"We don't do business in Alberta."

[Thunderball]

Originally Posted by Cowboy89

2009 and 2010 is the foreseeable future and it sure as hell won't be even close to $150/bbl anytime soon. So no it's not like oil prices can only go up! In a $45/bbl world hiking royalties just makes tough times tougher. Ripping up old agreements compromises business climate and that was exactly what that clip alluded to. Even if prices recovered overnight capital wouldn't return as fast due to the risk of government policy changing on a whim. Had there been no royalty review the low price itself would have slowed development down enough to avoid unsustainable inflation. Just yesterday Alberta's inflation rate was quoted as 2.4 down .2 from the national average. There was never a need for public policy hacks to draft up a royalty increase in the first place. The net result is less government revenue and less business going on. Hurray! congrats idiots! EPIC FAIL no one's better off.

Correct me if I'm wrong, but is it not likely that we're in for a vicious oil spike in the near future with current trading well below what is considered to be a market range. There's only so much oil/gas consumption that is discretionary.

I suppose we can't blame Farmer Ed for that... but we can definitely blame him for the exacerbation of instability in Alberta.

[Cowboy89]

Originally Posted by Tower

hmmm - your opinion.

And yes I do believe if I do have to google much like anyone else who wants accurate info then do it... "If you have to" make such judgments try to be less prickish about it.

And perhaps my information is not from google. I might just use yahoo!

As well it is common knowledge that oil in the Middle east is better quality but as well more "dangerous/risky/cost safy concern" to get at... Costs vary in all aspects Cowboy. Which from your online stand point seems to point to is that you MUST know. But I digress.

It is true that I'm not an oil boy. It is true that I am not an expert but it is also true that I must know someone who does... And he's pretty f'n smart.

If our oil is currently under contract and countries or companies back out of the contract then does it not make sence that other countries and companies would jump on the oppertunity like previously said countries who are starved for oil? Me thinks yes.

Then how come land sales suffered immediately after the royalty agreement? Even in a high price environment they dried up. Where are the other multitudes of companies rushing into Alberta to drill up our marginal oil and gas? They have been free to bid on new land packages. Why did those prices tank as oil and gas prices soared this spring?

Me thinks said companies bidding less on Alberta land know more than you and your f'n smart friend about the best use of their own capital.

[Cowboy89]

Originally Posted by Thunderball

Correct me if I'm wrong, but is it not likely that we're in for a vicious oil spike in the next 2-3 years with current trading well below what is considered to be a market range. There's only so much oil/gas consumption that is discretionary.

I suppose we can't blame Farmer Ed for that... but we can definitely blame him for the exacerbation of instability in Alberta.

Very true, but tell that to the Saudi's as their storage facilities continue to build up. Inventories in Asia, Europe, and North America continue to build. China and India's demand will shrink with a US recession because they're economies are built to leach off of American consumer goods/services sales.

Yeah $150/bbl this July was the vicious oil spike everyone was talking about 5 years ago. I think speculators/investors will be a little gun-shy and actually keep the price lower than fundamentals for a few years after this meltdown.

[Thunderball]

Originally Posted by Cowboy89

Very true, but tell that to the Saudi's as their storage facilities continue to build up. Inventories in Asia, Europe, and North America continue to build. China and India's demand will shrink with a US recession because they're economies are built to leach off of American consumer goods/services sales.

Yeah $150/bbl this July was the vicious oil spike everyone was talking about 5 years ago. I think speculators/investors will be a little gun-shy and actually keep the price lower than fundamentals for a few years after this meltdown.

So realistically, what's the likely pricing range you have been hearing for the forseeable future?

[Cowboy89]

Originally Posted by Thunderball

So realistically, what's the likely pricing range you have been hearing for the forseeable future?

What analysts and research houses are saying is $70-80 is on the optimistic side long term (in a year or two) and Short-term could tumble as low as $30, but not due to fundamentals but rather a continuation of panic selling and overreaction this fall/winter before an ultimate recovery. A $50 swing is pretty big, but in my opinion expecting a $150 upswing so much so as to base legislation and government policy around it happening would be the definition of insane.

[Thunderball]

Originally Posted by Cowboy89

What analysts and research houses are saying is $70-80 is on the optimistic side long term (in a year or two) and Short-term could tumble as low as $30, but not due to fundamentals but rather a continuation of panic selling and overreaction this fall/winter before an ultimate recovery. A $50 swing is pretty big, but in my opinion expecting a $150 upswing so much so as to base legislation and government policy around it happening would be the definition of insane.

Agreed... I heard slightly more positive numbers in the $70-90 range by the end of the winter if all goes well. Of course, things could change still.

[Mr.Coffee]

Originally Posted by burn_this_city

We drew a red circle around the moon today and decided we wont be investing there either.

Yeah... we did that at work today too. We just don't see the potential upside since there's some doubt that there is fossil fuels. Plus that would be one gigantic pipeline.

I've already mentioned a ton on this site about this stuff. It really isn't even news anymore. I will resort to the old offshore Africa comparison again because it got brought up again here when somebody mentioned not investing in other areas of the world because they are unstable.

Scenario: Drill an oil well.

Location: Offshore Equatorial Guinea
Cost: varies, but approx. $7MM
Regulations: Next to none.. do whatever you need to do.
Initial Production Rates: Anywhere between 25,000 to 50,000 bbls/d.
Government: Possible instability
Royalties: Anywhere from 10-15%

Location: Alberta
Cost: varies, but approx. $1MM (deepish well)
Regulations: Up the ass. More hoops to jump through than a lion in the circus.
Initial Prodution Rates: 100 bbls/d. (Decent well)
Downside: Possible instability
Royalties: Before last week's adjustment, upwards of 50%

Not much of a discussion is it?

^ Extreme example, but you get the idea. Hello B.C. & Sask!

[Tower]

Originally Posted by Cowboy89

Then how come land sales suffered immediately after the royalty agreement? Even in a high price environment they dried up. Where are the other multitudes of companies rushing into Alberta to drill up our marginal oil and gas? They have been free to bid on new land packages. Why did those prices tank as oil and gas prices soared this spring?

Me thinks said companies bidding less on Alberta land know more than you and your f'n smart friend about the best use of their own capital.

Me thinks your the type who pick fights in bars.

[Barnes]

Man BC is cashing in this year.

AB
Year | Parcels Sold | Bonuses | Hectares | Avg$/Ha
2005 | 8,796 | 1,827,239,438.48 | 2,888,212.1560 | 632.65
2006 | 8,473 | 1,471,853,475.66 | 2,692,912.3020 | 546.57
2007 | 6,561 | 710,685,624.99 | 1,871,920.6340 | 379.66
2008 | 5,615 | 882,405,726.08 | 1,772,351.3190 | 497.87

BC
Year | Bonuses | Hectares | Avg$/Ha
2005 | $533,985,782.86 | 579,402 | $921.62
2006 | $629,849,173.78 | 690,744 | $911.84
2007 | $1,047,107,705.74 | 595,559 | $1,758.19
2008 (to Oct.16/08) | $2,455,733,022.96 | 671,538 | $3,656.88

[guzzy]

one huge point people are missing here is companies are going to BC because there are more profitable wells. This was going to happen regardless of royalties. The advances in drilling technology have made drilling in BC a profitable venture where in Alberta it is clearly less profitable because of the quality of wells. Chevron got out of ALberta 5 years ago because of the quality of wells and the mature resources.

BC is largely untouched and has vast reserves, especially in natural gas. The companies will always blame the govt but the truth is they know it is more profitable in BC because of the quality of the wells being drilled

[flamesfever]

In Saskatchewan the 4 things which make the Bakken play economic are:

1. a tight, thick, widespread formation which is oil bearing.

2. increase in commodity price i.e. oil

3. improved technology in getting the oil out i.e. staged fracs in hz wells.

4. a royalty system which allows companies to get their investment back in a hurry.

One should not downplay the importance of the royalty sytem - without it, I believe the Bakken play would be much less attractive.

[flamesfever]

Originally Posted by guzzy

one huge point people are missing here is companies are going to BC because there are more profitable wells. This was going to happen regardless of royalties. The advances in drilling technology have made drilling in BC a profitable venture where in Alberta it is clearly less profitable because of the quality of wells. Chevron got out of ALberta 5 years ago because of the quality of wells and the mature resources.

BC is largely untouched and has vast reserves, especially in natural gas. The companies will always blame the govt but the truth is they know it is more profitable in BC because of the quality of the wells being drilled

I acknowledge your point that their may be more "elephants" left to be found in B.C., and that the larger companies like Chevron have to go after the big plays. However, in Alberta, because of the basin maturity its the smaller companies that are becoming increasingly important to Alberta, and the new royalty scheme is hitting them the hardest.

In my experience, it's only 10 to 20% of the wells which are great producers and which you often have to include in your economics to make prospects economic. If you hit these wells with a 50% royalty, the plays become uneconomic when you factor in risk.

It's obvious to me that the people who designed the new royalty scheme do not understand the business.

IMO until the 50% royalty on the best wells is reduced to 30%, the companies will continue to put a red line around Alberta.

[I-Hate-Hulse]

High royalties or not, it'll be lousy commodity pricing that kills production activity in these pricey plays with a vengeance.

Alberta needs a reminder every once in a while that our oil and gas won't last forever. Sure would be nice if we had more of a Heritage Fund for the day when it's all not viable to produce here. There will continue to be higher quality plays with better economics in places other than widely explored Alberta. We'd better get used to it.

[Ford Prefect]

Originally Posted by Red

This is what happens when you vote in a guy that's appealing because he is just like you, the average Joe farmer.

The guy looks confused and now he acts like it too. We need a smart person to get us through these tough times, not a farmer.

So ... farmers are intrinsically stupid? Nice.

[tkflames]

Originally Posted by Bobblehead

A reporter at an O&G conference who said one company put a red border around Alberta and said as a selling point that they don't do any business in Alberta.

To be fair, the "reporter" was Kevin O'Leary made famous in Canada for being a direct and forward (some may call him a jerk...i don't) on dragons den who happens to have be seeking 1.2B worth of investment opportunities. While I doubt he has any expertise in the O & G sectors, I would argue that much of the investment demand comes from a large group of people like him as opposed to a small group of experts in the field.

[First Lady]

Here is another.

http://watch.bnn.ca/#clip114391

The person being interviewed refers to Royalites as taxes; which is not accurate IMO, but he makes some very valid points regard how the new change will play out.

I also believe the interview makes an error, in that he says the government has not backed off on the oilsands. Just last week:

"Syncrude, the largest oilsands producer in the world, agreed to pay increased royalties under Premier Ed Stelmach's new regime starting in 2016, rather than next year, as other oil and gas producers in Alberta will."

http://www.canada.com/calgaryherald/...a-0fd9b0e16367

2016 was their original end date for their contracts. So really nothing has changed. Where are all the people who wanted our "fair share"?
I would have thought they would be screaming about this by now.

[flamesfever]

Originally Posted by I-Hate-Hulse

High royalties or not, it'll be lousy commodity pricing that kills production activity in these pricey plays with a vengeance.

Alberta needs a reminder every once in a while that our oil and gas won't last forever. Sure would be nice if we had more of a Heritage Fund for the day when it's all not viable to produce here. There will continue to be higher quality plays with better economics in places other than widely explored Alberta. We'd better get used to it.

You can bet when things start to slow down after the government's new royalty scheme starts to take significant cash flow from producers on January 1, that the government will be using your argument - " it wasn't us, it was commodity prices Bla Bla Bla.

BC and Saskatchewan are proving that a fair and reasonable royalty regime does get results. The answer is simple - money flows where it get the best return, and until the Alberta Government wakes up, it's not going to flow here.

[SeeGeeWhy]

Take comfort folks...I do ALL of my business in Alberta.