Canadian dollar sinks below 88 cents as Saudis cut oil to $77

[lorenavedon]

Originally Posted by burn_this_city

If anyone is interested in Western Canada Select (bitumen) pricing year over year, this website has pricing for yesterday and one year ago. You can see the heavy oil producers are still in better shape now than this time last year.

http://www.psac.ca/firstenergy/

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.

[1stLand]

Maybe the Saudi's think that housing prices are too high in Calgary and they are eroding the price of oil so that they can buy houses for cheap next year?

[blankall]

Originally Posted by burn_this_city

http://en.wikipedia.org/wiki/Ghawar_Field

They have the king of oil fields. No one knows for sure, except the Saudis how much they have left.

Their oil is also cheaper to extract and of better quality than most oil sources

[Frequitude]

Originally Posted by ExiledFlamesFan

The current price is almost $20 below the YTD avg. If this oil glut continues this will cut into the bottom lines of oil companies and the province.

What is the break even prices for oil sands operations? I've heard $60 or $55/barrel

Suncor reported last week a Q3 Oil Sands cash cost of $33.10/barrel. Note however that they have the best assets of anyone in the oil sands, but it should give you an idea that operating assets are far from becoming uneconomic. It's the new development that is at risk.

[burn_this_city]

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.

I don't think that you realize that probably 40% of money spent in the oilsands business is sustaining capital work, that will continue regardless. Your doom and gloom nonsense doesn't hold much water when you compare this downturn to 2008. We have a short to medium term decline in pricing, but its not the bottom falling out of the basket. Marginal projects have already been shelved, but I haven't heard any announcements that will have a material impact on employment province wide.

[Red]

Originally Posted by burn_this_city

I don't think that you realize that probably 40% of money spent in the oilsands business is sustaining capital work, that will continue regardless. Your doom and gloom nonsense doesn't hold much water when you compare this downturn to 2008. We have a short to medium term decline in pricing, but its not the bottom falling out of the basket. Marginal projects have already been shelved, but I haven't heard any announcements that will have a material impact on employment province wide.

2008 was a short term shock caused mainly by "mood". What we have right now is over supply and lack of demand. We don't know how long this will last. Maybe $70 is the new norm for WTI? Maybe $50? We don't know. The market will sort it our over the next year or so. Very different from 2008.

[burn_this_city]

Originally Posted by Red

2008 was a short term shock caused mainly by "mood". What we have right now is over supply and lack of demand. We don't know how long this will last. Maybe $70 is the new norm for WTI? Maybe $50? We don't know. The market will sort it our over the next year or so. Very different from 2008.

2008 was a collapse of the capital markets and an overall decline in demand due to recession. Both of those smoked expansion because there was no way to borrow money for growth. The price drop killed expansion by companies that grow through cash flow because their cash flow was cut by half or more.

[lorenavedon]

Originally Posted by burn_this_city

I don't think that you realize that probably 40% of money spent in the oilsands business is sustaining capital work, that will continue regardless. Your doom and gloom nonsense doesn't hold much water when you compare this downturn to 2008. We have a short to medium term decline in pricing, but its not the bottom falling out of the basket. Marginal projects have already been shelved, but I haven't heard any announcements that will have a material impact on employment province wide.

employment has been slowing down already since early this year. The low oil prices will do nothing but fuel continued layoffs. The unemployment numbers are meaningless when %99 of the people working in EPCMs are contractors that don't factor into these numbers. People here made a lot of money and have large nest eggs so even when they stop getting new work / contracts they can last quite a while before panic sets in. If things don't pick up, 2015 doesn't look so hot.

[_Q_]

Originally Posted by lorenavedon

employment has been slowing down already since early this year. The low oil prices will do nothing but fuel continued layoffs. The unemployment numbers are meaningless when %99 of the people working in EPCMs are contractors that don't factor into these numbers. People here made a lot of money and have large nest eggs so even when they stop getting new work / contracts they can last quite a while before panic sets in. If things don't pick up, 2015 doesn't look so hot.

What?

[burn_this_city]

I'd say less than 25% of people at EPCs are contractors. I don't think you're in this industry and speaking from experience.

[MoneyGuy]

Originally Posted by Slava

I wouldn't recommend getting naked to look at your portfolio, but whatever eases the pain I suppose!

What the he11 is wrong with you? Have you never heard of naked calls?

Besides, you should give naked review meetings a try. It takes clients' minds off of the market.

[afc wimbledon]

Originally Posted by MoneyGuy

What the he11 is wrong with you? Have you never heard of naked calls?

Besides, you should give naked review meetings a try. It takes clients' minds off of the market.

Graphic representation of a soft market eh!

[Bill Bumface]

Originally Posted by Red

2008 was a short term shock caused mainly by "mood". What we have right now is over supply and lack of demand. We don't know how long this will last. Maybe $70 is the new norm for WTI? Maybe $50? We don't know. The market will sort it our over the next year or so. Very different from 2008.

There was a huge supply glut after the 2008 crash. Tankers were being used for storage more than they were for transport.

[Red]

Originally Posted by burn_this_city

2008 was a collapse of the capital markets and an overall decline in demand due to recession. Both of those smoked expansion because there was no way to borrow money for growth. The price drop killed expansion by companies that grow through cash flow because their cash flow was cut by half or more.

True and capital markets are often very much "mood" directed. More important I was pointing out that it was a short lived blip.What we have now is shaping out to be a longer term shift towards lower prices as demand falls and supply expands.

[burn_this_city]

Has demand really fell though? We might be a bit oversupplied, but last I heard demand was 92M BPD, which is almost 10% higher than 5 years ago.

http://www.eia.gov/forecasts/steo/report/global_oil.cfm

[ranchlandsselling]

Originally Posted by burn_this_city

Has demand really fell though? We might be a bit oversupplied, but last I heard demand was 92M BPD, which is almost 10% higher than 5 years ago.

http://www.eia.gov/forecasts/steo/report/global_oil.cfm

Not to mention a recovering US economy that can stoke demand as well as increased use of oil and gas as an input due to its low cost. I'm certainly not paying as much attention at the pump with gas below $1.00... Just wish it was summer time!

[MoneyGuy]

Originally Posted by afc wimbledon

Graphic representation of a soft market eh!

Yes, graphic indeed.

[SeeGeeWhy]

This thread makes me want to write an essay.

[Slava]

Originally Posted by SeeGeeWhy

This thread makes me want to write an essay.

I'd read it.

[oilyfan]

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.

Where are you coming up with this doomsday scenario? In the depth of the 08 downturn Alberta unemployment shot up to approx 12%. We haven't seen the unemployment increase at all this year really. Yet you are making the assertion that there have been massive layoffs in Calgary, and that the employment numbers are hodden by the contractors. Well, if you know anything about what happened in 2005-2008, literally everyone was becoming a contractor. We are nowhere close to that situation.