Official (Alberta) Oil Discussion Thread

[Frequitude]

Originally Posted by _Q_

So what does everyone think of this production freeze by Saudi and Russia? Is this the beginning of the rebound?

I'm not the excited about it. A freeze means nothing. A cut is what we need to bring prices up. That's why we didn't see much of a reaction in the markets.

[CaptainCrunch]

As per the freeze, I heard a great description of it on BNN.

Lets say that your neighbor is playing their stereo so loud that it gives you a health crushing migraine. You finally have had enough, you go over to your neighbor, hammer on the door and ask them politely to turn their damn hip and or hop music down.

Your neighbor replies that he won't turn it down, but he promises not to turn up the volume any more.

So nothing changes and you still have a soul crippling migraine.

[bizaro86]

Originally Posted by _Q_

So what does everyone think of this production freeze by Saudi and Russia? Is this the beginning of the rebound?

We promise not to pump any more oil than our maximum possible output.

[OMG!WTF!]

Out of uwti with kabob money. Thanks Iran.

[GGG]

The fact that they are talking means they are trying to increase the price without pain. They want to do the minimum amount necessary to push the price to just below the point where shale makes sense.

I think these conversations do indicate that we have hit the bottom of the market. Real cuts won't happen until you see real US production drops.

[Slava]

Originally Posted by Frequitude

I'm not the excited about it. A freeze means nothing. A cut is what we need to bring prices up. That's why we didn't see much of a reaction in the markets.

That's right, but what it should do is set a base, which in itself is a positive at this stage.

[Knalus]

Originally Posted by Slava

The "not-as-sexy" why oil will rise side of the coin: http://www.calgaryherald.com/peter+t...852/story.html

Really excellent article. One of the big disconnects between the analysts and the public is in respect to their idea of "long term". Analysts sometimes seem to think that 2 quarters from now is "long term", not three years from now.

[Slava]

^ Three years isn't long term either in the investing world. That discussion begins at 5 years by most standards and in some cases is longer still.

[Frequitude]

Replying to blueski's post regarding Suncor in the layoffs thread since it makes more sense here.

Originally Posted by blueski

Riding on the coat tails of better days and higher capex, it'll take a few quarters, but operating costs will sky rocket.

This doesn't make any sense. What do "better days" (I'm assuming you mean better oil prices so higher revenues) and "higher capex" (I'm assuming you mean growth capex) have to do with cash costs on sustaining assets? It's not like they have been or are slashing sustaining capital. I just don't follow what you are trying to say here.

[ranchlandsselling]

Originally Posted by Frequitude

Replying to blueski's post regarding Suncor in the layoffs thread since it makes more sense here.


This doesn't make any sense. What do "better days" (I'm assuming you mean better oil prices so higher revenues) and "higher capex" (I'm assuming you mean growth capex) have to do with cash costs on sustaining assets? It's not like they have been or are slashing sustaining capital. I just don't follow what you are trying to say here.

Thanks for asking. I wondered the same but assumed I was just out to lunch and believe there are in fact "dumb questions", so I remained silent.

[IliketoPuck]

Originally Posted by Frequitude

Replying to blueski's post regarding Suncor in the layoffs thread since it makes more sense here.


This doesn't make any sense. What do "better days" (I'm assuming you mean better oil prices so higher revenues) and "higher capex" (I'm assuming you mean growth capex) have to do with cash costs on sustaining assets? It's not like they have been or are slashing sustaining capital. I just don't follow what you are trying to say here.

Perhaps he is referring to the inevitable snap back in service prices from contractors/drilling companies/suppliers that will occur once the price of oil recovers.

E&P companies grind the services industry into a pulp when in a down cycle and have to pay the piper as a result when things improve.

[Frequitude]

Originally Posted by ranchlandsselling

Thanks for asking. I wondered the same but assumed I was just out to lunch and believe there are in fact "dumb questions", so I remained silent.

Don't worry man. There are no dumb questions in here.

Originally Posted by IliketoPuck

Perhaps he is referring to the inevitable snap back in service prices from contractors/drilling companies/suppliers that will occur once the price of oil recovers.

E&P companies grind the services industry into a pulp when in a down cycle and have to pay the piper as a result when things improve.

The service company grinding probably wouldn't affect OpEx that much. Those savings, while substantial, are realized mainly on growth projects (i.e. grinding materials suppliers, contractors, etc.). The best way to get per barrel op costs down is to keep the plant running. There's a reason Syncrude's cash costs per barrel are something like $50 compared to $30ish across the street and it has little to do with the numerator. It's all in the denominator. They couldn't keep that plant running consistently over the past couple years.

[IliketoPuck]

Originally Posted by Frequitude

Don't worry man. There are no dumb questions in here.


The service company grinding probably wouldn't affect OpEx that much. Those savings, while substantial, are realized mainly on growth projects (i.e. grinding materials suppliers, contractors, etc.). The best way to get per barrel op costs down is to keep the plant running. There's a reason Syncrude's cash costs per barrel are something like $50 compared to $30ish across the street and it has little to do with the numerator. It's all in the denominator. They couldn't keep that plant running consistently over the past couple years.

Agreed, the best way to lower $/boe opex is to increase production. Although rates for maintenance, etc. have been ground down as well.

IMO Syncrude (and COSL) were / are poor forecasters. If you routinely miss your nameplate capacity y/y, then you should likely adjust your production expectations and guidance accordingly.

[nik-]

shocking to no one

http://boereport.com/2016/02/17/iran...output-levels/

[blueski]

All I was trying to say above is that they were doing a lot of right things before in the area I was in. Now they sure are not. It hasn't bit them yet but it will in a few quarters. And the funny thing is their cost savings are miniscule and when you factor in what they are getting, it's a huge loss. I probably misused the word capex, sorry for the confusion.

[ranchlandsselling]

Originally Posted by nik-

shocking to no one

http://boereport.com/2016/02/17/iran...output-levels/

And WTI continues its daily charge, +$2.12 $31.16.

[Frequitude]

Originally Posted by ranchlandsselling

And WTI continues its daily charge, +$2.12 $31.16.

Double meat for everyone!

[Tinordi]

Wood Mackenzie: Global oil industry and the black swan event.

http://www.forbes.com/sites/woodmack.../#396fd1334104

So what is the black swan event? It is not only that such a mass market electric vehicle could threaten oil demand growth, but that the underlying technological innovations necessary to be competitive with ICEs threaten the entire hydrocarbon industry – not just oil, but natural gas and coal as well. My hypothesis is that if a battery is capable of storing enough energy to move a $25,000 mid-size sedan 300 miles, then it would be cheap and small enough to mount another battery in the garage. If the garage battery is charged by roof-mounted solar and/or wind, it removes the need for incremental electricity generation from central power plants fired by natural gas or coal.

Former Saudi Oil Minister Zaki Yamani is credited with the quip, “The Stone Age didn’t end because the world ran out of stones – and the same will be true with oil.” I usually conclude these black swan discussions with clients by saying that I won’t see the end of the oil industry, my kids won’t see the end, but my grandkids just might. If Tesla can meet its Model 3 aspirations in the next few years, my observation might be realized much earlier than I used to think. There’s a new Tesla dealership near my house; I think I’ll take a look.

Disruptive oil futures are not as inconceivable as many in this thread are arguing.

[Regorium]

I'd just prefer that the industry dies by itself to a black swan event (much like this massive drop in oil prices), rather than being regulated to death by the government.

Like I said in the other thread, if TransCanada goes bankrupt building a 15 billion dollar empty tube in the ground, so be it. It's their prerogative to do so.

[Jason14h]

The Stone Age didn’t end because the world ran out of stones

What a fantastic Quote! I love it