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

[Partners]

You should have sent these ideas to Cam?

[Partners]

Double post..POS computer..Brad's fault..

[bucket]

Partners

Smart ass. You are too. I know you are but what am I?

Pretty much sums up the debate the other night.

Too funny and yes I am being sarcastic.

[oneoff]

There's money in oil for everybody at $100 US or CAN.

There's money (overall)if Crescent Point hedged over the past several years; which they have consistently.. In fact they "lost" several hundred millions when oil was at its peak and more than made it up by hundreds of millions in the last months and will continue to do so for at least a few more months.

THEN WHAT HAPPENS if you wish to now want to forward hedge RIGHT NOW to add on a time period into the more distant future.

Thats pretty hard when the margins you may hope to get might very well exceed the world price for you oil (discounnted no doubt ) in a world with storage capacity filled to the brim.

Don't ever forget the carnage that Crescent Pointhas heaped on the service industry. And corporate headquaters continues to ask for further rounds of price cuts from service companyies they need; and the cruel ratcheting downn of drilling costs to the point that there isn't enoough of the tab left to pay those suppliers expenses.

And as for that hedging that is spoken of so fondly by thhe stock market; please ask how much of that windfall is returned to partners; or service providers or even leaseholders.


I know thats good business smarts on their part; but it should be a fair question to ask if they are hedged at say $50..; just


How does accounting handle a spot price that may be $100.00. I've asked that question and the answer is todays hedging is beneficial to stockholder and financiers...not those who get royalties and overrides for their contributions.

And in the future you might imagine that those share s will get paid the lower hegded value and any profits in unhedged will be taken by you know who.

Whole lot like a tenant forward contractsgrain at a price and sells and settles for landlord share at lesser of hedged or current priice.

[oneoff]

To chuckies valid point of the handful of oil companies that are vertically integrated and have refining capacity of their own which could be seen as a part of their crude oil production business.

Have to acknowledge that point (with no reservation).

And in return I expect (with no argument except maybe some points of clarification); that this production-refining relationship doesn't apply to but a handlful of major players in the Sask market. And with the wholesale export of oil through pipelines and railways it obviously and international picture.

Certainly not for EXXON in Sask; soon not to be Husky with their proposed dispositions;; maybe Federated Coop; but with their regulatory problems on the production side they might even be nearly out of the picture at least in the short run.

What is overlooked is that even EXXON and Husky and Federated Coop may be refiners of some sort; but their associated flare gas isn't handled by their facilities (that I know of) and so outside of the obvious collusion at the gas pump price; I think we should be looking out for the hundreds of minor and junior crude oil producers who also pay typically 83% or 95% of some RM taxes throoughout SE Sask and not be so intimately concerned about Crescent Point's half interest in the oil patch throughout Sask.

They can and will look out after their corporate interest without much help needed and will rise or fall along with the hundreds of other players who aren't as powerful in the industry.

[oneoff]

As for the question?

Are they doing everything possible to keep as many people working and families fed?

UNQUOTE

What do you think? I suspect they will squeeze the last penny out of desperate service companies who would tell you they are not sure if they are covering the costs with what the oil company has said they would pay or else find someone to do the work for less.

And the drilling company either works for half or less of peak prices a little over a year ago; job shares,lays off, no overtime; one rig out of a dozen working
(in some cases); selling assets at auctions; cut up 18 rigs for scrap; go on unemployment; little work and so on.

And as for where the millions and billions (also thousands and tens of thousands went.......its gone.....pissed away....leveraged....gambled on fancy houses or toys.....whatever.....but long gone.


Such is the way of human nature and business.


All a case of history repeating....which it will again and again and again.; with casualties at each itineration.

But this repeat of history involves a deliberate government attempt of forcing major changes which could very well create new third world countries and ruined provinces at disadvantage very bad timing; being in the wrong place and circumstances well beyond anyone's control.

[oneoff]

As for the question?

Are they doing everything possible to keep as many people working and families fed?

UNQUOTE

What do you think? I suspect they will squeeze the last penny out of desperate service companies who would tell you they are not sure if they are covering the costs with what the oil company has said they would pay or else find someone to do the work for less.

And the drilling company either works for half or less of peak prices a little over a year ago; job shares,lays off, no overtime; one rig out of a dozen working
(in some cases); selling assets at auctions; cut up 18 rigs for scrap; go on unemployment; little work and so on.

And as for where the millions and billions (also thousands and tens of thousands went.......its gone.....pissed away....leveraged....gambled on fancy houses or toys.....whatever.....but long gone.


Such is the way of human nature and business.


All a case of history repeating....which it will again and again and again.; with casualties at each itineration.

But this repeat of history involves a deliberate government attempt of forcing major changes which could very well create new third world countries and ruined provinces at disadvantage very bad timing; being in the wrong place and circumstances well beyond anyone's control.

[oneoff]

Just for interests sake here's some very ballpark figures for what might be expected as current revenues and expenses for what is considered as a "marginal" oil well in SE Sask.

All ballpark figures that might be what one could expect. ; realizing someone might likely do the same work for next to nothing.

Power 300-3500 per month (demand charge at $11 perKVA permonth, Meter at $54.00 plus about 7cents per KW energy consumption)...taxes 3 grand per year...surface ease lease 3 grand, trucking by hour $150 per hour or so......battery operator 400/moth...accounting and compliance/bookeepin $400/month....service rig if needed (calculate on how many month to payback that expense which is literally open ended, and impossible to estimate if it will be zero over any period; or would make it a case of "drain tanks and suspend the well.....ultimate decommissioning (a liability that doesn't go away for a solvent company. Ask geniuses who would have created a make work program for service rig companies if interested in contesting why this bad idea was not taken up in federal budget; but realize this is an important line item in a long term budget,,,and finally the provincial government is taking cleanup and decommissioning seriously....

treating 3.50 to 5.00 a cube of produced oil/ater......water disposal $1.00 per cube or more....pipeline tarriffs, "dockage", "shrinkage" etc, fees.....$10,000 to get company name as an industry player and participate as a member of the Orpan well fund;.....provincial royalties (depending on volume produced and deemed value of oil. Varies month to month and now no excuses or exceptions dealing ith government computer)....prepaid decommissioning levy also due at government demand based on a 3 year moving monthly average. (asset to liability ratio of less than 1 triggers payment....Deposit of 55,500 if it is called for or actually any amount it is felt would be required for an ultimate cleanup;


Anyone interested I could continue ?

[DaneG]

Sounds like BSE in the oil patch,they will get through it but not without several casualties like the cattle industry.

[chuckChuck]

The oil industry is a complicated business with lots of variables.

In private and public companies the goal has often been to reap windfall profits if possible and often in less than a sustainable way.

If the industry didn't see this coming a few years back as the US became a big producer then they made a mistake in judgement.

Norway made a conscious effort to save some of the resource revenue for future generations as they knew it was a one time opportunity. They also protected themselves from a viscious downturn that causes serious problems for families, communities and provinces that have become too dependent on oil and gas.

Pipelines will help but they won't solve the fundamental problem which is there is too much supply for the market. Until this corrects, everything else is just tweaking here and there.

[chuckChuck]

We should also not forget that the high loonie that was in large part due to high oil and other commodity prices in Canada had a profound impact on manufacturing and exports. There was a lot of jobs lost in certain sectors that weren't directly tied to the oil industry. As important as the oil industry is to western canada and newfoundland it is only part of our economy.

[chuckChuck]

http://www.macleans.ca/economy/economicanalysis/canada-the-failed-petrostate/

Canada, the failed petrostate?

Canada hasn’t bet the economy on the energy sector. Not even close.

Andrew Leach

November 4, 2013
You hear a lot about Canada being a petrostate from energy industry opponents. You might hear them say things like, “we’ve fallen into the staples trap.” You’ll also hear much the same story, although with a different implication, from the industry’s proponents who are quick to argue that our economy depends heavily on oil and gas, and without oil and gas we’d be short schools, hospitals, and other social programs (PDF).

I’ve taken to opening most public talks I give with a question: What is the share of oil and gas extraction in Canada’s GDP? I get a wide range of answers, generally in a range from 5-40%. The high numbers, in the 30s and 40s, tend to come both from the industry’s staunchest opponents and from those occupying the corporate towers of Calgary.

So, what do the data say? The data tell you that the energy share and oil and gas share of Canada’s GDP is dropping, that the growth in the energy sector has accounted for a much smaller share of Canada’s economic growth than most people seem to imagine, and that the oil and gas share of of total corporate taxes paid in Canada is smaller than its GDP share. The data also show little to no evidence of a Harper-effect. Let’s look at each of these in turn.

First, the GDP shares. Since 1997, the energy sector share of Canada’s GDP has declined – yes, declined – from over 12% to less than 10%. Over that same time period, oil and gas extraction has also declined slightly, from just over 7% to just over 6%. Data on unconventional oil extraction are not available over this entire timespan, but between January 2007 and August 2013, that subsector (which includes oil sands) increased from 1.3% of GDP to 2.0% in the most recent data available—rapid growth to be sure, at 7.5% per year, but on a small base.

Energy and oil share of Canada's GDP. Source: Statistics Canada (CANSIM Table 379-0031).



What about roles in economic growth? The graph below shows GDP growth rates by sector for 9 years before Prime Minister Harper took office and the 7 years since, as well as the cumulative average growth rates over the entire period. In all cases, the energy sector actually lags behind overall economic growth – something which was already implied given its share becoming less important. What is evident from this graph is the disparity in impacts from the economic crisis and beyond – manufacturing and good production in general are hard-hit, while services and energy are closer to historic levels. But, despite the soundbites, our economic recovery hasn’t been driven by the energy sector.

Sector GDP growth rates. Source: Statistics Canada (CANSIM Table 379-0031).



In terms of contribution to Canada’s economic growth, the growth in the energy sector was equivalent to 8% of Canada’s total GDP growth during the 2006-2013 period. The change in oil and gas sector GDP was approximately the same as the change in total energy sector GDP over that same period. For comparison, growth in public sector GDP was equivalent to 26% of total economic growth over the first 7 years of Mr. Harper’s time as Prime Minister – perhaps we are more of a bureaucrastate than a petrostate?

What about taxation? The oil and gas industry has recently become a champion of social programs, schools, and hospitals. We are to believe that the expansion in oil and gas production has led to vast new tax revenue for governments through which to fund our social programs. That also doesn’t stand up very well, in Canada or in Alberta. Canadian data on tax base and revenue are updated with a longer delay than GDP data, so we only have data up to 2011, but they still tell an interesting story. In 2006, when Prime Minister Harper took office, oil and gas (including support activities) comprised 8% of taxable corporate income in Canada – a total which fell to 4.3% by 2011. Similarly, the oil and gas share of total taxes paid fell from 9.4% in 2006 to 4.2% in 2011. The story is similar in Alberta with respect to royalties – resource royalties as a share of government income were over 40% when Prime Minister Harper took office, and are around 30% today – still important, of course, but not increasing as you might have been led to believe. If the oil and gas industry is worried about paying for our schools, hospitals, and social programs, they are going to have to get their profitability house in order first—Statistics Canada estimates that sector profit margins dropped from 21.5% in 2005 to 8.5% in 2011. Taxes are paid on net revenue, after all.

Lastly, we hear a lot about energy exports, which have definitely increased, although more in the pre-Harper years than since he took office. The figure below shows energy sector imports and exports both increasing since 1997 (this data set was truncated to match the GDP data above), with significant changes in net exports as well. In the period from 1997 through to PM Harper’s swearing-in, energy exports increased at an average rate of 10% per year—yes, 10%. Since, they’ve increased at an average rate of 5%. Net exports follow basically the same trend – an increase of 10% in the 9 years before this Prime Minister took office, and 5% per year on average since. Net exports have increased quickly since the depth of the financial crisis, in January of 2009, at a rate of 15% per year on average, but even over that period, exports grew at a rate nearly identical to the pre-Harper years. We best be careful. Another decade or two with these kind of increases and we’ll be in Norway territory.

Energy imports, exports, and net exports, seasonally adjusted, balance of payments basis. Source: Statistics Canada Cansim Table 228-0059

If someone tries to tell you that Canada has bet the economy on the oil sands or that we are a petrostate, perhaps this will give you a few tools to question that contention.
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[sumdumguy]

I wonder if Agriville Admin could program the site to disallow double posts?

[oneoff]

Sure that was all written in Eastern Canada; and sure it is comforting to the East.

But the last I heard, the Alberta economy revolves around the wealth of a healthy oil industry. And resources and oil determine whether Sask is prosperous (or not). In fact the deficits incurred because of decreased spending has obvious balance sheets results.

Take a look outside your door and don't bite the hands of the energy that pays your taxes, fuels your vehicles and puts money in your pockets.

There's more to the economy of western Canada than what you see. And its effect on individuals and their livlihoods is not insignificant.
It also isn't curable (in Western Canada) with what is budgeted and proposed .

[riders2010]

How is gas 89 when a barrel of oil is the price it is? Who s making the winfall?