Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 231926 times)

SharperDingaan

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At time of writing, WTI is USD 54.09.
The US sinks 3 tankers, shuts down 3.3M (25%) of Iranian exports/month (30(136,000-24,000)); and WTI falls 24% from the USD 71.14 when a Saudi tanker was attacked maybe 2 weeks prior? At the same time that the US is observed aggressively building inventory - PRIOR to its tanker strike. To most people this is preparation for an extended 'stay'; price should be be reflecting a conflict premium, not a conflict discount.

Amazing what a news blackout and the media distraction of a foreign state visit can do! ;D
https://www.businessinsider.com/trump-baby-blimp-ready-president-lands-state-visit-2019-6

https://oilprice.com/Latest-Energy-News/World-News/US-Forces-Blow-Up-Three-Oil-Tankers-In-Syria-Enforcing-Oil-Embargo.html

The strike was carried about by coalition planes, which hit three oil tankers, leaving four dead. The coalition has not yet made a statement about the attack. In the area controlled by Assad, oil consumption stands at around 136,000 bpd. Production, meanwhile, is only 24,000 barrels per day.

https://dailynewsegypt.com/2019/06/02/iran-warns-against-any-gulf-clashes-threatens-oil-would-surpass-100-per-barrel/

"Yahya Rahim Safavi who served before as the chief commander of the Islamic Revolutionary Guard Corps threatened that crude oil prices will exceed the $100 per barrel mark if any clash between the two countries took place.

Following the attack oil prices jumped to around $71.14 per barrel, after reports of drone attack at oil pumping stations in Saudi Arabia, following the two Saudi oil tankers which were attacked off the coast of the UAE on Monday."

SD
« Last Edit: June 03, 2019, 06:33:33 AM by SharperDingaan »


Cardboard

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"The US sinks 3 tankers,..."

I truly thought you were joking. Then I saw the link that you posted and realized that this was real...

We are living in a time of unbeliveable complacency. People keep dreaming, hoping and giving a chance to all kinds of unicorns and pot companies about extravagant future profits projections while the most important commodities in the world (oil, copper, uranium, natural gas and many other) are being totally forgotten and dismissed. Price to pay will be very high someday.

Cardboard

Spekulatius

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"Typically, these companies show better cash flows and pay nice dividends, unlike E&Pís that generally donít generate FCF."

You certainly have not done your homework on respectable Canadian E&P's lately.

Cardboard

CNQ looks interesting for example. They acquired Devonís in in situ oilsand assets for 3x EBITDA. Now that looks like a good deal to me:
https://www.cnrl.com/upload/multi_media_element/201/04/0529-devon-canada-asset-acquistion-presentation.pdf
To be a realist, one has to believe in miracles.

sculpin

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Oil Tightness Obscured

by Trip Rodgers, CFA | Jun 4, 2019

We believe supply-driven tightness in crude has been masked by investor macro concerns relating to demand, as well as the recent weather-impacted rise in US oil inventories.

In our view, the magnitude of these supply factors more than offsets potential demand slippage and should result in a continuation of oil tightness.

We see significant value in many oil-related equities, particularly those boosting free cash flow through enhanced operating efficiencies and capital spending discipline.

https://www.bpcfunds.com/content/oil-tightness-obsecured/

Spekulatius

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"Typically, these companies show better cash flows and pay nice dividends, unlike E&P’s that generally don’t generate FCF."

You certainly have not done your homework on respectable Canadian E&P's lately.

Cardboard

CNQ looks interesting for example. They acquired Devon’s in in situ oilsand assets for 3x EBITDA. Now that looks like a good deal to me:
https://www.cnrl.com/upload/multi_media_element/201/04/0529-devon-canada-asset-acquistion-presentation.pdf

Actually, if you want to a good laugh read these press releases about the same transaction from the seller (Devon) and the buyer ( CNR). You couldn’t really tell they are about the same asset (Devon’s Jackfish heavy oil assets) and some of the numbers are absurdly far apart.

Devon’s press release:
https://www.devonenergy.com/news/2019/Devon-Energy-Announces-Strategic-Exit-of-Canadian-Business-for-CAD-38-Billion

Sounds like they got a great price for a barely cash flowing asset.

CNR press release:
https://www.cnrl.com/upload/multi_media_element/201/04/0529-devon-canada-asset-acquistion-presentation.pdf
[/quote]

Sound like they got the bargain of a lifetime (3x EBITDA for a long life asset)

It’s pretty clear that Devon cherrypicked the numbers to make it appear like they got good money for an underperforming asset. that probably by picking different time periods(2018 vs 2019).


CNR bought an asset with 128k/bod, 780M brl proved reserves with 1.265B future EBITDA/year. Devon sold an asset with 113k production, 409M brl proved reserves and 238M in field level cash flow.

How can they both be right? I am guessing that a change in crude prices can move proved serves around and cash flow, but the extend of divergence is mind boggling.
« Last Edit: June 07, 2019, 06:59:59 PM by Spekulatius »
To be a realist, one has to believe in miracles.

bizaro86

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CNQ reported production capacity, Devon reported actual production. On the reserves side, I would guess that is a net vs gross difference. IIRC US O&G companies report production and reserves net of royalties, whereas the Canadian standard is to report gross numbers (total product, including the govt share).

I did tons of work on Jackfish in a past life, and I think CNQ got a crazy good deal on this asset. I'm suprised Suncor wasn't willing to pay more for that tbh. CNQ had an operational synergy advantage buying these assets (on both the SAGD and conventional sides) and Suncor wouldn't have wanted the coventional heavy.

CVE would have even better synergy on the thermal side, but the market would destroy them if they made another acquisition, even if it was cheap/good.

Spekulatius

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CNQ reported production capacity, Devon reported actual production. On the reserves side, I would guess that is a net vs gross difference. IIRC US O&G companies report production and reserves net of royalties, whereas the Canadian standard is to report gross numbers (total product, including the govt share).

I did tons of work on Jackfish in a past life, and I think CNQ got a crazy good deal on this asset. I'm suprised Suncor wasn't willing to pay more for that tbh. CNQ had an operational synergy advantage buying these assets (on both the SAGD and conventional sides) and Suncor wouldn't have wanted the coventional heavy.

CVE would have even better synergy on the thermal side, but the market would destroy them if they made another acquisition, even if it was cheap/good.

Thanks, very helpful. I have followed CNQ and I believe, they are one of the better operators and capital allocators.
To be a realist, one has to believe in miracles.

bizaro86

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CNQ reported production capacity, Devon reported actual production. On the reserves side, I would guess that is a net vs gross difference. IIRC US O&G companies report production and reserves net of royalties, whereas the Canadian standard is to report gross numbers (total product, including the govt share).

I did tons of work on Jackfish in a past life, and I think CNQ got a crazy good deal on this asset. I'm suprised Suncor wasn't willing to pay more for that tbh. CNQ had an operational synergy advantage buying these assets (on both the SAGD and conventional sides) and Suncor wouldn't have wanted the coventional heavy.

CVE would have even better synergy on the thermal side, but the market would destroy them if they made another acquisition, even if it was cheap/good.

Thanks, very helpful. I have followed CNQ and I believe, they are one of the better operators and capital allocators.

I agree with that assessment. CNQ is an extremely effective operator. The company does the same work with less people than its competitors, and spends less on procurement. That sometimes means they skimp on quality, in my opinion, but on average I think they are one of the best operators in the industry.

I also think their capital allocation is very good. One risk the market is not considering is Murray Edward's health. He is an exceptional entrepreneur, but is significantly overweight.

SharperDingaan

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"Two oil tankers were attacked in the Gulf of Oman on Thursday, leaving one ablaze and both adrift, shipping firms said, driving oil prices as much as 4% higher over worries about Middle East supplies." https://ca.reuters.com/article/topNews/idCAKCN1TE0OI-OCATP

SD

DooDiligence

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"Two oil tankers were attacked in the Gulf of Oman on Thursday, leaving one ablaze and both adrift, shipping firms said, driving oil prices as much as 4% higher over worries about Middle East supplies." https://ca.reuters.com/article/topNews/idCAKCN1TE0OI-OCATP

SD

Eeek, I just finished an advanced firefighting refresher for revalidation of my STCW certificate (required to renew a Coast Guard license).

I worked on a T2 tanker out of Jebel Ali during Desert Storm but wouldn't want to do it now.
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%'s held @ MV 06/18/2019 minus 18.3% investable cash

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