Official (Alberta) Oil Discussion Thread

[calumniate]

Originally Posted by FlameOn

Oil markets crash across the Middle East as Iran follows through with their obligations and sanctions on them are lifted. Qatari and Saudi stock markets have dropped 42% and 38% respectively since the Saudi initiated price war back in November 2014.

https://uk.finance.yahoo.com/news/ir...102835505.html

I really wonder how much of the successful conclusion of the Nuclear deal with Iran was motivated to punish the Saudis for their increased production.

A CBC article on the same thing - Iran now online at an additional 500k barrels / day:
http://www.cbc.ca/news/business/oil-...iran-1.3408580

[burn_this_city]

http://www.bloomberg.com/news/articl...ould-fall-soon

Speculation that if things continue without the dollar dropping more we will start to see production shut ins from some Oilsands producers.

[heep223]

The lower we go, the faster we see production drop off a cliff, the faster price will come back to reasonable levels. Do not lose hope people, it's hard to see past the current environment because we are humans, but it's always darkest before the dawn.

[GGG]

I think one thing missing from this analysis is hedging. I would suspect that most Companies hedged at least some of their production in order to survive the downside risk of 2016. And those that didn't hedge would have strong enough balance sheets to handle the production losses. In the SAGD space you permanently damage your production by shutting off steam.

So it likely takes until the latter part of the year with prices being where they are or lower to have production being shut in.

[burn_this_city]

Originally Posted by heep223

The lower we go, the faster we see production drop off a cliff, the faster price will come back to reasonable levels. Do not lose hope people, it's hard to see past the current environment because we are humans, but it's always darkest before the dawn.

Lets hope the darkest isn't sub $20 like it feels like we're headed. I would have thought people would begin shutting in marginal stuff worldwide at sub $40, but here were are at $28 and it hasn't happened yet.

[Slava]

Originally Posted by burn_this_city

Lets hope the darkest isn't sub $20 like it feels like we're headed. I would have thought people would begin shutting in marginal stuff worldwide at sub $40, but here were are at $28 and it hasn't happened yet.

I think that is because of the leverage, which takes a while to unwind and is particularly messy. So its better for them to keep rolling at $28 and make the loan payment while they can in hopes of being "the one" that survives.

[heep223]

Originally Posted by burn_this_city

Lets hope the darkest isn't sub $20 like it feels like we're headed. I would have thought people would begin shutting in marginal stuff worldwide at sub $40, but here were are at $28 and it hasn't happened yet.

Originally Posted by Slava

I think that is because of the leverage, which takes a while to unwind and is particularly messy. So its better for them to keep rolling at $28 and make the loan payment while they can in hopes of being "the one" that survives.

Slava is right. Banks (particularly in the US) haven't addressed this issue yet in terms of write-downs/re-structurings/calling in loans. They've been trying to push it off with the hope that prices will come back before they have to deal with it. Companies have to keep producing even though they're losing $/barrel because they have to service their debt. Something like 85-90% of free cash flow in US upstream is going toward debt service. Which is shocking and it's not sustainable.

The dominos will start falling and that's when the real recovery will start. The lower oil goes, the faster and harder this will all happen.

[FlamesAddiction]

With sanctions being lifted in Iran, the price is only going to go lower. Iran said that they are going to increase production regardless of price just to get their market share back.

Oil companies make up about 50% of the revenue in the firm I work for, and we are definitely feeling it. Everyone just had their hours cut down to 80%, and a few people just got laid off. They said they only expect the austerity measures for a couple of months, but I am still job hunting.

As a side, has anyone heard whether the airline companies are going to drop the fuel surcharge they added to ticket prices when the price of fuel skyrocketed?

[IliketoPuck]

I was surprised to see that most borrowing base companies in town had their lines maintained during the fall review, I would have expected more downward revisions than there were.

It will be interesting to observe the spring review season once bank price decks are reflective of current prices.

[heep223]

Originally Posted by FlamesAddiction

With sanctions being lifted in Iran, the price is only going to go lower. Iran said that they are going to increase production regardless of price just to get their market share back.

What if non-OPEC production falls of a cliff, 5X more than Iran's increase?

You cannot say that "price is only going to go lower" based on one variable. Way too much uncertainty.

[FlamesAddiction]

Originally Posted by heep223

What if non-OPEC production falls of a cliff, 5X more than Iran's increase?

You cannot say that "price is only going to go lower" based on one variable. Way too much uncertainty.

I'll admit. I am not an expert on the economics of oil and may have spoken out of turn. I just get the sense that increasing supply at this point isn't going to help our cause here.

[CaptainCrunch]

Originally Posted by heep223

What if non-OPEC production falls of a cliff, 5X more than Iran's increase?

You cannot say that "price is only going to go lower" based on one variable. Way too much uncertainty.

I get a sense that Iran is going to flood the market, this is found money for them.

Plus it creates instability with Opec nations if they do that.

[Locke]

Originally Posted by FlamesAddiction

I'll admit. I am not an expert on the economics of oil and may have spoken out of turn. I just get the sense that increasing supply at this point isn't going to help our cause here.

Well, on the surface that could be correct, but realistically what is the benefit in flooding the market that has surplus supply already at a ridiculously low price?

Sure, its dollars coming in the door, but are those dollars profit? If the price is low it makes more sense to hold back and wait until it comes up so you can maximize the benefit of your resource.

Its the same mistake the Saudis are making. "Flood the market and gain marketshare!!!"

Great. Lots of people are buying what you're selling, just at rock-bottom prices. So you're selling lots of stuff, just not making much while you're at it.

Congratulations?

[IliketoPuck]

Tomorrow will be an interesting day to see how much Iranian oil supply has been priced in.

It's not like they haven't been selling their oil to China the entire time anyway.

[heep223]

Here, for all the NDP supporters who keep saying that the royalty review and uncertain policy hasn't had any effect on markets.

But with the election of Rachel Notley’s NDP government in Alberta, then Justin Trudeau’s Liberal government in Ottawa, along with their carbon taxes and oilsands growth constraints, the U.S. company was growing increasingly nervous about Canada’s political landscape — nervous enough that it took a pass, giving Suncor a free hand to increase its bet on the oilsands.

http://business.financialpost.com/ne...-oil-sands-ltd

[Brewmaster]

From the reports I've read, oil sands production is unlikely to see shut-ins unless WTI gets to the low $20's and stays there. Based on the average variable costs, mining projects will continue down below $10/bbl and SAGD projects could see shut-ins in the $20-30/bbl range. This is all for existing production where the fixed capital has largely been spent.

[Flash Walken]

Can someone explain to me what the industry term 'shut-in' really means for these different projects?

[GGG]

Originally Posted by Flash Walken

Can someone explain to me what the industry term 'shut-in' really means for these different projects?

It means to stop producing oil.

So Sagd it means turning off the steam gens and closing the producers and letting the resivoirs slowly cool and de pressurize. This makes it more difficult to regain production and may permenantly lower the total production from the well long term.

[WinnipegFan]

Originally Posted by CaptainCrunch

I get a sense that Iran is going to flood the market, this is found money for them.

Plus it creates instability with Opec nations if they do that.

I think we may under estimate the amount of oil Iran already had in the system. They've been pumping it through Turkey for a while. This would lower the amount of actual new oil on the supply side.

[Fuzz]

Originally Posted by Locke

Well, on the surface that could be correct, but realistically what is the benefit in flooding the market that has surplus supply already at a ridiculously low price?

Sure, its dollars coming in the door, but are those dollars profit? If the price is low it makes more sense to hold back and wait until it comes up so you can maximize the benefit of your resource.

Its the same mistake the Saudis are making. "Flood the market and gain marketshare!!!"

Great. Lots of people are buying what you're selling, just at rock-bottom prices. So you're selling lots of stuff, just not making much while you're at it.

Congratulations?

Amazon strategy. Lose money, but make up for it in volume!