BL

Western Canadian Select WAS selling for $6.48 bbl. NOW $4.18 ! . . . Enbridge charges between $7 to $9 bbl to ship to the GOM refineries.

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Some companies have storage arrangements previously made because the gov shut ins. Others suncor will refine / upgrade some . But ya everyone is SOL .... the equal and opposite reaction to this mess is gonna cause the recession this early stimulus is trying to avoid.

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The world has essentially flicked the demand switch off and oil companies are winding down the switch back on if all at once will use up storage and the lag time to have production back online is gonna be painful.  Delays go both ways and are expensive on both sides.

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As Rob pointed out they almost never sell at actual WCS.

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2 minutes ago, Enthalpic said:

As Rob pointed out they almost never sell at actual WCS.

And hedges (some that work some that dont)

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1 hour ago, Enthalpic said:

As Rob pointed out they almost never sell at actual WCS.

They sell at "actual" WCS every day, what they rarely if ever do is sell at spot WCS. 

Meanwhile, it's worse than you know. The bitumen doesn't meet pipeline specs, so must be blended with diluent. The cost of that diluent? $50/bbl by the most recent number I've seen, although that's likely going to come down. How much diluent per barrel is needed? The ratio of bitumen to diluent is roughly 66:33 so that $6.48 bbl has $16.65 worth of pentanes plus in it. 

So, how much are Canadian operators making now? Your production cost of $15 wasn't even on the same planet as reality. 

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Just now, Ward Smith said:

They sell at "actual" WCS every day, what they rarely if ever do is sell at spot WCS. 

Meanwhile, it's worse than you know. The bitumen doesn't meet pipeline specs, so must be blended with diluent. The cost of that diluent? $50/bbl by the most recent number I've seen, although that's likely going to come down. How much diluent per barrel is needed? The ratio of bitumen to diluent is roughly 66:33 so that $6.48 bbl has $16.65 worth of pentanes plus in it. 

So, how much are Canadian operators making now? Your production cost of $15 wasn't even on the same planet as reality. 

A lot (most?) of the diluent is recovered at the refinery - it's not really sold with the oil.

The refineries can crack the heavy fractions to lighten it up.

 

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1 hour ago, Enthalpic said:

A lot (most?) of the diluent is recovered at the refinery - it's not really sold with the oil.

The refineries can crack the heavy fractions to lighten it up.

Your lack of understanding is astounding. I know ten times more about this than you apparently do and you live in Edmonton! Don't you talk to people in the industry who are your (hurting) neighbors? 

Yes diluent is recovered but no they don't pay the producer when it is. At high enough prices it's a wash, but at these prices? Full on disaster. 

Your second sentence also displays your ignorance. It's too heavy to "crack". 95% of it goes into delayed cokers, the remainder more sophisticated methods like UOP. 

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(edited)

On 3/27/2020 at 1:03 PM, Ward Smith said:

Your lack of understanding is astounding. I know ten times more about this than you apparently do and you live in Edmonton! Don't you talk to people in the industry who are your (hurting) neighbors? 

Yes diluent is recovered but no they don't pay the producer when it is. At high enough prices it's a wash, but at these prices? Full on disaster. 

Your second sentence also displays your ignorance. It's too heavy to "crack". 95% of it goes into delayed cokers, the remainder more sophisticated methods like UOP. 

I'm not a petroleum engineer.  

Edmonton is far from just oil pros.  I only know one guy that works in an actual refinery; one guy who works at SAGD plant.  Several others are indirectly employed by oil (welder, truckers, environmental, safety). The rest of my friends are pretty much all technologists or teachers.

Thanks for the information.

Edited by Enthalpic
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(edited)

On 3/27/2020 at 12:16 PM, Rob Kramer said:

Some companies have storage arrangements previously made because the gov shut ins. Others suncor will refine / upgrade some . But ya everyone is SOL .... the equal and opposite reaction to this mess is gonna cause the recession this early stimulus is trying to avoid.

Suncore  is shutting down one of its two syncrude trains .

Warren Buffet can't be happy about his investment.

Edited by BLA
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(edited)

3 hours ago, Ward Smith said:

They sell at "actual" WCS every day, what they rarely if ever do is sell at spot WCS. 

Meanwhile, it's worse than you know. The bitumen doesn't meet pipeline specs, so must be blended with diluent. The cost of that diluent? $50/bbl by the most recent number I've seen, although that's likely going to come down. How much diluent per barrel is needed? The ratio of bitumen to diluent is roughly 66:33 so that $6.48 bbl has $16.65 worth of pentanes plus in it. 

So, how much are Canadian operators making now? Your production cost of $15 wasn't even on the same planet as reality. 

The diluent/condensate is trading in the low $20's. 

Edited by BLA
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It will be interesting to see the structure of this package, when it's announced (I don't follow Canadian politics closely but looks like differences in opinions about giving credit facilities to the industry vs supporting disaffected people directly)

https://www.theglobeandmail.com/politics/article-ottawa-prepares-multibillion-dollar-bailout-of-oil-and-gas-sector/

Quote


The federal government is preparing a multibillion-dollar bailout package for Canada’s oil and gas sector that is expected to be unveiled early next week, sources say.

Federal and Alberta government insiders are saying little about the details – citing the sensitivity of the options under discussion – but the oil and gas sector can expect to get more access to credit, especially for struggling small and medium-sized operations, and significant funding to create jobs for laid-off workers to clean up abandoned oil and gas wells.

 

One senior Alberta source said the province is expecting Ottawa to provide $15-billion in relief to an industry that has been hammered by the COVID-19 crisis and the price war between Saudi Arabia and Russia that has cratered oil prices and energy-company stocks.

 

Sources in both governments say they do not want to reveal some of the measures under discussion in case they are taken off the table in the negotiations and financial markets react negatively when the final package is announced next week.

The Globe and Mail is keeping the names of the sources in this story confidential because they were not authorized to discuss the matter publicly.

In recent days, Premier Jason Kenney has floated the idea of a credit facility for the industry similar to the U.S. Troubled Asset Relief Program (TARP) that bailed out banks and automobile companies during the 2008-09 financial crisis. A TARP-style program would see Ottawa purchase shares in distressed oil and gas companies – similar to what Canada did for the auto industry in 2008.

As federal-provincial negotiations continued, Alberta CEOs released a letter to Prime Minister Justin Trudeau – signed by 65 executives – asking for the creation of a TARP to purchase distressed assets, suspension of the federal carbon tax and all income tax at every level and urged the banks to provide no-interest loans and loan guarantees.

“Our companies collectively represent over 100,000 working Canadians,” the letter said, urging "all levels of government to work together toward one goal: no Canadian, household, business or organization is left worse off than where they were when this crisis began.”

A federal source cautioned that major players such as Suncor and Canadian Natural Resources have the financial resources to pick up many of the small and medium-sized energy companies that can’t survive the current crisis and that Ottawa’s role should be focused on helping unemployed oil and gas workers.

Finance Minister Bill Morneau, who along with Mr. Kenney spoke to energy executives Wednesday, has a team working full-time on recommendations to keep the industry going.

Natural Resources Minister Seamus O’Regan held a three-hour talk with the Canadian Association of Petroleum Producers (CAPP) Thursday.

“We know that the oil and gas sector has been particularly affected, and specific help is needed. We’re looking at all options – including helping maintain jobs in the industry by enabling workers to put their skills to use remediating the environmental liabilities associated with orphan wells,” Mr. O’Regan’s communications director, Carlene Variyan, said in a statement to The Globe.

Mr. Morneau has already said Ottawa will provide financial assistance to create jobs in reclaiming orphan wells and that there is also the possibility of changes to payroll taxes for the industry.

One federal source said many jobless oil and gas workers can access federal funds that were announced in the $27-billion emergency aid package unveiled on Wednesday. Work-sharing programs may also be on the table.

Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, kicked off a price war with Russia that sent prices into a tailspin.

Oil rose Thursday, after dropping sharply on Wednesday that saw prices at their lowest levels in two decades. Western Canadian Select, the benchmark price for Alberta crude, closed up at near US$13 a barrel. West Texas Intermediate was also up, closing at roughly US$25. Prices increased after U.S. President Donald Trump said he would get involved in the oil-price war between Riyadh and Moscow to encourage them to cut oil production and stabilize prices.

CAPP president and chief executive officer Tim McMillan said the combination of the global economic slowdown resulting from the COVID-19 virus and the dramatic drop in oil prices owing to geopolitical actions by Russia and Saudi Arabia is having a devastating impact on Canada’s oil and natural gas sector.

“While the details still need to be developed, CAPP is encouraged by the federal and Alberta governments’ economic-stimulus announcements to date." He said he is working with both governments on an immediate aid package.

Mr. McMillan said an injection of funds directed toward cleaning up orphaned and inactive wells would go a long way to helping the sector survive, through direct job creation, getting the energy service sector back to work and correcting company balance sheets where well liabilities are a concern.

“Governments are earnestly trying to work through this and are engaging to figure out what are the most acute moves that can be made now,” he told The Globe on Thursday. "Everybody knows this isn’t a silver bullet situation – it’s addressing challenges as they arrive, and we are keen to support them in that effort.”

Alex Lindsay, a civil engineer who has worked in the oil patch for six years, told The Globe that he would like to see governments backstopping debt to prevent a slew of bankruptcies in the patch.

“But as long as oil costs less than a bucket of chicken, we’re in trouble,” he said.

While it’s quite usual for sector activity to ramp down around this time of year for spring breakup, Mr. Lindsay said he is seeing an unusually widespread shutdown across the sector.

“I don’t think I could even get a job on a service rig right now, and you could always get a job on a service rig. I’m not even seeing the ads for those any more, which is crazy. I mean, I got a job on a service rig in 2015 when everyone thought the world was coming to an end,” he said, referring to the oil-price dive that kicked off Alberta’s recession.

Asked what could help oil and gas survive in the next few weeks, Mr. Lindsay said cash to clean up orphan and inactive wells right now would likely help get the sector back to work.

Arc Resources founder Mac Van Wielingen said the Alberta government should immediately look at deferring or forgiving royalty payments for oil and gas companies, and cutting property and other taxes and fees.

“The only way we can create more liquidity is to reduce current costs,” said Mr. Van Wielingen, a long-time energy executive and investor, who has also been named to a panel created by the province’s Premier to guide Alberta through the combined effects of low oil prices and the economic fallout from the pandemic.

He said it’s difficult to envision the federal government doing any kind of direct bailout, specifically targeted to oil and gas, given the federal Liberals’ past policy pronouncements. But he said the sector could benefit from more generic relief programs for Canadians businesses.

“We also need the banks to back off in terms of principal repayments and interest payments for say, six months.”

 

 

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5 hours ago, BLA said:

The diluent/condensate is trading in the low $20's. 

It has historically traded about $5-10 over WTI. Notice where WTI sells at today? 

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4 hours ago, Ward Smith said:

It has historically traded about $5-10 over WTI. Notice where WTI sells at today? 

The forward futures are not that cheap. And a great deal of the oil delivered is either hedged or sold forward at a fixed price in a long term contract. Many, particularly China, have been trying to get out via force majeure but they might not get off without partial payment. 

If I were sitting on a shale field with good cash position and dirt cheap rig rates, low crew rates, and good productivity from prior wells in the formation, and I had my own property rather than leases, then I would consider selling forward or hedging my production on a new well that would be producing next year. Because the current costs should be towards $400/ft, so costs should fall to below $30. 

Though the best deal is to buy the debt of competitors nearby with paper selling at 40% of par.. . 

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45.65
45.65
44.88
0
0
03/27/20
 
45.68s
+0.77
0.00
45.68
45.68
44.91
0
0
03/27/20
 

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17 hours ago, Rob Kramer said:

The world has essentially flicked the demand switch off and oil companies are winding down the switch back on if all at once will use up storage and the lag time to have production back online is gonna be painful.  Delays go both ways and are expensive on both sides.

It is going to take either alot of cooperation, or a miracle, to dry up the new and improved glut! We managed NOT to do it at $50-60/bbl and reasonable demand.

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On 3/27/2020 at 1:03 PM, Ward Smith said:

Your lack of understanding is astounding. I know ten times more about this than you apparently do and you live in Edmonton! Don't you talk to people in the industry who are your (hurting) neighbors? 

Yes diluent is recovered but no they don't pay the producer when it is. At high enough prices it's a wash, but at these prices? Full on disaster. 

Your second sentence also displays your ignorance. It's too heavy to "crack". 95% of it goes into delayed cokers, the remainder more sophisticated methods like UOP. 

Also, note that the two biggest oil sand producers have their own refining capacity; so they get their own diluent back cheap.

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(edited)

@0R0 in another thread last week I talked about futures strategy for this. The conversation also drifted into discussion of the traders versus the real users. 

Your site from above had this nifty chart that separates the two camps

Unfortunately I can't post the graphic here

Barchart separates into commercial and non commercial traders. Commercial of course are the real customers of oil, or producers. Non commercial are the market makers, traders, Wall Street louts and layabouts like some of the traders who frequent this site. ;)

Edited by Ward Smith
Deleted failed graphic

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Suncor doesnt sell WCS it sells diesel fuel and syncrude sweet premium. 

But with that said, as already mentioned, suncor fort hills is cutting down to 1 train and I haven't seen it in the news yet but they are definately partially closing their mines at base plant which is horrifying to me because base plant is the capital city of the oil sands. You cant lay off 500 equipment operators and maintain existing production levels. It's already happened. Syncrude has shut down MLX SAGD site completely. 

Syncrude is being run with minimum staffing. They closed 90% of the bathrooms and lunch rooms for fuck sakes! Eventually the cokers will crash and syncrude will be a TKO (3 for 3 years in a row crashing a month before scheduled maitenance) that month is oh....right now! Every day I ask myself. ..did the cokers crash yet? Did they crash yet? Well isn't that strange! Maybe they will get lucky and there will be no fires or explosions at syncrude this year. 

 

Anywhoo....it sucks but cuts have to be made somewhere. Prices will re balance at some point. Will canada lose a million barrels a day marketshare? For now it's looking that way. 

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1 hour ago, Keith boyd said:

Suncor doesnt sell WCS it sells diesel fuel and syncrude sweet premium. 

But with that said, as already mentioned, suncor fort hills is cutting down to 1 train and I haven't seen it in the news yet but they are definately partially closing their mines at base plant which is horrifying to me because base plant is the capital city of the oil sands. You cant lay off 500 equipment operators and maintain existing production levels. It's already happened. Syncrude has shut down MLX SAGD site completely. 

Syncrude is being run with minimum staffing. They closed 90% of the bathrooms and lunch rooms for fuck sakes! Eventually the cokers will crash and syncrude will be a TKO (3 for 3 years in a row crashing a month before scheduled maitenance) that month is oh....right now! Every day I ask myself. ..did the cokers crash yet? Did they crash yet? Well isn't that strange! Maybe they will get lucky and there will be no fires or explosions at syncrude this year. 

 

Anywhoo....it sucks but cuts have to be made somewhere. Prices will re balance at some point. Will canada lose a million barrels a day marketshare? For now it's looking that way. 

Buddy with CNRL (formerly Devon) still has his job,  but now they fly them in and out two every weeks instead of every week.

Alberta actually Is getting federal support this time.

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(edited)

4 hours ago, Ward Smith said:

@0R0 in another thread last week I talked about futures strategy for this. The conversation also drifted into discussion of the traders versus the real users. 

Your site from above had this nifty chart that separates the two camps

Unfortunately I can't post the graphic here

Barchart separates into commercial and non commercial traders. Commercial of course are the real customers of oil, or producers. Non commercial are the market makers, traders, Wall Street louts and layabouts like some of the traders who frequent this site. ;)

Clever

Edited by Enthalpic

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21 hours ago, Enthalpic said:

Buddy with CNRL (formerly Devon) still has his job,  but now they fly them in and out two every weeks instead of every week.

Alberta actually Is getting federal support this time.

I am still working too but a lot of the fly in fly out people have been laid off. I work for the waste management company that has contracts on most of the sites. It's getting real slow. garbage bins are filling up slower due to non essential staff off site. Camp bins are getting serviced less and less. Garbage pickup is a good barometer for the labour force numbers overall honestly. We hired like crazy for the shut downs and.....that was all kiaboshed. We pulled all the bins out of syncrude MLX they are completely shut down. A lot of places just aren't calling for bin service any more.   I used to work for ceda at base plant and they are flat out  because the fly in fly out by's from Newfoundland are in quarantine or never came back to avoid a quarantine on days off.  

I dont know much about CNRL, but suncor and syncrude are cutting deep. The layoffs are astronomical. It's mostly the contractors. They cant keep the plants running forever without doing any maitenance.  the syncrude cokers are famous for crashing just weeks ahead of scheduled maitenance on them. 

 

 

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