Official (Alberta) Oil Discussion Thread

[DiracSpike]

Originally Posted by burn_this_city

I'd argue after yesterday's DAP decision the regulatory risk is now greater in the US than Canada.

The fact that an existing pipeline could be ordered to shutdown is extremely concerning. Especially for our producers as the only lifelines we have are old pipelines to the states that WILL be targeted by these groups. It's the logical extension of their strategy, once they've killed off KXL and the Line 3 replacement they'll start going after existing pipelines, they're trialing that now with Line 5 and have it partially shuttered. If people think things are bad now wait until existing capacity is stopped. This isn't about pipelines being unsafe, or indigenous rights, or any other red herring argument that gets thrown against a wall by these obstructionists to see what sticks. It's a proxy war against the oil and gas industry itself, and as such it won't stop at just preventing new pipelines because that isn't the goal. It sounds crazy that they could get existing pipelines shutdown but they have precedent now, just like 10 years ago I thought it was crazy to be opposed to crucial infrastructure like pipelines and now they're basically impossible to build.

[Corral]

Originally Posted by CaptainCrunch

Its funny because your left wing friends are going to be the first to cry for government subsidies when their electricity bills and fuel costs and things like consumer electronic costs goes through the roof, all while screaming their eat their rich platitudes.


I mean you look at the amount of money people in Ontario are already paying for their utilities because of the Green Energy boondoogles and its psychotic.



Add on the carbon tax. and its effect on everything.

Sure people can claim, revenue neutral and refunds, but there are questions on if rebate = Cost to living increases with the Federal plan.

These days it seems big oil whines for taxpayer subsidies more than anyone else.

[Mr.Coffee]

Originally Posted by Corral

These days it seems big oil whines for taxpayer subsidies more than anyone else.

given the last few years, I absolutely see no reason why not. In fact, "big oil" (insert eye roll) is owed massively on the backs of society if anything, because of how much society has totally ####ed them.

To Diracspike's point. If existing pipelines get shut down, watch your life very, very rapidly start to suck. You can listen or you can continue to be ignorant. It's like saying, hey the doctor says I have cancer, but "big pharm" is only trying to make money off me. And then you die while ignoring the symptoms.

In fact I'll go the extra mile and say people like you, specifically, are PRECISELY... the problem.

[Rutuu]

Originally Posted by Corral

These days it seems big oil whines for taxpayer subsidies more than anyone else.

I feel like its more medium oil asking...the big guys have a few green projects on the go and want to consolidate the good pieces that shake out of administration.

Whenever I read the posts after the latest pipeline denial, I can't help but think that energy companies just aren't listening to their customers. Years ago I did 13yrs in the patch as a petroleum engineer, so I get that the world needs fossil fuels right now, but no one likes being told they have no other option. That's a dangerous proposition for any company to make to their end users, be it Visa/Mastercard or O&G.

[DiracSpike]

Originally Posted by Corral

These days it seems big oil whines for taxpayer subsidies more than anyone else.

The only thing “Big Oil” whines about is the artificial politically influenced restricting of market access and ability to sell their product. Any business anywhere any time would whine about that because that’s the essence of market economics, if you can’t sell your product you don’t have a business. All they’re asking for (besides lately due to the virus but everyone has had their hands out) is the ability to sell into a highly competitive global ecosystem. Not asking for prevalent tax breaks and subsidies like merging tech or renewable energy. Not asking to be overtly protected from any kind of competition like our benevolent telecom and banking oligopolies. Not asking for price fixing and supply management like the dairy cabal.

By Canadian standards oil is as laissez faire as it gets, and they’ve only recently reached out for government assistance with pipelines because envriro obstructionists and terrible government policies have made private financing of these critical projects impossible. If that’s truly your issue with big oil then your beef is with those entities and not the industry.

[Mr.Coffee]

Originally Posted by Rutuu

I feel like its more medium oil asking...the big guys have a few green projects on the go and want to consolidate the good pieces that shake out of administration.

Whenever I read the posts after the latest pipeline denial, I can't help but think that energy companies just aren't listening to their customers. Years ago I did 13yrs in the patch as a petroleum engineer, so I get that the world needs fossil fuels right now, but no one likes being told they have no other option. That's a dangerous proposition for any company to make to their end users, be it Visa/Mastercard or O&G.

Well that’s what Canadians want, right? They obviously want oil and gas to fail, so it will. It really is as simple as that.

I’ll tell you though, there has never been a stronger case of “careful what you wish for” than this in Canadian history. I like a financial systems ability to adapt to changing environments and society demands a whole hell of a lot more than any energy complexes ability to. People are just so insanely ignorant of energy and its use it is shocking. But continue to hypothesize on that device you are using that is made from oil and gas, within a home heated or cooled by oil and gas, wearing clothes that are oil and gas, eating food made possible from oil and gas, using plastics and thousands of other materials from oil and gas in day to day life about how oil and gas is overrated.

Do people really think other people aren’t working on energy? Do people really not think if it could be done or would be done it wouldn’t be done already? We’ll need breakthroughs and those will take decades, not a handful of months or years. In the meantime, we’ll be poorer and have a significantly worse society. Yay for ignorance!

[CaptainCrunch]

Originally Posted by Corral

These days it seems big oil whines for taxpayer subsidies more than anyone else.

They've been a hell of a lot quieter about it then the airline industry, the hospitality industry, and the auto makers.


I mean how many months ago did Trudeau stand up and say help for the Oil sector is hours or days away and then nothing.


The only thing I've heard is the how impossible it is for a lot of companies in the Oil Sector to get access to the temporary loans funds that other industries are getting.

[Corral]

O&G is hardly laissez faire here. If it truly were, the oil sands would be a fraction of its size. Government subsidies royalty breaks and other incentives fueled the boom post 1995 which now faces a transportation problem. True market economics would have factored in the risks but we all know externalities get overlooked when short term thinking is rosy.

Its really the privatize the gains socialize the losses ideology that turns me off. Just look at Fort Mac. For all the money generated up there, that town still looks like the 70s. Reap the wealth and let social and environment costs fall elsewhere. Thats big oil for you.

[accord1999]

Originally Posted by Corral

Its really the privatize the gains socialize the losses ideology that turns me off.

If you look at stock performance for the last several years, versus revenues that have been generated due to oil and gas activity and sales for Governments, it's more like socializing the profits and privatizing the losses. Even today, the biggest single winner from the direct and spin-offs effects from Alberta oil and gas is the Canadian Federal Government. The biggest loser are the stock and bond holders.

[Rutuu]

Originally Posted by Corral

O&G is hardly laissez faire here. If it truly were, the oil sands would be a fraction of its size. Government subsidies royalty breaks and other incentives fueled the boom post 1995 which now faces a transportation problem. True market economics would have factored in the risks but we all know externalities get overlooked when short term thinking is rosy.

Its really the privatize the gains socialize the losses ideology that turns me off. Just look at Fort Mac. For all the money generated up there, that town still looks like the 70s. Reap the wealth and let social and environment costs fall elsewhere. Thats big oil for you.

One of the exercises I've been doing at our fund the last few months was looking where in the O&G supply chain you can actually make a return. Its abysmal in the E&Ps, the services, the refiners, and the retailers. The only guys that are investible are the infrastructure, the banks that finance it (if you want a diluted take) or if you're a decent credit analyst maybe the debt.

Its been like that for years...basically the majority of Canadian oil and gas is a food program, paying salaries, paying off debt, and returning nothing to shareholders. This has gone on for years and years. Like you mentioned, the whole thing is over banked, over subsidized and over capitalized. There is a future for oil and gas, but its smaller, more efficient, and focused on profitability, not unbridled growth. That's frustrating to hear I'm sure, as it means job losses, but its not just Quebec and BC holding folks down, you need less people to bring a well on these days and operate it, and its capital intensive the way they're doing it, so costs have to be cut further.

This story is being repeated outside of Canada as well. Add the political layer of not wanting fossil fuels and its a nightmare.

Also if you look around the world you can design away from fossil fuels and electrify, that will take time, but I can tell you now that an Australian home has a different energy bill profile to a Canadian one, but they'd match up nicely with electric furnaces in Canada instead of NG.

[DiracSpike]

Originally Posted by Corral

O&G is hardly laissez faire here. If it truly were, the oil sands would be a fraction of its size. Government subsidies royalty breaks and other incentives fueled the boom post 1995 which now faces a transportation problem. True market economics would have factored in the risks but we all know externalities get overlooked when short term thinking is rosy.

Its really the privatize the gains socialize the losses ideology that turns me off. Just look at Fort Mac. For all the money generated up there, that town still looks like the 70s. Reap the wealth and let social and environment costs fall elsewhere. Thats big oil for you.

“Privatize the gains”? You do know that the crown receives royalties on every barrel produced in this province, right? Any subsidies and incentives they gave to develop the technology to produce the oil sands have been paid back in multiples, and the vast share of capital expended to grow production to current levels has been private capex by the private companies that are present there. As mentioned by accord share and bond holders have been slaughtered lately while the government collects their nut no matter what. The “public losses private gains” phrase was en vogue when it was actually applicable, when banks in the us made billions making knowingly risky bets and then had the liability paid off by the taxpayer. Now it’s just common leftist parlance to throw that out about any industry they don’t like. Its not at all applicable in this case and if you want to make that argument you’re going to need better evidence than your personal opinion on the decor in fort McMurray.

[Corral]

Originally Posted by DiracSpike

“Privatize the gains”? You do know that the crown receives royalties on every barrel produced in this province, right? Any subsidies and incentives they gave to develop the technology to produce the oil sands have been paid back in multiples, and the vast share of capital expended to grow production to current levels has been private capex by the private companies that are present there. As mentioned by accord share and bond holders have been slaughtered lately while the government collects their nut no matter what. The “public losses private gains” phrase was en vogue when it was actually applicable, when banks in the us made billions making knowingly risky bets and then had the liability paid off by the taxpayer. Now it’s just common leftist parlance to throw that out about any industry they don’t like. Its not at all applicable in this case and if you want to make that argument you’re going to need better evidence than your personal opinion on the decor in fort McMurray.

Trust me I get it. No need for personal attacks. My point is that huge tax breaks and other incentives led to a bloated industry that now has transportation and cost and debt problems. So its not laissez faire. A true market system with all the necessary risks factors would mean a much smaller oil sands and Alberta would have way less people and problems.

And fine. Instead of Fort Mac decor lets talk about the billions of taxpayer dollars being spent to clean up industry mess in the oil patch. The list of socializing the losses is a long one. But you can call it whatever you want

[Mayo]

Originally Posted by Corral

Trust me I get it. No need for personal attacks. My point is that huge tax breaks and other incentives led to a bloated industry that now has transportation and cost and debt problems. So its not laissez faire. A true market system with all the necessary risks factors would mean a much smaller oil sands and Alberta would have way less people and problems.

And fine. Instead of Fort Mac decor lets talk about the billions of taxpayer dollars being spent to clean up industry mess in the oil patch. The list of socializing the losses is a long one. But you can call it whatever you want

I think you're probably correct when looking at just Alberta in the near term...the growth spiraled jobs and salaries out of control and we are paying for it now.

The flip side is that these extra mega-projects now online are going to be supplying a steady stream of royalties for the next few decades.

I'd say our massive growth has made Alberta more volatile, but overall better off if we can navigate the volatility.

[CaptainCrunch]

https://www.cbc.ca/news/canada/calga...llan-1.5668095

rench energy giant Total says it is writing off $9.3-billion worth of oilsands assets in Alberta and cancelling its membership in the Calgary-based Canadian Association of Petroleum Producers.


Total now considers oil reserves with high production costs that are to be produced more than 20 years in the future to be "stranded" given its carbon reduction targets and because the resource may not be produced by 2050, the Paris-based company said Wednesday.

[burn_this_city]

A handful of companies have now left CAPP mostly for climate change/ESG reasons. Total still the largest foreign producer in the oilsands through their stake in Fort Hills and Surmont.

[Tron_fdc]

Heard though the grapevine CNRL is hoarding cash like they were before they bought out Shell. I would think this is likely due to Covid, but with those guys who knows. I also spoke with one of the "higher ups" up there that mentioned they are now sub $20/BBL (I believe the figure tossed around was around $15-$17). Add in the wage subsidy and they are likely sub $10/BBL which is nuts.......that's Saudi territory.

If they are generating that kind of money I wouldn't be surprised to see them go shopping.

[Weitz]

Originally Posted by Tron_fdc

Heard though the grapevine CNRL is hoarding cash like they were before they bought out Shell. I would think this is likely due to Covid, but with those guys who knows. I also spoke with one of the "higher ups" up there that mentioned they are now sub $20/BBL (I believe the figure tossed around was around $15-$17). Add in the wage subsidy and they are likely sub $10/BBL which is nuts.......that's Saudi territory.

If they are generating that kind of money I wouldn't be surprised to see them go shopping.

They blew all their cash prior to the pandemic and crash did they not?

[DiracSpike]

Originally Posted by Weitz

They blew all their cash prior to the pandemic and crash did they not?

That was my impression as well, although they did secure a big bank note just as #### hit the fan so I guess that could be considered cash in a way. Definitely an interesting company, I'm really curious what their strategy could be. Their whole M.O. has been to acquire companies on the cheap but at a certain point there's only so much you can buy before you start to wonder why they're so cheap, and you need the cycle to swing back in a big way to justify your investment. The last three major purchases in this basin, by my count, have all been by them, Devon Oil Sands in 2019, Shell Albian Mine in 2017, and Devon Conventional/Natural Gas in 2014. They're also the largest natural gas producer and oil producer so it's not like they have any holes in their asset portfolio, except for a prominent downstream presence. It makes me wonder about Husky, they're struggling pretty hard, foreign owned by someone in Hong Kong (read: China now), have a lot of thermal assets that fit well in CNRL's preferred execution plan, and have downstream refineries and such. That would be a major major purchase, cash alone wouldn't be enough to get that one done.

[Tron_fdc]

Originally Posted by Weitz

They blew all their cash prior to the pandemic and crash did they not?

Not too sure, but I don't think so. I believe their FY 2019 showed a cash balance of approx 5 billion. I don't know where they are at the moment though.

CNRL stock hovering around $25 and if they do have free cash, it's not outrageous to imagine a stock-for-stock transaction with a cash portion for an undervalued asset like Husky or Imperial. I don't work with any of those 2 operators, but word on the street is Imperial can barely keep the lights on.

All Orange Julius territory however, so take with grain of salt.

[Weitz]

Yah perhaps not all their cash. But I know they bonus'd out in record fashion just before the pandemic/crash.

I don't think you will see a large M&A outside of the oilsands till the new inactive well program is rolled out and fully understood.

Rumbings are must retire 4% of your assets per year.