Official (Alberta) Oil Discussion Thread

[Leondros]

Originally Posted by Bill Bumface

Disagree. While yes, buybacks can be totally benign in some scenarios, we now see buybacks at levels never seen before across industries.

This indicates that capital is so plentiful, that businesses can't keep up with allocating capital to their core value creation streams. It's a cheaper/easier lever to pop numbers for quarterly reports to make the execs look good. The whole point of capitalism is that capital gets allocated to value creation, and value creation has a side effect of job creation. The entire system is so slanted toward corporations right now that they have to find a way to basically dispose of their excess capital.

Or in the case of oil and gas companies, its a better return on investment for the company to buy back its shares than to execute some of their capital projects due to economics. Many Canadian O&G companies simply have better returns by utilizing free cash flow to purchase shares and return that value to shareholders than to start projects based on the economics on a full cycle basis.

[boogerz]

Originally Posted by Bill Bumface

Disagree. While yes, buybacks can be totally benign in some scenarios, we now see buybacks at levels never seen before across industries.

This indicates that capital is so plentiful, that businesses can't keep up with allocating capital to their core value creation streams. It's a cheaper/easier lever to pop numbers for quarterly reports to make the execs look good. The whole point of capitalism is that capital gets allocated to value creation, and value creation has a side effect of job creation. The entire system is so slanted toward corporations right now that they have to find a way to basically dispose of their excess capital.

This is my take on it as well. Suncor had billions to allocate for stock buybacks in Feb/Mar when the market was already showing signs of long-term weakness.

I hear it's "so bad" that even sustaining projects are suspended due to austerity measures.

All the extra capital that was burned on buybacks sure would come in handy right now

[Mayo]

Originally Posted by Leondros

Or in the case of oil and gas companies, its a better return on investment for the company to buy back its shares than to execute some of their capital projects due to economics. Many Canadian O&G companies simply have better returns by utilizing free cash flow to purchase shares and return that value to shareholders than to start projects based on the economics on a full cycle basis.

Exactly. Or the projects are economic yet would be stupid to execute because of curtailments/market egress issues.

[flamesfever]

Originally Posted by Mr.Coffee

Truthfully layoffs at places like Suncor or TC are a HUGE black mark on industry at this stage. Oil companies for decades have been short sighted about laying people off. And you can kinda wrap your head around it if it’s the juniors or middle sized companies. But when you have a massively pro industry government and all the negative press about oil and gas and then 3 of the largest oil and gas enterprises do a pile of layoffs????? I mean... guys......... you have to be smarter than this.

Oil and gas has failed (and I mean use of the word has, because that is literally what’s happened- it’s over) because Canadian oil and gas was too arrogant and too ignorant to win the PR battle. And at the end of the day it was the MOST important thing. When we all look back in 50 years and this is the equivalent Blockbuster business case study in future textbooks, it’ll be about how an industry thought it was bigger than public opinion and then came to reality with it. For shame. Because this was a winnable battle when it mattered, about 10-15 years ago. Now? Way, way way too late. It’s over.

We are simply in unprecedented times with the world pandemic, and the major companies must survive. If layoffs are essential, then so be it.

I disagree that the industry has not gone to great length to try and win over the public, and have failed. I believe presently 2/3 of Canadians feel that we should build pipelines to increase the sale of our oil and gas. IMO the main problem in the PR battle facing the industry is, and always will be, that trying to educate the public is futile, as the industry is far too complex.

[bizaro86]

Buybacks and layoffs are both happening because new projects in AB are structurally unprofitable.

As long as that is true, it makes sense for corporations to return their profits to shareholders either as dividends or buybacks, since capital spending is value destructive.

And without capital spending, you need a lot less employees.

[Yoho]

https://twitter.com/user/status/1315652848957321216

[Looch City]

Welp, time to take up arms I guess?

Where is the nearest 'Berta Forces recruitment station??

[Suave]

Curtailments look to be done, or at least put on hold. Should hopefully help get more work going in the patch, espically in the Lloyd/Bonnyville areas.

Alberta to scrap oil production limits in December with demand for heavy oil poised to rise

The Alberta government said Friday it would stop setting monthly oil production limits to allow producers to utilize available pipeline capacity.

The provincial government said in a statement that while it will extend its regulatory authority to curtail oil production through December 2021, it will not set production limits due to 16 per cent of Alberta’s crude oil production remaining offline, down from 22 per cent at the start of the COVID-19 pandemic. The government said it does not plan to resume production limits at this time.

[RichieRich]

Just to clarify this new allowance and that is that the AER directive regarding flare and vent volumes must still be adhered to. So what that means is that if your oil (of whatever weight) also produces an excess of solution gas, the producer is not allowed to vent to atmosphere more than 900 m3/d. The practicality of that is the well production is merely reduced so that gas volumes meet that number. The other component to this is that ideally the producer has access to a gas pipeline that will accept the gas, provided the pipeline has capacity and they can meet the pipeline specs (usually requiring a dehy and compressor). I worked for an organization a few years back that failed to check that their new glorified "boomer" oil well could actually deal with the gas. They couldn't. Talk about epic fail.

[codfather]

Originally Posted by RichieRich

the producer is not allowed to vent to atmosphere more than 900 e3m3/d.

Are you sure it's 900 decs per day? That would be 27,000 e3m3 over a 30 day month which is an absolutely insane amount of gas. I work for a producer and there are large gas properties that produce less gas than this. 27,000 decs at current prices would be about $1.5 million. Pretty easy to make a business case to tie in volumes like that I would think.

I'm pretty sure the AER flags you if you have a single facility venting or flaring above 30 decs in a single month and have done so for quite some time so 900 in a day just seems crazy.

[Suave]

Its 900 m3/day not 900 decs per day.

The licensee or operator must apply this decision tree to combined flaring and venting of more than 900 m3/day and be able to demonstrate how each element of the decision tree was considered and,where appropriate, implemented.

[codfather]

Thanks Suave, that makes more sense. 900 m3/day is still a decent amount of gas but well within the wheelhouse for an oil well to produce.

[Yoho]

https://twitter.com/user/status/1320006668311093248

[Roughneck]

If only they pushed for that pipeline to and through Quebec before shutting it all down.

[Yoho]

Alberta, Saudi firm in talks to build $5-billion petrochemical plant


https://www.theglobeandmail.com/amp/...y-as-province/

[GGG]

Originally Posted by Yoho

Alberta, Saudi firm in talks to build $5-billion petrochemical plant


https://www.theglobeandmail.com/amp/...y-as-province/

I hate the race to the bottom with subsidies for everyone in order to compete with other jurisdictions.

[Oil Stain]

Originally Posted by GGG

I hate the race to the bottom with subsidies for everyone in order to compete with other jurisdictions.

Race to the bottom of what?

They need to do as many of these types of deals as possible in my opinion.

A project like this will create thousands of short term jobs as well as hundreds of top end jobs that will last for 40+ years.

Facilities of this size also have huge yearly operating budgets and support numerous secondary industries.

It seems to me like diverting as much of our natural resource production into facilities that will create finished products has a way better pay off for the average Albertan than focusing on more pipelines to ship all the profits of industry elsewhere.

[DeluxeMoustache]

I agree. If AB can’t get access to tidewater for crude, then having a petrochemical industry at home makes sense.

And 12% of eligible capex, not to be paid until the facility is producing? That isn’t bad based on a quick back of the envelope calculation. Let’s assume that about a third of capital expenditure is labour and add 10% engineering and project management, and that is all taxed at 36%. The province is ahead by startup.

[GGG]

Originally Posted by Oil Stain

Race to the bottom of what?

They need to do as many of these types of deals as possible in my opinion.

A project like this will create thousands of short term jobs as well as hundreds of top end jobs that will last for 40+ years.

Facilities of this size also have huge yearly operating budgets and support numerous secondary industries.

It seems to me like diverting as much of our natural resource production into facilities that will create finished products has a way better pay off for the average Albertan than focusing on more pipelines to ship all the profits of industry elsewhere.

It might make economic sense but I can still hate the race to the bottom. The extreme example right now is the movie industry where without tax subsidies you just can’t compete and there is no natural advantage to one jurisdiction over another. Or the Amazon head quarters where Amazon extracted concessions from the places they wanted to move to anyways. In general corporations know that they can extract concessions from jurisdictions in exchange for jobs. It’s a global problem and I do not like it.

[Azure]

I still don't get how the SA deal is a race to the bottom?

Everyone has known for a long time that if Alberta or Canada for that matter could find unique ways to get 'more' out of our oil before we send it south or to the ocean we come make more money.

Is that not the case here?