A barrel of oil at 32.00 /bbl (Can)...Connecting the dots

[oneoff]

Here's a real life example of what oil producers are faced with in general terms over the last month for example

Non sour, clean , treated light gravity crude oil; delivered to the pipeline will returned a cheque for $32.00 Can.

Its "discounted" BECAUSE Sask and alberta oil id "dicounted" when the buyers around the world decide it is "discounted".

Now that cheque isn't all profit; and production isn't all oil and nothing runs forever without maintenance and repairs and it takes checking to prevent costly spills; and paperwork and accounting like few would believe.

And taxes and lease rentals and snow plowing and maintaining private roads and paying permits and fees and cathodic protection and power bills and methanol and chemical to make a trouble free operation work.

And truckers and some big equipment at undetermined intervals for workovers and to fix general wear and tear.. And treating facilities that you own or lease or pay a fee to use.

And shut ins and downtimes and as with everthing else; some allowance for accidents, liabilities, theft, vandalism and safety and training and certifications and even signage and keeping up to changing standards required of the whole operation.

And like farmers; the primary oil producers pay for the whole industries costs... either directly or indirectly.


Now for those who still believe the oil industry is dependent on subsidies; I would say that in the end it is the consumer who really in the end pays for energy production; but at this particular time in history; the margins are non existent for all but the lowest cost producers who happen to have the fields (or wells) that have all expenses and liabilities under very tight control and minimal unexpected costs.

It is quite interesting to have access to the costs and supposed revenues of even the largest oil company data. Despite what bluffs and misinformation you maty be subject to; I would recommend becoming familiar with the new IRIS computer system implemented by the Ministry of the Economy.

All is tracked from proposal stage of development; through drilling completion, production data ; sales etc.; previous history;etc and everyone's non confidential data in developed areas available within 30 days or less to any interested party.

Anyone wish to discuss? There is lots to share; but not from this end with those out to simply destroy or use an important industry.

[katoe]

So what are profits when oil is over 100

[bucket]

Oneoff

Good post.


Interesting. A relative in the oil industry says if world oil price is 32 cdn oil producers would be lucky to start at 18.

Then even bigger discounts for heavy oil.

Not sure why gas at the pumps is 86 cents a liter.

I guess that a question for askbradwall.

[chuckChuck]

The other important part to look at is the integrated large scale companies like Exxon who produce,refine and sell finished retail products.

[bucket]

Katoe


Like stupid crazy. That's why we had a monkey puppet at the controls for the last 8 years.

Then when shit hits the fan the monkey puppet begs Ottawa for money.

Then Justine looks and sees we elected anderson and ritz again and basically .... like his dad....fuddle duddle.

What do guys expect?

[chuckChuck]

Why Toronto-Dominion Bank Thinks Crescent Point Energy Corp. Is Bulletproof in 2016
By Adam Mancini - March 24, 2016 | More on: CPG TD CPG TD


On March 9, Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) released its full-year earnings for 2015 and outlook for 2016. These releases were eagerly anticipated since they would demonstrate how Crescent Point performed during the one of the worst-performing years for oil in history, when prices averaged the lowest they have been since 2004.

Despite the weak pricing, Crescent Point’s results were impressive. Crescent Point posted netbacks (profit per barrel) of $36.19 including hedging and $25.43 without hedging. These are exceptional results; Crescent Point’s overall peer group of junior and intermediate producers had an average netback of $15.84 per barrel.

Crescent Point has rolled out several major changes for 2016, including the largest dividend cut in its history and a reduction in capital spending (including a weighting of most spending in the second half of the year when prices are expected to improve)—all without reducing the production guidance.

In response, analysts at Toronto-Dominion Bank stated that this “sets the company up to be bulletproof over the next 24 months under current forward prices.” Looking at the company’s cash flow situation, it’s obvious why TD analysts are correct.

Crescent Point is set up for prices as low as US$30/barrel

TD bank stated that Crescent Point is bulletproof under current forward prices for the next 24 months, which are currently $39.23 for 2016 and $44.91 for 2017. Crescent Point was even more optimistic—the company stated that it should be able to live within its cash flow for 2016 if oil prices were to average US$35 per barrel.

Nobody knows where oil will end up for 2016, but given the fact that there is still an oversupply of about 1.5 million barrels per day and over 500 million barrels sitting in U.S. storage, it is best to assume a worst-case scenario. This would be an average of US$30 per barrel for 2016 (an extremely unlikely scenario).

Would Crescent Point still be cash flow positive at these levels? It appears so.

At US$30 West Texas Intermediate (WTI) prices, Crescent Point could expect to earn revenue of roughly $33 per barrel of oil. The revenue per barrel Crescent Point gets is based off a discount to a blend known as Manitoba Light Sour Blend (LSB), and in 2015 this discount averaged about $3.17 per barrel. In January, when WTI prices averaged around US$31 per barrel, LSB prices were $36.14 per barrel, and using the $3.17 discount would mean Crescent Point earns about $33 per barrel.

The end result? With total costs per barrel of about $25 (according to TD Bank), Crescent Point can be expected to earn between $300 and $400 million of cash flow after deducting all of its operating and corporate expenses. This is without any hedging and shows that Crescent Point is still cash flow positive at US$30 per barrel.

Crescent Point has a strong hedging program

Unfortunately, Crescent Point is expecting to spend $950 million on capital expenditures, and will also need to spend about $250 million on their dividend. This means that $300-400 million of cash coming in is not nearly enough to cover its costs.

Fortunately, Crescent Point has a strong hedging program that allows it to basically sell a large portion of its oil at much higher prices. For 2016, Crescent Point has 39% of its crude production hedged at an average of $80 per barrel.

Crescent Point estimates the value of all its hedges to be about $500 million through to 2018. It is important to note that this is the value of the hedges as of March 4, 2016, when oil prices were US$36 per barrel. The value of these hedges would grow substantially as oil prices drop to US$30 per barrel, which would likely bring the value of the hedge book to about $700 million.

The end result? When you take Crescent Point’s cash flow of $300-400 million and add in the value of the hedge book (which Crescent Point would monetize), and Crescent Point could have cash flow of $1.1 billion, which could cover the capital expenses and most of the dividend, requiring very little borrowing.

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[chuckChuck]

This was based on 2015 results from the previous article:

Despite the weak pricing, Crescent Point’s results were impressive. Crescent Point posted netbacks (profit per barrel) of $36.19 including hedging and $25.43 without hedging. These are exceptional results; Crescent Point’s overall peer group of junior and intermediate producers had an average netback of $15.84 per barrel.

[chuckChuck]

From the Financial Post:
Crescent Point Energy Corp slashes dividend, as oil plunge forces $589-million charge in Q4
Republish
Reprint

Geoffrey Morgan | March 9, 2016 | Last Updated: Mar 9 4:52 PM ET
More from Geoffrey Morgan | @geoffreymorgan
Excluding the write-downs and other items, Crescent Point Energy Corp had $258 million of adjusted earnings from operations, or 51 cents per share, in the fourth quarter of 2015.
Crescent Point Energy CorpExcluding the write-downs and other items, Crescent Point Energy Corp had $258 million of adjusted earnings from operations, or 51 cents per share, in the fourth quarter of 2015.

CALGARY — Crescent Point Energy Corp., the largest oil producer in Saskatchewan, cut its dividend and pared back its spending plans Wednesday as it took a $589 million charge resulting from the collapse in oil prices.

The company took the impairment charge on its assets as a result of the plunge in oil prices and bleak forecasts for future prices.

The charge pushed Crescent Point to a $382 million net loss in the fourth quarter, compared to earnings of $121 million the same time a year earlier.

Crescent Point president and CEO Scott Saxberg said on an earnings call that the company has been “very conservative” in booking oil reserves. “We still have low-risk reserves left to book,” he said.

Despite the large charge, the company’s chief operating officer Neil Smith said Crescent Point could be profitable at current oil prices. The West Texas Intermediate benchmark price closed at US$38.31 per barrel on Wednesday, up US$1.81.

“At $25, I’m still making money. In the low $20s, I’m still making money,” Smith said.

Still, the Calgary-based company cut its monthly dividend to three cents per share from 10 cents beginning this month. The move is expected to save Crescent Point a further $430 million per year, as it continues to cut its costs.

Smith said Crescent Point has also approached the oilfield service companies working for the company and asked to see their books, in an effort to further drive down costs through its own supply chain and those of its service providers.

Unconventional oil and gas producers across Western Canada have been slashing their capital budgets and aggressively cutting costs as the oil price rout drags on.

Seven Generations Energy Ltd., which produces natural gas in northwestern Alberta and northeastern British Columbia, announced Wednesday that it had reduced its drilling costs by 24 per cent over the course of 2015, while also reducing its costs to frack wells by 26 per cent.

Seven Generations president and CEO Pat Carlson said he thinks more than half of the costs the company has cut throughout the downturn will be sustainable if oil prices rise.

At the moment, Carlson said, oilfield service companies — like drilling companies and hydraulic fracturing companies — are “bidding lower and lower” on jobs.

The Calgary-based company was able to beat analysts’ expectations for cash flow in the fourth quarter, although it did post a $28 million net loss in the quarter, compared with net earnings of $68 million at the same time a year earlier.

Both Seven Generations and Crescent Point plan to spend less this year as oil and gas prices are forecasted to remain low.

Crescent Point now expects to spend $950 million over the course of 2016, compared with an initial estimate between $950 million and $1.3 billion. Most of that money is allocated the second half of the year, when it will be used to bring more oil on-stream for next year.

“We view the budget and dividend cuts as a prudent and smart decision, and one that will ensure (Crescent Point) manages through the downturn while waiting to resume growth when oil prices recover,” National Bank Financial analyst Kyle Preston said in a research note.

gmorgan@nationalpost.com

[chuckChuck]

From the financial post article above:

Despite the large charge, the company’s chief operating officer Neil Smith said Crescent Point could be profitable at current oil prices. The West Texas Intermediate benchmark price closed at US$38.31 per barrel on Wednesday, up US$1.81.

“At $25, I’m still making money. In the low $20s, I’m still making money,” Smith said.

[Partners]

Bucket..do you blame your every day screw ups on Brad Wall to???

[bucket]

So chuckchuck what you are saying is. ....Brad wall meet Neil smith....Neil smith meet brad wall.


Funny if these guys are making money at 20 bucks why is gas at the pumps 86 cents and why is brad wall begging for money on their behalf.

Askbradwall.

[chuckChuck]

This is cold comfort for anyone who has been laid off and needs work.

However it appears that for some oil companies that are not heavily in debt and who hedged the sales price they are still doing quite well!

Where are the guys who made the 10s and 100s of millions and billions of dollars from the oil industry during the good times? Are they doing everything possible to keep as many people working and families fed?

Or did they take their money and run?

[bucket]

Partners

To an extent.... uh.....yes.

But here is why.

Here is a guy that says he stands up for the province but his team can't think.

There are so many opportunities. ....he us not looking for them.

Create a program to put oil workers to work this spring. He can't figure it out.

Create a farm operator course but he is not creating farmers .... he is creating eventually a farm workers union. Think on that a while ... you will know what I mean.

There are many more but he is not thinking of making this province better but his backers wealthier.

He isn't the caliber of a john diefenbaker or grant Devine.

[Partners]

You should have sent these ideas to Cam?

[bucket]

Partners

The saskparty started the farm worker course 2 years ago. It will create the farm worker union quicker than anything else.

They are too stupid to figure that out.

What they should have created is a farm mentor course. Cheaper and a better way to reduce the age of farmers.

I think you are missing what I am saying. We may be on the same page but I leap thru my thoughts and it gets confusing and that's my fault in my communication.

I have been told I miss the details of my dribble and the leaps of my thoughts are too far apart.

Squirrel ..... I may have addhd.