Official (Alberta) Oil Discussion Thread

[Kavvy]

so ya, in the last 5 min WTI has shot up over a buck from earlier when it was lower then the previous close.
It has come back down a bit since, but still odd.

[OMG!WTF!]

Originally Posted by Kavvy

so ya, in the last 5 min WTI has shot up over a buck from earlier when it was lower then the previous close.
It has come back down a bit since, but still odd.

Crude Inventories report was at 10:30 est. I guess they were lower than expected.

[Kavvy]

Originally Posted by OMG!WTF!

Crude Inventories report was at 10:30 est. I guess they were lower than expected.

somehow the price change was cooler to me when it wasn't support by any facts.

[OMG!WTF!]

Originally Posted by Kavvy

somehow the price change was cooler to me when it wasn't support by any facts.

That is so true. Like did Iran finally snap and lob a few at Riyadh?. But no. Just sucking up more grease than usual.

[polak]

Also rebel attacks in Nigeria disrupting supply there to go along with Libya and Canada

[FLAMESRULE]

And in the "holy crap" news of the day, Whitecap bought Husky's SW Sask assets for $595MM (11,600 boepd). Seems crazy high to me.

[TurdFerguson]

Originally Posted by FLAMESRULE

And in the "holy crap" news of the day, Whitecap bought Husky's SW Sask assets for $595MM (11,600 boepd). Seems crazy high to me.

Interesting to see whitecap active again. they said they'd continue to be active in this climate and are backing it up.

[IliketoPuck]

$51,200/boe is a pretty good deal for Whitecap considering the low decline nature of Husky's assets.

Before this whole thing started, assets like those would have easily gone for > $100,000/boe.

Edit:

And that doesn't even consider all of the infrastructure that Whitecap is getting in this deal (23 batteries and a gas plant) + 660 drilling locations.

[Slava]

Penn West may go bankrupt if a new deal isn't reached before the end of June.

[Fuzz]

Originally Posted by Slava

Penn West may go bankrupt if a new deal isn't reached before the end of June.

http://www.cbc.ca/news/business/penn...583876?cmp=rss

[IliketoPuck]

Originally Posted by Slava

Penn West may go bankrupt if a new deal isn't reached before the end of June.

I'm actually more surprised that they managed to remain onside their debt covenants for Q1.

[Tron_fdc]

Debt levels at 4 times your stock value? Who signs off on that kind of thing? Is that common?

I don't work O&G (thank god) but that seems insane. Our bank (RBC) would NEVER go along with something like that. Maybe it's time to start looking for a new bank!

[I-Hate-Hulse]

Originally Posted by Tron_fdc

Maybe it's time to start looking for a new bank!

Actually, I think they're trying to find more banks like them.....

The company is in admittedly bad shape, but there are plenty of companies in danger / or have already breached covenants. The question is: how badly does the bank want to push the company into CCAA and inherit a pile of assets it then has to monetize? Or do you hold your breath and hope management's plan is better?

[Hack&Lube]

At the end of the day, a bank doesn't want to run an oil company. This is a very last-resort thing to do but RBC has been pulling the strings for quite a long time over at Penn West. This is just getting nearer to the last straw.

As far as this lending behavior goes, this was pretty standard in the industry to borrow, borrow, borrow in order to drill. In good times, high oil prices and high stock prices would balance out the long recovery times.

[Enoch Root]

Originally Posted by Tron_fdc

Debt levels at 4 times your stock value? Who signs off on that kind of thing? Is that common?

I don't work O&G (thank god) but that seems insane. Our bank (RBC) would NEVER go along with something like that. Maybe it's time to start looking for a new bank!

No one signed off on that, things just change.

The stock was as high as $28 in 2011. Now it is $0.82. When your stock price drops 97%, your ratios usually don't look too good.

[Tron_fdc]

Originally Posted by Enoch Root

No one signed off on that, things just change.

The stock was as high as $28 in 2011. Now it is $0.82. When your stock price drops 97%, your ratios usually don't look too good.

So what are they borrowing against? Receivables? Stock value? Sure your ratios take a beating as your stock value drops, but that debt must be tied to SOMETHING...?

I'm wondering how much exposure joe investor has when a stock like Pennwest gets delisted and the banks start calling loans causing a bankruptcy. If this becomes the norm does the government step in here and bail them out? I'm not being alarmist (maybe a little) but I'm curious what happens if this becomes common. It's going to have a pretty big trickle down effect.

I still have a hard time coming to terms with the lending. Are they leveraging every last asset in the company to keep expanding it, and when it implodes they take a buyout and walk away? I mean, there are well run companies DT still turning a profit, what are they doing differently? They're not run by sailors?

[burn_this_city]

Tied to reserves and market cap.

[IliketoPuck]

Reserves are likely not considered as it is a covenant based lending facility.

Only real lending determinants in that case are cash flow, debt, market cap, or any other balance sheet tests that are required for the purpose of remaining onside the covenants prescribed.

Smaller borrowers (ie usually below 40,000 boe/d) will have their lending facilities tied closely to reserves, production, and commodity prices.

[Tron_fdc]

So the reserve value I'm assuming? (X) amount of reserves at (X) dollar per bbl?

Isn't that a little speculative on everyone's part?

Again, I'm not an O&G guy, I'm trying to understand where the lending comes from.

[Tron_fdc]

OK, so they determine a reserve value and a market cap, then come up with a percentage of those two you can borrow against?

We borrow against receivables (50%) and stock value (50%) of our parts, which I guess is the same thing as reserve value (stock) and cash flow (receivables).