Official (Alberta) Oil Discussion Thread

[burn_this_city]

Originally Posted by bizaro86

Also, the ETF is a huge player in the market. Commodities traders are aware of this, and know that if the value of USO gets low enough, it will liquidate and sell a huge amount of June futures. Wanting to make money, they short june futures in huge size. That pushes the price down. The ETF sponsor wont want the value of USO to go negative, so if the value of the fund gets low enough they will liquidate. That will be a huge forced sale of june crude futures, pushing the price down even more. Then the traders will cover their shorts.

This is exactly what I've seen play out over the last few days.

[bizaro86]

Originally Posted by GGG

Do non-derivative based ETFs carry these death spiral risks. Like a VOO or a fund of funds like VGRO?

No. The risk for USO is that what they own doesn't stay constant - every month they sell the old futures and buy new ones. VOO owns a static basket of stocks, it only changes when the index rebalances, which isnt often or dramatic.

A better crude oil etf would own physic crude to eliminate this risk, but the cost of storage is quite high.

[Slava]

Originally Posted by bizaro86

No. The risk for USO is that what they own doesn't stay constant - every month they sell the old futures and buy new ones. VOO owns a static basket of stocks, it only changes when the index rebalances, which isnt often or dramatic.

A better crude oil etf would own physic crude to eliminate this risk, but the cost of storage is quite high.

USO shifted to August futures, got halted and then June futures rose almost in sync. Incredibly entertaining, unless you're holding it I suppose!

[edslunch]

Originally Posted by Sliver

IDK, that doesn't seem outrageously expensive to me for rent on a giant tanker.

Obviously sucks with oil being valueless, but I would have thought those things cost more.

$2.5/bbl for a month if my math is correct. Not outrageous for a short period of time.

[bizaro86]

Originally Posted by edslunch

$2.5/bbl for a month if my math is correct. Not outrageous for a short period of time.

About right. Also, that is hugely, insanely profitable for the tanker companies.

[GGG]

Originally Posted by bizaro86

About right. Also, that is hugely, insanely profitable for the tanker companies.

Rates are up by about 5 times right now from normal.

[Mayo]

Originally Posted by Fuzz

How does anyone think oil prices will recover in the next 2 months? As of May, we will still be producing at least 20% more than consumption, every day. All storage is full. It's baffling.

Enough production will come offline that it will recover (and by recover I mean $30-40USD WTI)

Whether that happens by next month or by July is the question

[Flash Walken]

Does anyone who knows what they are talking about want to talk about shutting in Wells and what that actually looks like on the ground and for companies that would service those sites?

[GGG]

Originally Posted by Flash Walken

Does anyone who knows what they are talking about want to talk about shutting in Wells and what that actually looks like on the ground and for companies that would service those sites?

There would be no well services. You just stop producing oil out of the well. In Thermal operations this can do long term damage to the asset.

[Weitz]

Originally Posted by Flash Walken

Does anyone who knows what they are talking about want to talk about shutting in Wells and what that actually looks like on the ground and for companies that would service those sites?

Turning a valve in conventional. A little more involved in thermal.

[Geraldsh]

Even conventional wells, in a heavy oil zone, will require service to avoid being sanded in when restarting. Servicing will be needed on restart as well so the service rigs make a few bucks.

[stang]

Husky in my area (Lloydminster) has basically shut in all cold and laid off most of its staff. Hard to see those wells ever operating again.

[Flash Walken]

Originally Posted by GGG

There would be no well services. You just stop producing oil out of the well. In Thermal operations this can do long term damage to the asset.

Originally Posted by Weitz

Turning a valve in conventional. A little more involved in thermal.

Originally Posted by Geraldsh

Even conventional wells, in a heavy oil zone, will require service to avoid being sanded in when restarting. Servicing will be needed on restart as well so the service rigs make a few bucks.

Fight fight fight

[Weitz]

Well Geraldish is talking about reactivating them.

[Geraldsh]

If there is no hope of reactivating them they get tossed onto the abandoned well pile....

[GGG]

Originally Posted by Flash Walken

Fight fight fight

I see all three of those statements in agreement with each other.

[Flash Walken]

I was just hoping for more info.

For instance is there a la our limitation on what it takes to shut down these well sites?

Say I'm the Acme Oil and Gas company and I operate Wells in Canada and all of a sudden I'm looking at the situation and thinking 'i need to shutter 100 well sites', I'm probably not the only company having to do that. Am I figuring right that sealing off or otherwise pausing an operation is a different man power concern outside of the usual steam chief , electrical engineer etc operating crew? Is it possible to physically shutter these well sites if this lingers for a long time or even gets worse?

Is there a situation where the need to limit or stop production reaches some urgency?

I'm trying to understand how it works operationally.

[Bring_Back_Shantz]

Originally Posted by Flash Walken

I was just hoping for more info.

For instance is there a la our limitation on what it takes to shut down these well sites?

Say I'm the Acme Oil and Gas company and I operate Wells in Canada and all of a sudden I'm looking at the situation and thinking 'i need to shutter 100 well sites', I'm probably not the only company having to do that. Am I figuring right that sealing off or otherwise pausing an operation is a different man power concern outside of the usual steam chief , electrical engineer etc operating crew? Is it possible to physically shutter these well sites if this lingers for a long time or even gets worse?

Is there a situation where the need to limit or stop production reaches some urgency?

I'm trying to understand how it works operationally.

It really depends on what is being shut in.
Some operations it's really as easy as clicking on a computer screen, and you can leave them down for however you like, and turn them back on with a single click.

For others, like thermal operations, there would be a lot more work to shut things in properly and try to limit formation damage, if you even could.

There's no single answer to "What does it take to shut wells in".

[Weitz]

Originally Posted by Flash Walken

I was just hoping for more info.

For instance is there a la our limitation on what it takes to shut down these well sites?

Say I'm the Acme Oil and Gas company and I operate Wells in Canada and all of a sudden I'm looking at the situation and thinking 'i need to shutter 100 well sites', I'm probably not the only company having to do that. Am I figuring right that sealing off or otherwise pausing an operation is a different man power concern outside of the usual steam chief , electrical engineer etc operating crew? Is it possible to physically shutter these well sites if this lingers for a long time or even gets worse?

Is there a situation where the need to limit or stop production reaches some urgency?

I'm trying to understand how it works operationally.

Generally you can shut in a well and leave it shut in indefinitely. The AER has requirements based on well type and length of shut in time on if addtional work or inspections need to be done.

Don't confuse abandoning or decommissioning a well with shutting in a well. Generally wells cycle on and off anyway. And can be shut in by an operator. 100 wells could be shut in by an operator in a day or 2 really.

Certain operations (SAGD for example) are quite a bit different in how they are treated though as there is a lot more at play.

[Bring_Back_Shantz]

Originally Posted by Geraldsh

If there is no hope of reactivating them they get tossed onto the abandoned well pile....

No.
There is a lot of confusion here about orphaned, vs inactive, vs abandoned well.

Inactive wells are just wells that aren't flowing. They still belong to and are the responsibility of the owner.

Abandoned wells, are wells that have been properly sealed up and capped. Abandoned wells don't require much, if any further work or action. The next step would be reclamation of the surface site, which is usually not expensive.

Orphan wells are wells that need to be abandoned, but the owner is no longer in business. This is what the orphaned well fund is for.

So no, even if there is no hope of wells ever being reactivated, they do not go onto the "Abandoned" pile, and I'm sure what you really meant was "Orphaned", and I assume you also meant are taxpayers on the hook for the costs to abandon them. No, whoever the owner is would be required to abandon them, provided they still exist.

Hope that helps.