Official (Alberta) Oil Discussion Thread

[OMG!WTF!]

Originally Posted by IliketoPuck

Fundamental difference is supply this time around.

The markets are acting irrationally, in my opinion. A slight increase in U.S. rigs does nothing in the grand scheme to offset the declines occurring right now.

You need to get back to the level of rigs we were at pre-crash, and stay there for 2 years straight to get back to adding meaningful amounts of production.

Everything else right now, in my opinion, is typical media sensationalism backed up by little to no actual analysis.

I think it's USD strength providing most of the headwind for oil price. It's hard to imagine an entire market watching tv and acting irrationally over an extended period.

[Izzle]

Oil hovering at $40. It briefly dipped below $40 this morning. News suggest oil oversupply and rigs coming back online are not helping. Looks like single meat for days.

[Bob]

Originally Posted by Izzle

Oil hovering at $40. It briefly dipped below $40 this morning. News suggest oil oversupply and rigs coming back online are not helping. Looks like single meat for days.

US shale drillers have apparently improved more than expected: http://www.telegraph.co.uk/business/...-a-standstill/

North America's hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.

The 'decline rate' of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more.

Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.

His company has cut production costs by 26pc over the last year alone. Pioneer is now so efficient that it is already adding five new rigs despite today's depressed prices in the low $40s. It is not alone.

The Baker Hughes count of North America oil rigs has risen for seven out of the last eight weeks to 374, and this understates the effect. Multi-pad drilling means that three wells are now routinely drilled from the same rig, and sometimes six or more. Average well productivity has risen fivefold in the Permian since early 2012.

Bad news for Alberta, unfortunately:

The losers are high-cost projects elsewhere: off the coast of Nigeria and Angola, in the Arctic, or the oil sands of Canada and Venezuela's Orinoco basin. Roughly 4m to 5m barrels a day of future supply has been shelved around the world.

[polak]

Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week - with some poetic licence - claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.

Consultants Wood Mackenzie estimated in a recent report that full-cycle break-even costs have fallen to $37 at Wolfcamp and Bone Spring in the Permian, and to $35 in the South Central Oklahoma Oil Province. The majority of US shale fields are now viable at $60.

If shale can produce profitable oil in this environment can't we pretty much call it a day for any hope of a recovery?

Or maybe everyone will realize that limiting production and driving prices up is now the best play for everyone since the Saudi's won't be able to drive Shale out like they intended? Wishful thinking??

[Bill Bumface]

Originally Posted by polak

Or maybe everyone will realize that limiting production and driving prices up is now the best play for everyone since the Saudi's won't be able to drive Shale out like they intended? Wishful thinking??

So if guys in the US can make money at $45/bbl, and the Saudis cut 1 bbl of production to attempt to drive prices higher, why isn't that just replaced by 1/bbl of US shale oil?

I know once that happens enough you're starting to hit the higher cost shale barrels, but that is maybe $60, and now the Saudis are seeing less oil revenue than ever before at their decreased volumes.

I don't see how they do anything but pump for cash.

[polak]

Yeah I don't disagree. Everyone is going to flood the market. Is this the "put a fork in them" moment for any oil sands expansion?

[IliketoPuck]

Originally Posted by OMG!WTF!

I think it's USD strength providing most of the headwind for oil price. It's hard to imagine an entire market watching tv and acting irrationally over an extended period.

Tertzakian lays it out better than I ever could.

http://business.financialpost.com/ne..._lsa=c106-3ee7

[OMG!WTF!]

Originally Posted by IliketoPuck

Tertzakian lays it out better than I ever could.

http://business.financialpost.com/ne..._lsa=c106-3ee7

That would explain why oil stocks have diverged from the price of oil. Also crude inventories were all down on today's report.

[Bill Bumface]

Originally Posted by OMG!WTF!

That would explain why oil stocks have diverged from the price of oil. Also crude inventories were all down on today's report.

The EIA report today was 1.4 Mbbl increase to crude stocks and distilate was up by 1.2Mbbl.

The gasoline draw of 3.3Mbbl was the good news that drove price up today.

[Lubicon]

http://www.cbc.ca/news/canada/calgar...2016-1.3706074

The good news out of this may be that this could free up future cash for some producers when they do want to drill again. Currently it is being spent in getting out of contracts. This will also help reduce costs long term as they may be able to negotiate better rig rates when they do decide to drill again. Or maybe not.

[GGG]

Originally Posted by Lubicon

http://www.cbc.ca/news/canada/calgar...2016-1.3706074

The good news out of this may be that this could free up future cash for some producers when they do want to drill again. Currently it is being spent in getting out of contracts. This will also help reduce costs long term as they may be able to negotiate better rig rates when they do decide to drill again. Or maybe not.

It won't change future rig costs and it doesn't really free up cash as if they were paying not to drill it means the economics would be pretty bad on the wells that were originally planned to be drilled

[nik-]

All that sounds like is a good way for Trinidad to ensure they're one of the last options looked at for future business. However, when the choice is potentially impact future business or shut the doors now it's probably a pretty easy choice.

Not that I know anything about Trinidad's situation, just broad assumption on the state of drilling companies right now.

[stampsx2]

Originally Posted by Bob

US shale drillers have apparently improved more than expected: http://www.telegraph.co.uk/business/...-a-standstill/





Bad news for Alberta, unfortunately:

Yes bad news for Alberta.

The politicians here make it impossible for oil sands to be more efficient, carbon taxes, royalties, anti pipeline. They'll never get their costs down. In the mean time u.s. producers are getting more and more efficient and taking over the market while canada sits and twittles its thumbs. Canada is it's own worst enemy.

[Bring_Back_Shantz]

Originally Posted by nik-

All that sounds like is a good way for Trinidad to ensure they're one of the last options looked at for future business. However, when the choice is potentially impact future business or shut the doors now it's probably a pretty easy choice.

Not that I know anything about Trinidad's situation, just broad assumption on the state of drilling companies right now.

I'm not sure I follow.
This story is about producers paying to get out of commitments they made to use those rigs (often the rigs are purpose built for the producer, hence the commitment).
Why would this make Trinidad a bad option to do future business with.

[Lubicon]

Originally Posted by GGG

It won't change future rig costs and it doesn't really free up cash as if they were paying not to drill it means the economics would be pretty bad on the wells that were originally planned to be drilled

Not necessarily true I would argue. I would expect that day rates today are much lower than when these contracts were signed so you could drill today for less than you could last year or two years ago. If rig rates aren't going down then the industry will fail in their goals of reducing cost. All other services have taken a hit on rates, I have to think drillers have too.

A lot of discussion has focused on the oil sands and rightfully so but there is also the conventional industry in Canada. I don't think costs have come down enough yet but we do stand a decent chance of competing with shale oil (we produce it too) if we can achieve this. There may be a glimmer of hope for that side of the industry.

[Weitz]

Originally Posted by Lubicon

Not necessarily true I would argue. I would expect that day rates today are much lower than when these contracts were signed so you could drill today for less than you could last year or two years ago. If rig rates aren't going down then the industry will fail in their goals of reducing cost. All other services have taken a hit on rates, I have to think drillers have too.

A lot of discussion has focused on the oil sands and rightfully so but there is also the conventional industry in Canada. I don't think costs have come down enough yet but we do stand a decent chance of competing with shale oil (we produce it too) if we can achieve this. There may be a glimmer of hope for that side of the industry.

You don't think costs have come down enough on the service side? Or on the Owner side?

You literally have service companies working for free/at a loss.

[Lubicon]

Originally Posted by Weitz

You don't think costs have come down enough on the service side? Or on the Owner side?

You literally have service companies working for free/at a loss.

I'm well aware of that, I work for one. Owner side costs have come done largely on the backs of the service side. Service side is struggling to adjust their cost structure as they do not have nearly the leverage or ability that the producers do. Not sure where the solution lies, just that we need to find a way for everyone to get cost in line with the new price reality. It won't be easy.

[Violator]

https://twitter.com/CityofVancouver/...50343176417280

well......

[puffnstuff]

Mayor of Vancouver is no good.

[PaperBagger'14]

Originally Posted by Violator

https://twitter.com/CityofVancouver/...50343176417280

well......

I've never understood the idea of "BC, AB and SK should separate!". As much as I don't see any monetary benefit we have by being part of Canada, BC is against pipelines (and Alberta's economy) as much as anyone.