate and expand profitably above $40. If oil goes back to $50 by the end of the year that's a 65% increase in cash flow (well actually somewhat less if you assume that CAD will rally alongside). That IS going to help these companies in a meaningful way immediately.
Just remember that this is a cyclical business. Don't lose hope - and while it may be tempting to continue to feel and claim that "it's only going to get worse", if you take a longer term view then it's only going to get better. Actually the lower we go, the more downgrades there are, the more capex cuts there are, the faster we're going to come back.