The ongoing financial turmoil and financial discussion thread

[Claeren]

Originally Posted by FLAMESRULE

Wells are being shut-in...we can all thank Eddy the Clown for having a hand in this...idiot...

I think this sentiment is hilarious!

I mean it is not that much different than blaming the NEP the last time around, where yes it may have had some effect, but really there were other much larger things at play.

Likewise this time, where we see a collapse in energy prices, collapse in investment capital and much more productive finds in both BC and SASK, yet Eddie will still take the blame for it forever after.


When people are losing their jobs in the energy sector after christmas it is not going to be because of the royalty scheme - it is because no one wants what we are selling for the price we can sell it for.

But blame Eddie and the conservatives - I was never really a fan anyways! lol (Although I am fiscally conservative, I just don't feel the current party is all that fiscally conservative.... ) It is great that this time it is not those horrible easterners, but it is those horrible westerners that ruined the energy gravy-train!


Claeren.

[Slava]

Originally Posted by FLAMESRULE

Wells are being shut-in...we can all thank Eddy the Clown for having a hand in this...idiot...

I would love to blame Eddy for this. I wish I had the power he has though....only a genius like him could force the price of oil down by $100/barrel over the last 6 months

[kevman]

Originally Posted by Nancy

Not a very good best case, given that EI pays like $1600 a month or something like that. That may cover your mortgage and utilities, so long as you don't spend any money on gas or food.

That's ok since gas is free lately...they'll be paying us to drive our trucks soon enough!

[kevman]

Originally Posted by I-Hate-Hulse

In other news, CNRL just cancelled flex days. .

Smaller bonuses, no Christmas gifts and now no flex days!?!?! What is this? I fell like I'm working for free...

[FLAMESRULE]

Wow. All I said was that Eddy the Clown had a hand in it, not that he was the sole destructive force in this. I guarantee you that the company I work for would not be considering shutting in production just yet if it weren't for the royalty fiasco in this province. When our royalties nearly DOUBLE (~25% to ~47%) that has a direct impact on cash flow and ability to sustain a viable business. Couple that with a 70% decline in oil price and it is bad.

[FLAMESRULE]

Originally Posted by fotze

heavy oil wells can't just be turned back on either, would need a rig for each of them, supply shock is a coming. oh ya, aren't the royalties not in effect for 5 years now.

There is only a break for wells drilled between 1000 + 3000m I believe. We're at 900+m so we get hammered Jan 1.

And you are right, a shut-in heavy well will never return to its original level of production prior to being shut-in.

[Claeren]

^ I am not an expert on the new royalty scheme by any means but I was under the impression that the big increase was applied at the, then unheard of, high oil prices.

With these much lower prices are the increases that much as well?

22% more of $150/barrel is a long ways from 22% more of a $25/barrel.




Claeren.

[Nancy]

Originally Posted by kevman

Smaller bonuses, no Christmas gifts and now no flex days!?!?! What is this? I fell like I'm working for free...

Yah, but don't CNRL employees receive a lot of their pay as stock options?

Oh, wait a minute...

[Claeren]

Just a quick comment on the unemployment figures,

The fact the market is largely flat (so far) after numbers like that is astonishing to me. These are numbers coming in BEFORE 1-to-3 of the automakers goes into bankruptcy.

Also, the 530,000 jobs is bad, but a few hidden things to look at:
- 400,000 people 'fell off' of the list last month because they have given up looking for work. Years ago they were counted but they stopped so that the government could look better, these people are likely into the (tens of?) millions and are totally disfranchised within America. When counted it shows America is more hollow than it appears compared to past recessions.
- A lot of companies are quietly waiting until after Christmas to start layoffs.
- A lot of temporary retail jobs have been created before christmas, these will be gone in the new year.
- Canada's 70,000+ job losses would equal 700,000 in the USA. That is pretty significant and shows we are not by any means immune.




Claeren.

[FLAMESRULE]

Originally Posted by Claeren

^ I am not an expert on the new royalty scheme by any means but I was under the impression that the big increase was applied at the, then unheard of, high oil prices.

With these much lower prices are the increases that much as well?

22% more of $150/barrel is a long ways from 22% more of a $25/barrel.

Claeren.

I'm not either, but I think we reach the 47% or so field average at around $80USD/bbl. The royalty rates vary according to the realized wellhead price and the average well production (eg. a higher producing well in the same field will pay more royalty than a lower producer) I honestly dont know what our royalty rate is now at $42/bbl. Having said that, as the price continues to drop we are forced to constantly re-evaluate the budget.

I'm going to figure out our current rate at $42/bbl...

[FLAMESRULE]

As a general question for those involved heavily in the market (specifically O+G), as a shareholder in a major or very cash rich junior right now would you prefer your company to 1) Start a major share re-purchase plan to lower your stock base or 2) target cheap acquisitions??

http://business.theglobeandmail.com/.../Business/home

[Slava]

Originally Posted by Claeren

Just a quick comment on the unemployment figures,

The fact the market is largely flat (so far) after numbers like that is astonishing to me. These are numbers coming in BEFORE 1-to-3 of the automakers goes into bankruptcy.

Also, the 530,000 jobs is bad, but a few hidden things to look at:
- 400,000 people 'fell off' of the list last month because they have given up looking for work. Years ago they were counted but they stopped so that the government could look better, these people are likely into the (tens of?) millions and are totally disfranchised within America. When counted it shows America is more hollow than it appears compared to past recessions.
- A lot of companies are quietly waiting until after Christmas to start layoffs.
- A lot of temporary retail jobs have been created before christmas, these will be gone in the new year.
- Canada's 70,000+ job losses would equal 700,000 in the USA. That is pretty significant and shows we are not by any means immune.




Claeren.

This is because the markets are a forward looking instrument. While the enormous job losses are not good the markets were expecting worse. (IIRC the rate in Canada is now at 6.6% and the projection was 6.7%). The numbers are never perfect...but the other thing that the numbers include is people who have left one job and already have another one lined up.

[I-Hate-Hulse]

Actually disregard my comment re CNRL losing their flex days. I only got that second hand and after a few calls to confirm this it's not looking like that's the case.

[Slava]

Originally Posted by fotze

Well this week is over and good riddance, now its nothing but up eh slava, you better be right.

I don't recall saying that it was all up from here...but nonetheless if I'm wrong the anonymity of the internet will protect me!

[jonesy]

Originally Posted by FLAMESRULE

As a general question for those involved heavily in the market (specifically O+G), as a shareholder in a major or very cash rich junior right now would you prefer your company to 1) Start a major share re-purchase plan to lower your stock base or 2) target cheap acquisitions??

http://business.theglobeandmail.com/.../Business/home

target cheap stuff. That is how to leapfrog ahead. There were more millionaires made in the depression of the 30's than at any other time in history. Right now, cash is king.

[Claeren]

Originally Posted by Slava

This is because the markets are a forward looking instrument. While the enormous job losses are not good the markets were expecting worse. (IIRC the rate in Canada is now at 6.6% and the projection was 6.7%). The numbers are never perfect...but the other thing that the numbers include is people who have left one job and already have another one lined up.

Actually, the losses were far in excess of what was forecast as a worst case scenario.

I was under the impression that 400,000 was the highend of 'worst case', 30% above the actual numbers?


Oh, and I also heard that both OCT and SEPT unemployment numbers were quietly revised upwards as well.


That is alright though, I don't think there is much downward momentum until the new year. How much bad news can there be in the next 2 weeks that could not be put off for another 2 weeks to let people enjoy their christmas?




Claeren.

[dustygoon]

Originally Posted by FLAMESRULE

As a general question for those involved heavily in the market (specifically O+G), as a shareholder in a major or very cash rich junior right now would you prefer your company to 1) Start a major share re-purchase plan to lower your stock base or 2) target cheap acquisitions??

http://business.theglobeandmail.com/.../Business/home

The math.....you buy back stock if the rate of return implied in the stock price is higher than you can get in investing in your own assets or buying companies. So basically, if you can't find anything to invest in out there that can generate a better return than buying your own stock, then you put your cash into your own shares. A lot of companies operate like traders....buying their stock when its cheap and issuing secondaries or private placements to raise money when the stock is high.

If you are a growing company with a good management team, it is pretty tough to tell investors that you can't find any good assets to pick off and have decided to buy back your own shares.

[Phanuthier]

It seems for Buffet, he perfers management to use extra cash to buy back shares if its not being reinvested, the reason being that if the company is chartering outside of its usual business (i.e. if coca-cola were to buy a film industry) that its not under its expertise. Overhead (SG&A) would be higher I would assume, and the company would run less efficiently. (Am I right there? Just trying to interpret diff opinions) It seems like acquisitions seem to be good only if its in the same industry to keep the same management expertise (assuming you are investing in a company with good management, i.e. not Ford, GM, AIG, et al).

BTW ... markets have went really bearish to really bullish the past few hours. Down 3% to up 3% lol.

[Slava]

Originally Posted by Claeren

Actually, the losses were far in excess of what was forecast as a worst case scenario.

I was under the impression that 400,000 was the highend of 'worst case', 30% above the actual numbers?


Oh, and I also heard that both OCT and SEPT unemployment numbers were quietly revised upwards as well.


That is alright though, I don't think there is much downward momentum until the new year. How much bad news can there be in the next 2 weeks that could not be put off for another 2 weeks to let people enjoy their christmas?




Claeren.

I was going by the Canadian percentages that were discussed earlier this monring on BNN. In any event, the market looks like it will finish relatively even today.

[jonesy]

Originally Posted by Phanuthier

It seems for Buffet, he perfers management to use extra cash to buy back shares if its not being reinvested, the reason being that if the company is chartering outside of its usual business (i.e. if coca-cola were to buy a film industry) that its not under its expertise. Overhead (SG&A) would be higher I would assume, and the company would run less efficiently. (Am I right there? Just trying to interpret diff opinions) It seems like acquisitions seem to be good only if its in the same industry to keep the same management expertise (assuming you are investing in a company with good management, i.e. not Ford, GM, AIG, et al).

BTW ... markets have went really bearish to really bullish the past few hours. Down 3% to up 3% lol.

Yes I agree, it can't be random in what you buy. For example it might make sense to buy a cash strapped company in your industry that had a good product/service/technology but had very slow sales or a debt, then you would control the assests when times got better, but you bought it at a fraction of its potential value.

So should Toyota buy GM as an example Only if they think that in the future the products/technology will be good enough to make a large return in the long haul. Guess you have to look at the potential baggage of said company as well. Don't want that to drag you down to your own death.