Official (Alberta) Oil Discussion Thread

[heep223]

The NDP are not doing anything wrong. They're just not doing anything at all, past their populist promises. Frozen in time with the realization that they made those promises with no knowledge of economics and business. Just unfortunate that it's costing us all jobs and dollars.

CEO of Transalta is an extremely competent and thoughtful leader. Apparently she went on a frustrated rant.

http://business.financialpost.com/ne...hange-policies

[ranchlandsselling]

Originally Posted by Tinordi

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

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



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

Wait... If Tesla, who everyone knows is out there trying to revolutionize the battery and car industry succeeds I don't think that's a "black swan event".

*groan* for a wiki copy and paste:

The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.

The theory was developed by Nassim Nicholas Taleb to explain:

The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.

The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).

The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event's massive role in historical affairs.

I don't think Tesla success would be beyond the realm of normal expectations in history, science, finance and technology.

In fact it is science, finance and technology combined that will one day end world reliance on oil.

[rubecube]

Yep, this is getting pretty indefensible at this point.

[Leeman4Gilmour]

Originally Posted by ranchlandsselling

In fact it is science, finance and technology combined that will one day end world reliance on oil.

I hope Bolivia (I googled where one can find large lithium deposits) is easier to deal with than the Middle East

I say that partly in jest. I'm all for transitioning away from hydrocarbon based energy sources. I just think we should be careful about trying to get away from one finite resource only to end up relying on another.

[Slava]

Originally Posted by ranchlandsselling

Wait... If Tesla, who everyone knows is out there trying to revolutionize the battery and car industry succeeds I don't think that's a "black swan event".

*groan* for a wiki copy and paste:



I don't think Tesla success would be beyond the realm of normal expectations in history, science, finance and technology.

In fact it is science, finance and technology combined that will one day end world reliance on oil.

Yeah its not a "black swan" at all. The whole story of a black swan is that no one in the western hemisphere could conceive of anything other than a white swan until they started travelling to Australia and saw black swans. Until that moment though, its inconceivable.

When you have people running around predicting the end of oil or reliance on oil its not a black swan in the least.

[Jacks]

Originally Posted by heep223

The NDP are not doing anything wrong. They're just not doing anything at all, past their populist promises. Frozen in time with the realization that they made those promises with no knowledge of economics and business. Just unfortunate that it's costing us all jobs and dollars.

CEO of Transalta is an extremely competent and thoughtful leader. Apparently she went on a frustrated rant.

http://business.financialpost.com/ne...hange-policies

No new investment, wonderful. 3 more years of this clown show.

[Kavvy]

Originally Posted by Jacks

No new investment, wonderful. 3 more years of this clown show.

um, why is the CEO of transalta considered so respected?

I admit I know nothing about her, other than the stock chart of TA.tsx.... maybe not the most fair way to judge a CEO, but still counts....

[V]

Good question. Add in the price fixing charges and I'm not sure what makes this CEO so well respected.

[Weitz]

Quiet you guys. Transalta gives me work in this downturn!

[CorsiHockeyLeague]

Originally Posted by heep223

http://business.financialpost.com/ne...hange-policies

So that article says Transalta cut their dividend by 78% to save them 160 million bucks. Fair enough, but it also says they eliminated their DRIP at the same time. Can anyone who understands this stuff explain why on Earth they would eliminate their DRIP if they're trying to save money by paying out less on dividends?

[heep223]

Originally Posted by CorsiHockeyLeague

So that article says Transalta cut their dividend by 78% to save them 160 million bucks. Fair enough, but it also says they eliminated their DRIP at the same time. Can anyone who understands this stuff explain why on Earth they would eliminate their DRIP if they're trying to save money by paying out less on dividends?

DRIP dilutes current shareholders at a time when the company is trying to protect their EPS

[Top Shelf]

I heard Encana and Cenouvs got their debt rating cut to Junk status. That can't be good...

[OldDutch]

Originally Posted by Top Shelf

I heard Encana and Cenouvs got their debt rating cut to Junk status. That can't be good...

or unsurprising. I went for lunch end of last year with my O&G investment banker buddy, and I remember standing outside a restaurant in the beltline. I asked how is work? He waved his hand in the direction of downtown and said "All of that is broken"

Since then it has only got worse. Downtown is one giant money pit in general, and it isn't going to get better, especially for Canadian companies who are getting thrown rocks while asking for help.

[heep223]

Originally Posted by Top Shelf

I heard Encana and Cenouvs got their debt rating cut to Junk status. That can't be good...

It's not news. Bond markets have been pricing this in. The ratings agencies lag the market. The individual bond issues are down a dollar or two but they've been crashing for months.

Market leads, and then analysts, economists, pundits, ratings agencies follow. By the time everyone has their doomsday hats on, and investors are out of the market, it's already coming back up. You see it time and time again but nobody remembers.

Originally Posted by OldDutch

Downtown is one giant money pit in general, and it isn't going to get better, especially for Canadian companies who are getting thrown rocks while asking for help.

This is purely anecdotal and ambiguous. What time horizon are you talking about? First half of this year will be heavy but look to the back half for a recovery. It's a cyclical business and it's always darkest before the dawn. Not sure what you mean by 'Canadian companies asking for help'.

[OldDutch]

Originally Posted by heep223

This is purely anecdotal and ambiguous. What time horizon are you talking about? First half of this year will be heavy but look to the back half for a recovery. It's a cyclical business and it's always darkest before the dawn. Not sure what you mean by 'Canadian companies asking for help'.

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.

[stampsx2]

Originally Posted by Jacks

No new investment, wonderful. 3 more years of this clown show.

And how can we be so sure there won't be four more years after that?

[puckedoff]

Whichever government campaigns on extending pogey will get the next four years, because I reckon we'll all have joined the rank of the unemployed by then.

[heep223]

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.

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.

[polak]

The best cure for low prices are low prices

[GGG]

I think what is some what lost in the pessimism is that the cost to maintain current production is a lot less than to build new plants and expand more production.

At the current price even the maintain production money is being pressured but a recovery to 40-50 even means that maintaining production levels is profitable. So high debt companies are bought up cheaply, debt is wiped out and we get stead production in the future. The current labour levels probably do not sustain maintaining current production.

So I see no more layoffs once we get to that 40-50 price target outside of acquisitions and mergers. At those prices there wouldn't me a significant recovery in terms of external investment and jobs though.

Companies are pot committed and the assets have been built utilizing existing assets is very economical at fairly low prices which bodes well for our future hear.