Official (Alberta) Oil Discussion Thread

[snootchiebootchies]

Originally Posted by Lubicon

This was briefly mentioned in the Alberta Politics thread but is more appropriate here I think. Looks like the old Heartland Upgrader is being resurrected in a slightly different form. $400 million loan guarantee from the Provincial government to help make it happen.

http://www.vctek.com/our-projects/me...artland-mcc-h/

https://www.cbc.ca/news/canada/calga...ntee-1.4988294

How is Value Creation still alive when so many companies with actual revenues have gone bankrupt? What is keeping these guys alive?

[Weitz]

https://www.cbc.ca/news/business/sup...ells-1.4998995

The Supreme Court of Canada has ruled that energy companies cannot abandon their responsibility to clean up old oil and natural gas wells in the case of bankruptcy.

This overturns two lower court decisions that ruled bankruptcy law has paramountcy over provincial environmental responsibilities in the case of Redwater Energy, which became insolvent in 2015.

The court ruled 5-2 to overturn the earlier ruling. In doing that, it said that bankruptcy is not a license to ignore environmental regulations.

Redwater Energy owned a stake in 17 producing oil and natural gas wells, as well as many more inactive wells. At the time of its insolvency, the company owed its bank, ATB Financial, just over $5 million.

This is going to have huge implications in the industry. Not good ones either. Right move though.

[Fuzz]

It's the right call, though.

[OMG!WTF!]

Not sure how many nails this coffin needs.

[Weitz]

Originally Posted by Fuzz

It's the right call, though.

Yep, polluter pay is the way to go. Banks are going to have a hard time lending now.

For jobs it actually might be better as banks won't be pushing the companies on the brink into receivership.

[Slava]

Originally Posted by OMG!WTF!

Not sure how many nails this coffin needs.

So wait, you would be in favour of letting companies walk away and leave everyone else to clean it up for them? I mean yeah, these companies are hurting, but that seems like it encourages poor behaviour as well?

[OMG!WTF!]

Originally Posted by Slava

So wait, you would be in favour of letting companies walk away and leave everyone else to clean it up for them? I mean yeah, these companies are hurting, but that seems like it encourages poor behaviour as well?

No no not at all. But it definitely changes the investment climate. I'm 100% for making companies pay for clean up first, creditors second. But no one is going to lend under those rules. Maybe there's a way to get something up front so creditors can lend with a level of certainty.

[burn_this_city]

It's a nail in the coffin of small cap producers and those that bought legacy assets.

[Weitz]

Originally Posted by burn_this_city

It's a nail in the coffin of small cap producers and those that bought legacy assets.

Guys who shouldn't be in business anyway.

[Ashasx]

Originally Posted by Weitz

Guys who shouldn't be in business anyway.

huh?

[Weitz]

Originally Posted by Ashasx

huh?

If you can't afford to service your liabilities you shouldn't still be in business making money, and thus passing your liabilities to someone else.

That's pretty much how things go now. Companies won't do any end of life work and just milk as much production as they can till the bank closes them, sells the assets that are still worth something to make some of their investment back, then the remaining garbage goes on to the OWA for them to clean up.

[Ashasx]

well if you are bankrupt, by definition you can't service your liabilities. Nothing changes in regards to that. All that changes is who gets the first crack at what's left, and that fundamentally changes the way banks will approach lending.

To say small cap producers shouldn't be in business makes no sense.

[Weitz]

Originally Posted by Ashasx

well if you are bankrupt, by definition you can't service your liabilities. Nothing changes in regards to that. All that changes is who gets the first crack at what's left, and that fundamentally changes the way banks will approach lending.

To say small cap producers shouldn't be in business makes no sense.

Never said all small cap's shouldn't be in business.

[Ashasx]

Originally Posted by Weitz

Guys who shouldn't be in business anyway.

..

[PsYcNeT]

The amount of orphan wells and abandoned pipelines (many of which are poorly or outright untracked) in Alberta is horrifying. Definitely the right move.

[Ashartus]

Originally Posted by Ashasx

well if you are bankrupt, by definition you can't service your liabilities. Nothing changes in regards to that. All that changes is who gets the first crack at what's left, and that fundamentally changes the way banks will approach lending.

To say small cap producers shouldn't be in business makes no sense.

Except often a lot of the liabilities can be serviced. A bankrupt oil company generally has remaining assets as well as liabilities. The previous court decisions were allowing the receiver to disclaim the liabilities and sell the assets; this decision means those assets have to be used towards addressing the liabilities first. Probably has some negative short-term consequences, particularly for investment, but better in the long run for Alberta taxpayers and the responsible players in the industry.

[Ashasx]

Originally Posted by Ashartus

Except often a lot of the liabilities can be serviced. A bankrupt oil company generally has remaining assets as well as liabilities. The previous court decisions were allowing the receiver to disclaim the liabilities and sell the assets; this decision means those assets have to be used towards addressing the liabilities first. Probably has some negative short-term consequences, particularly for investment, but better in the long run for Alberta taxpayers and the responsible players in the industry.

They were always used towards addressing the liabilities first. Debt from banks being a liability.

Either way, the result of this ruling was going to be an increase in either OWL rates (if upheld) or debt interest rates on small cap producers (if overturned). The industry was going to pay more regardless. It just passes on the expenses from the CNRLs of the world to smaller cap companies in the form of higher financing costs.

[Weitz]

Originally Posted by PsYcNeT

The amount of orphan wells and abandoned pipelines (many of which are poorly or outright untracked) in Alberta is horrifying. Definitely the right move.

Define horrifying? I wouldn't say 3100 wells is horrifying, its a good amount, but they do plan to do 900 this year.

Not sure about poorly or outright untracked though, you will have to elaborate there.

[Tron_fdc]

Does this affect the oilsands?

I recall a 260 billion figure to "clean up" the oil sands. Is CNRL/Suncor etc responsible for funding this?

[Wormius]

From the AERs site, it looks like a yearly fee that goes towards future reclamation costs, and not a prohibitive upfront cost before any drilling can start.



That's also 3100 sites that have just been left in their current state operation, not even formally abandoned let alone any remediation work done.