Just Say It Aint So!!

[DonAndersen]

Guys/Gals,

 

Well, sounds like here we go again. Lay-offs have started or are continuing in most of the oil centers in Alberta. Heard that Trican laid-off 100 guys and their trucks headed for the border [south one]. Repos of jacked up trucks and holiday trailers is going great guns in Red Deer. Folks in Grand Prairie are getting antsy. Work is slowing or stopped up there. Oil Week says 125,000 oil patch types to hit the bricks.

We are seeing a lot less folks in our hotels/motels/restaurants/businesses in Rocky.

 

How about you guys - seeing reality yet? Or is Calgary still in a frenzy?

 

See: http://www.oilweek.com/articles.asp?ID=383

 

http://www.canada.com/nationalpost/financi...b0e&k=33095

 

http://www.theglobeandmail.com/servlet/sto...PStory/Business

 

catch ya'

 

 

Don

[Grizz]

Don,

 

It might not stick.

 

http://www.cbc.ca/canada/calgary/story/2007/09/12/oil.html

[DonAndersen]

Griz,

 

Conventional Crude is about gone in Western Canada Basin. Eighty buck oil will only wind up the tar sands even more. Gas prices are stagnant. Most of the activity was related to gas.

Gonna be an ugly!!

 

Don

[SanJuanWorm]

Alberta is run on Natural Gas prices. Not oil. These cycles are normal. Once again I pray to keep my job or Lynn and Mike may have to adopt me.

[cheeler]

Gas prices will eventually rebound though; if there's no nuclear power for the oilsands the producers don't have much choice in other fuels to use to get the oil out anyways. There's also more natural gas power plants being built or planned out east, so a lower price now should ensure many of the projects will see construction.

[LynnF]

The co. I work for is feeling the heat - and we're not even 100% dependent on the O&G industry. But it's making a dent...a big one. While oil continues to rise, NG prices continue to drop and they really haven't done anything spectacular now in over a year I believe. Lots of juniors either being bought out or going under - I know of a few who have lost their jobs in Calgary already. It's not full on in the city yet, but the "hot" job market is no longer "hot" because there's more in the way of applicants to choose from now (in certain professions anyways). I honestly do not believe anymore in any predictions for O&G after what I've seen go on in the past year. Case in point: I went from being worth $450,000 in stock options to losing a job last November - all in the space of one day when the stock dove. This oil and gas game is a risky one - I like the risks because I like the rewards, but the consequences suck large as well.

 

Bottom line as per Don's original post - I wouldn't be puttin' any money into anything right now and I'll be a little more conservative with my spending for a bit. We're due for the bubble to burst and I think it's starting to deflate slowly.

 

And Dave - I've probably got a better chance of losing my job than you do, so you better be prepared to move some of those bikes outta your garage so Mike and I can move in. Besides...I've got enough high maintenance testosterone in my life without you adding to the mix

[PeteZahut]

Say it isn't so! My company gives me a market adjustment premium to keep me there because of the hot job market. If the hot job market goes away so does the extra cash.

[fishfreak]

I'm thinking the same thing you guys are. I work for a producer, and the only projects we're getting approved for drilling are for oil. I'm just thankful I still have wells to drill this year otherwise I'd be worried about my job...

[Brownstone]

I wish it'd slow a little, give the labour force time to rebound..a guy might find some good workers..

[DonAndersen]

Guys/Gals,

 

Talked to 2 oil/gas field supply companies today - one does rig pad clean up - gone from 2/wk billings>1bill since January - the other is a small picker truck owner/operator who hasn't invoiced for 3 months. Talked to another last nite - he says he didn't have to lay off workers - they quit looking for higher paying jobs. After a month of searching, they were looking for their old jobs back. No such luck.

The little guys are hurting.

 

Don

[Nick0Danger]

I know the company i work for just did some work for Schlumberger in Estevan Saskatchewan so they can rev up operations down there again. Also Fort Mac, has billions worth of work and the new found landers are headed back for a big project there so that will create a vacum for people to fill. When working in Brooks and med hat, seem to be alot happening there.

[Castuserraticus]

The attitude is nervous. Producing companies that were not as disciplined - marginal projects relying on increasing prices, loading up on debt - are in deep trouble. The healthy ones are closely evaluating their capital programs. Risk is back.

 

The service companies are usually late to the party and the first to get hit by cutbacks. The overbuild of equipment, launch of new companies, and large rate increases have set the stage for some tough times. The fortunate ones will be able to move equipment to the US where rig counts are rising.

 

What impacts gas prices?

 

Supply and demand - It's increasingly a world wide market. Canadian production peaked in 2001. There's going to be an explosion of production from the US Rockies region and, potentially, LNG (liquified natural gas) from international sources in the next few years. With gas-on-gas competition, price spikes will be much more subdued. Potentially countering this is competing demand from Europe and developing nations. Demand in North America has been flat for a couple of years. This could change with normal winter conditions, fuel switching due to cost savings, and industrial demand for the oil sands. Alberta internal consumption has grown by about 700MMcf/d over the past 10 years. European and developing country demand is still rising.

 

Exchange rates - The Canadian dollar is firmly trending higher. American markets set the price. Our gas seemed cheap when the $Cdn was worth $0.67US. The period of currency exchange adding to the selling price is ending. Many analysts put a fundamental price of $6US on gas prices due to present project costs.

[Castuserraticus]

Don,

 

It might not stick.

 

http://www.cbc.ca/canada/calgary/story/2007/09/12/oil.html

 

Oil price in $US increase + Appreciating $Cdn = $0

[DonAndersen]

Guys/Gals,

 

It's a tough world out there.

 

1 US Oil Barrel = $80.00 US

 

or $ 82.38 CDN

 

1 US bbl. = 159.96 liters

 

1 liter of car gas = $0.90 CDN

 

& 1 US bbl. of gas costs $ 159.06

 

Cost of production of oil from tar sand = $ 12.00 CDN/bbl.

 

So

 

$ 12>82.38 = 694% increase

 

&

 

$82.38>159.06 = 193% increase

 

and to really get your attention

 

 

Cost of Production = $12/bbl or $0.075/liter

 

and you buy it for $0.90/l

 

resulting in a increase from producer > you of only

 

$0.90/0.075 = 1200%

 

And just so castus... doesn't blow a gasket - some of the 1200% increase is taxes. None of the price increase is royalties.

 

Anybody catch Shell's CEO snivelling about the Royalty review?

 

And if I was just a tad more cynical, what if the oil companies, knowing right well a royalty review as going to take place, decided to cut their investments in drilling etc. thereby forcing lay-offs with the resulting public outcry about job loss which forced the Govt to again give them all a royalty holiday. They wouldn't do that - would they? Just remember, oil companies have been known of over-throw Govts when things didn't suit them.

 

 

regards,

 

 

Don

[Taco]

The one that irritated me a tad was the prick from Exxon warning us not play around with the royalties or they'd be forced to take their crayons back to Irving Tx. Made the front page...... musta scared Lyle somewhat because he's publicly stated the Tories were gonna reserve the right to cherry pick the review...... WTF else is new?

[SanJuanWorm]

Once again we note that there are idiots running our country.

[Taco]

Once again we note that there are idiots running our country.

 

Na, just the cream rising to the top of the Electorate...................................................course that doesn't say much for the rest of us <_<

[SanJuanWorm]

What really cuts my chops is the frivolous gov't spending.

[bowfin]

I work fora small drillig contractor and things are real bad there i have not worked since the end of april we mostly drilled for gas. The company keeps saying things are going to pick up but when. I have tried to get another drilling job but no one is hiring the drilling contractors that have work they have lots of guys sitting around just waiting for a call to go to work. The only job i got was to work in the states its sounds like a good job but i have to wait till my work visa is ready that wount be ready till the end of oct so i sit and wait till then sure glad i didnt piss this boom away this time lol

[bigbowtrout]

[Brownstone]

I work in production, and I cannot remember a time when it has been busier for me..the only thing that has slowed me in the last 3 years has been the weather...the "big" services went through lay offs and sending their equipment south this last winter also and there was lots of talk of how the oil patch was going to slow down...not from where i stand..alot of this speculation (from the field point of view anyway) came from "Calgary" being fed up with the price of big services .. ie- treating/fracture equipment..which aside from the actual drilling of the hole is probably the single most expensive step in completing a oil/gas well..with only a small handful of companies in Canada with this sort of equipment, CalFrac, Schlumberger, BJ sevices, Halliburton, Tri-can. They can pretty much charge what they want..the prices of these services has risen like no other in the field and Calgary started "rumors" that they were going to slow on completions until the prices came down.. This is just what I've absorbed from the field over the last year or so (and does not depict global conditions).. I would'nt worry one bit..I got in this oil racked at 12 bucks a barrel .. and have been busy ever since ..

[bigbowtrout]

I work in production, and I cannot remember a time when it has been busier for me..the only thing that has slowed me in the last 3 years has been the weather...the "big" services went through lay offs and sending their equipment south this last winter also and there was lots of talk of how the oil patch was going to slow down...not from where i stand..alot of this speculation (from the field point of view anyway) came from "Calgary" being fed up with the price of big services .. ie- treating/fracture equipment..which aside from the actual drilling of the hole is probably the single most expensive step in completing a oil/gas well..with only a small handful of companies in Canada with this sort of equipment, CalFrac, Schlumberger, BJ sevices, Halliburton, Tri-can. They can pretty much charge what they want..the prices of these services has risen like no other in the field and Calgary started "rumors" that they were going to slow on completions until the prices came down.. This is just what I've absorbed from the field over the last year or so (and does not depict global conditions).. I would'nt worry one bit..I got in this oil racked at 12 bucks a barrel .. and have been busy ever since ..

 

And thats the way I see it from my end. We stopped drilling and a lot of the other big players slowed down for those exact reasons.

[EdB]

I work for Calfrac Well Services and we are going strong. I work every day. I run an N2 pump and we work for Encana out of Strathmore. The bases in Red Deer and GP seem to be doing fine as well. Medicine Hat has so much work on the block (Suffield), that i'm not sure it would ever slow down. I think that we are the only service company that didn't lay off during break-up. Tri-can seems to be doing alot of work in our area as well. We are even hiring in the cement department because they are so busy. I know they have had to dicount there prices alot because the other companies are not working so they will bid anything. That's costing me bonus money which is no good.

[Castuserraticus]

Guys/Gals,

It's a tough world out there.

1 US Oil Barrel = $80.00 US

or $ 82.38 CDN

1 US bbl. = 159.96 liters

1 liter of car gas = $0.90 CDN

& 1 US bbl. of gas costs $ 159.06

Cost of production of oil from tar sand = $ 12.00 CDN/bbl.

So

$ 12>82.38 = 694% increase

&

$82.38>159.06 = 193% increase

and to really get your attention

Cost of Production = $12/bbl or $0.075/liter

and you buy it for $0.90/l

resulting in a increase from producer > you of only

$0.90/0.075 = 1200%

And just so castus... doesn't blow a gasket - some of the 1200% increase is taxes. None of the price increase is royalties.

Anybody catch Shell's CEO snivelling about the Royalty review?

 

And if I was just a tad more cynical, what if the oil companies, knowing right well a royalty review as going to take place, decided to cut their investments in drilling etc. thereby forcing lay-offs with the resulting public outcry about job loss which forced the Govt to again give them all a royalty holiday. They wouldn't do that - would they? Just remember, oil companies have been known of over-throw Govts when things didn't suit them.

regards,

Don

 

Why do I only get involved in the "lively" discussions?

 

In addition to a small calculation error (1 US Bbl costs $143.96Cdn) your numbers are simplistic and out of date. Between the producers and the pumps are the refiners, marketers, and governments. Tar sands are heavy oil and do not receive WTI prices. From Suncor's 2006 annual report:

 

Average light/heavy differential $8.83/Bbl - industry average is about $20 so Suncor does much better because they produce synthetic crude, 2007 is trending higher

 

Cash operating costs $26/Bbl - including production, transportation, and taxes.

 

So the estimated netback is down to ~ $47/Bbl and this is to deliver crude to the refinery. The actual calculation for Suncor in 2006 provides a netback of $41 likely because they also sell raw bitumen.

 

Your calculations also ignore the finding and development cost. Wells and mines are far from free. Industry average finding costs are over $20/Bbl.

 

Royalties paid on production increased to $911MM from $406MM (production increased from 165M to 263M BOPD, rates rise with prices)

 

To get product to consumers the oil has to be refined and distributed. The refiners process the crude into more valuable products (gas, diesel, lubricants, AVgas, bitumen). Historically, refinery margins have been below 4% but have crept up to 7% recently.

 

Gasoline refining and marketting costs averaged $23.80 /Bbl in 2005

 

And the governments take their share.

Gasoline taxes averaged $52.30/Bbl in 2005.

 

I have to sign off now because I'm late for the "Global Oil Conspiracy 101" course that's mandatory for all participants in the industry.

[Brownstone]

I work for Calfrac Well Services and we are going strong. I work every day. I run an N2 pump and we work for Encana out of Strathmore. The bases in Red Deer and GP seem to be doing fine as well. Medicine Hat has so much work on the block (Suffield), that i'm not sure it would ever slow down. I think that we are the only service company that didn't lay off during break-up. Tri-can seems to be doing alot of work in our area as well. We are even hiring in the cement department because they are so busy. I know they have had to dicount there prices alot because the other companies are not working so they will bid anything. That's costing me bonus money which is no good.

 

 

Encana is going crazy strong on their CBM project out by Hussar/Strathmore ...I have'nt seen the slow either..but you hear the rumors and I know some of the big companies had a decent number of lay-offs late last winter..every job ive done this summer has be a new well completion..and everyone i talk to seems to be flat out...