Crude Observations

So I guess that is that. OPEC had their big semi-annual meeting, replete with hype and intrigue, rumours of a re-established quota or some other form of market-friendly supply management initiative, all proposed and backed by none other than a suddenly receptive Saudi Arabia. Woot!   Except, as expected, the meeting ended with the fine folks of OPEC saying “it’s all good, nothing to see here. Perfectly happy with the self-correcting market. $50 oil is OK for now.”   In fact, the new Saudi oil minister even went so far as to declare that he […]

It seems not a month can go by where we don’t have to suffer through the annoyance of another massively important, game-changing, era-defining OPEC meeting.   The next one, for those of us who follow such things, is June 2. Betcha didn’t know that.   This meeting is the follow-up to the disastrous “freeze” meeting in Doha where Saudi Arabia scuttled any prospect of a freeze without Iran’s participation in a move clearly designed more for political reasons than economic ones.   Since then, OPEC members have not been idle, to highlight just a few […]

A short blog for a long weekend.   I have been reading a lot in the media lately about how in the context of this downturn, the rig count doesn’t matter, because of a variety of factors with the most prominent being efficiency gains, the fracklog (wells drilled but not completed) and higher initial production.   It is theorized that all these factors contribute to making the rig count irrelevant, the prevailing wisdom being that it is possible to do more with less, production enhancements were always low hanging fruit anyway and an inventory of […]

So here we sit in week 2 of the Fort McMurray crisis and, at the risk of having someone take a swing at me, it would appear that notwithstanding the ongoing crisis, things are at least settling down a bit.   The fire as it stands is under some measure of control and the weather appears to be cooperating. Donations of money and goods continue to pour in for evacuees and the province is mobilizing to get funds to those displaced, insurance companies are starting claims processes and infrastructure companies are hard at work restoring […]

So, umm, well it has certainly been an interesting week and the number one topic without a doubt, at least for us in Alberta, and more broadly Canada, has been the devastating wildfire situation in and around Fort McMurray.   Fort Mac, as it is known, is the figurative and actual heart of Canada’s oilsands region, poster boy for energy sector success or failure, popular whipping boy for pop star environmentalists and, most importantly, home to some 80,000 plus people, most of whom are permanent residents, almost all of them with their livelihood tied in […]

Ever wonder why we talk about “oil” all the time?   Here in Alberta we are in the throes of a recession and fiscal crisis the likes of which haven’t been seen in a very long time.   Clearly the crash in oil prices is to blame, as the collapse in royalty revenue has cratered government finances and the pullback in capex has resulted in massive job losses across the Western Canadian Sedimentary Basin.   But it seems a little naïve to hang the entire blame on oil, since oil is only one part of […]

Well I guess I should take a mulligan on that Doha meeting forecast, however it does appear that the market reacted as if I was right, special nod of thanks to Kuwait, where the underpaid immigrant labour force was able to take about 1.5 million barrels a day off-line in a three day strike that accomplished nothing substantive.   While the “freeze document” itself was apparently prepared in advance of the meeting and pretty much everyone in the room thought the meeting a mere formality, the Saudis had other ideas and allowed politics to interfere […]

**Warning – Mind Boggling Conclusion Included**   As we hit mid-April, we are dealing with some decidedly unseasonable weather patterns.   There’s Western Canada, where it’s basically been spring since February.   Then there’s the mid-continent and east coast of North America where the weather is decidedly less cooperative and it has been snowing and wintering off and on for the past couple of months.   And then of course there is Doha, Qatar, a traditionally scorching climate where pretty much everyone is hoping that it is going to be absofreakinglutely freezing on Sunday.   […]

So I was looking at my fearless forecast the other day deciding whether to pat myself on the back or run for the hills, and I realized that it is time for my Q1 interim report card on my predictions.   So here goes nothing as they say in the popular vernacular.   Price of oil In my ramblings, I held out that the price of oil would start to rally during the year. As a refresher, the year-end prediction was $60 a barrel for WTI and a $45 average price with most of the […]

It’s hard not to be excited by the story of the day, which of course as anyone in the Canadian energy sector will know is the Trudeau government coming out with an unqualified expression of support for both the Pacific Northwest LNG project and the Woodfibre project.   In announcing this stunning development, Prime Minister Justin Trudeau emphasized the significant economic benefits that would accrue to British Columbia, Alberta and Canada as a whole from this game changing development saying that no longer would a Liberal government allow Canada to play second fiddle when it […]

Does anyone remember an Easter this early? I don’t. So I looked it up. Turns out it isn’t that long ago. It was only 2008! That year Easter Sunday was March 23rd. That was the earliest in 100 years.   Just out of curiosity, I thought I would check the prices of our favoutie commodities at that date.   On Good Friday 2008 the price of WTI closed at $101.84 and the price of Nymex Gas closed at $9.254 an Mcf. Now that’s what I call a Good Friday, none of this depressed prices and OPEC nonsense. […]

As many among you know, this is in many ways my favourite time of year as it marks the beginning of March Madness, the annual ritual single elimination NCAA basketball tournament. In fact, I have the Duke game live-streaming as I write this (yes – I do that).   Since I have yet to fill out my bracket for this year’s tourney, I have rankings and match-ups on the brain, so I said to myself: “Self, wouldn’t it be cool if there was an energy sector bracket that we could all follow and (not) gamble […]

On the tail end of the last few weeks’ relief rally in the price of oil, it sure feels like some of the panic and urgency is out of the market, at least from the perspective of investing as companies use the respite from bad news to continue to tap the equity markets for capital to shore up their balance sheets (close to $13 billion in North America).   A key question is how sustainable this rally is given some of the forecasts. I suppose a lot depends on continued happy words from Russia and […]

A bit of a sidetrack from the energy sector this week as I contemplate a question that was asked of me the other day and is being asked with increasing frequency across the United States, Canada and the rest of the world, in particular after this past week’s “Super-Tuesday” primaries where both Hillary Clinton and Donald Drumpf appeared to tighten their grips on their respective nominations.   “Can Drumpf win and what happens if he does?”   So let’s separate this into two different but similar tracks, the first being about the nomination and the […]

So, first off, the IHS CERA conference has been on all week in Houston. Called the “Davos” of the energy sector, it has lived up to its nickname, with thousands of well-meaning boondogglers tut-tutting their way around high-end venues hoping to brush shoulders with someone, anyone, that they can pass a resume to and get a job. Wait a second, it’s not a job fair? Then why are there so many people who aren’t meaningfully employed in the sector in attendance? Honestly, do I really need reporters from multiple Canadian news outlets giving me a […]

Oil and gas investors and the general public alike have every right to be confused this week given the flurry of activity and some actual positive oil news (warning – oxymoron alert!) that led to a mid-week rally in energy prices and shares.   Earlier this week, Saudi Arabia, Russia, Qatar and Venezuela announced a tentative pact to freeze production at current (albeit record) levels, provided that Iraq and Iran (and the rounding errors known as the rest of OPEC) agree to follow suit.   Markets were immediately schizophrenic about the move, with Brent rallying […]

Another week, another outstanding bunch of crises and if you are an energy sector participant, this is pretty much the end, right? Turn out the lights, the party’s over?   No formal theme this week, just a bunch of disparate thoughts as the patch lurched through a whole range of wrenching issues this week. Call it ideas that may one day grow up to be full-fledged blogs.   Please, don’t read that Big Short book (or see the movie – that Steve Carrell is so lovable isn’t he?), what we’re telling you is truth… Goldman […]

So what if they threw a royalty party and no one came?   A little Alberta-centric this week as we had just a wee bit of big news last week with the release of the new Alberta Royalty Framework. The second bit of big news was the relatively muted reaction. Maybe it’s that market participants are shell-shocked, or maybe it’s that people have had bad news for so long that it’s difficult, all things considered, to know how to react to what is relatively speaking, a good news story.   For those not familiar with […]

After last week’s cathartic dumpster fire, there are a lot of directions I could take the column this week. The pickings are truly excellent!   As I write, the Alberta government is announcing its much anticipated (though not celebrated) new royalty program and I could have done a premature and uninformed analysis of that, but I prefer to wait until I read the document.   Or, I could have easily launched a spirited defense of the Energy East pipeline and dispelled a bunch the myths surrounding it, but I will do that later.   The […]

This week, there are a number of mundane topics that I could have written about, opined on or otherwise dissected.   For example, there was some boondoggle in Switzerland this week where a bunch of big heads got to mingle with a bunch of big egos, and Bono, in order to solve the world’s most pressing economic problems, eat some fondue and go skiing. There was also the matter of Leo DiCaprio’s brilliant deconstruction of the energy sector (ahem) where during a speech he decried the corporate greed of energy companies before hopping back on […]

The past week has been a difficult one for investors and culture fans alike. Not only have our souls been stripped bare by the ongoing turbulence in global markets, the further free fall in oil prices and the loonies’ dive so that we can all be forgiven for feeling a bit like Hans Gruber falling off the Nakatomi Tower (RIP Alan Rickman).   Not only has the year started out so heinously, but so far in 2016 we have lost significant contributors to our cultural world – artists who were generational talents and whose contributions […]

Hopefully everyone is well-rested and ready to tackle the new year with a renewed sense of optimism and enthusiasm – wait, what? The markets are crashing? China is imploding? Canadian dollar reaching millennial lows? Oil still cratering? Natural gas continuing to test lows? George Soros is profiting?   What is an investor/market/industry participant to make of all this? Is there no one who can make sense of this chaos, be a shining beacon in the fog of confusion, lead us to safety?   Well fret not, for in the time-honoured tradition of all lazy writers, […]

Since I plan on taking a break from publishing over the holidays, I thought it appropriate in light of the season to share with you the following poem. Best of the season to all of you and your families and friends, stay safe, stay warm, burn carbon.   When next you see me, it will be 2016 and I will be sharing my fearless forecast for the coming year.   A Christmas Ode to the Patch ‘Twas the night before Christmas, when all through the patch not a rig-hand was stirring, no need to dispatch. The […]

Is this Finally the End? What Does it All Mean?   So the past week has been, how shall we say, a bit of a challenge for the oil patch. Thanks to the wonders of cartels and not so free markets, we have seen the price of our favourite commodities – oil and natural gas, drop to precipitous levels that have not been seen since at least 2009 for oil and 2012 for gas.   It begs the question – are we done? Can it really be over? Is it time to pack up Calgary […]

**This just in – OPEC has decided to acknowledge that their production target of 30 million barrles a day is actually producing at 31.5 million barrels a day. What does this mean? Essentially an acknowledgement that they have been producing at that level for the past 18 months (thereby contributing to the problem they are trying to combat) and a bit of wiggle room to allow new Iranian production to displace some of the excess production of other members… in theory. Absent in the release is how to treat Indonesia who is now rejoining OPEC. […]

As many of you will know from reading this blog over the past number of months, I am a rabid environmentalist so I am particularly excited this week about the upcoming “COP21” conference to solve the world’s climate issues, or what is called the Paris Climate Conference, because the actual name is impossible to commit to memory. As many of you will also know, the above statement is mostly tongue in cheek – I am not in any way rabid!   That said, and all kidding aside, these climate conferences, as much as they make me […]

Last week featured a discussion about Canada’s place in the energy world and its role in supporting the oil and gas market in North America and elsewhere.   This week, the focus is on energy in general and oil and gas specifically, in particular given the massive amounts of anti-energy rhetoric leading up to the Paris Climate Summit including the near constant drum beat against “dirty” oil, Canadian political hand-wringing about being accepted by the global community, the breathless anticipation of the end of fossil fuels and the rise of the renewable, carbon-free utopia. Depending […]

I am out of the office this week so this is a short one, hope it doesn’t leave people wanting more…   It’s been a rough week for the energy sector (won’t it be nice to not have to say that at some point?). Storage, price collapse redux, reduced demand growth forecast from the IEA (can’t they just stop for a bit?). There are lots of people piling on.   First it was the colossal hypocrisy of the Keystone XL denial. Then it was the announcement of the Exxon probe by the New York State’s Attorney’s […]

First the breaking news – President Obama has rejected the Keystone XL pipeline citing the phantom climate concerns that his own State Department said don’t exist and notwthstanding the fact that since the application was first made, pipelines 10 times the length of the Keystone XL have been built in the U.S. without so much of a climate change “excuse me”.     This is a sad, but temporary, end to a long drawn-out process and a bit of a kick in the nether regions to a staunch ally, friend and trading partner to the U.S., however […]

As the job losses mount in the Canadian oil patch, the severity of the current downturn continues to hit home. As of the end of this month, an estimated 35,000 people have been laid off by oil and gas companies in Alberta and while no true figures are available for field people who work as subcontractors, the likelihood is that at least that many, if not double are currently not working in the various industries that support the upstream oil and gas industry. That plus the number of job losses at likely 100,000 and counting. […]

Alright, so fresh off what appears to be a fairly “bang-on” Canadian election call it is time to move on to a bit of a post-mortem on the election and some thought into what we might expect for the next four years from a Liberal government in Ottawa, particularly as it pertains to the energy sector.   First, a point for American readers – this is not some monumental shift in Canadian politics. Since Confederation in 1867, the Liberal party has been in power in Canada for a vast majority. It is not called the […]

So, last week it was mentioned here that this week I would share with the group a “fearless prediction” on the election. And I will. But first a little indulgence as I set the stage with a few thoughts on the election itself and how it has unfolded, a prediction and some rationale. Next week I will examine the actual results and provide some thoughts on what it means for the energy industry in Canada (see how I milked that for two separate blogs?).   This election cycle has been a painful one for many Canadians. From its start […]

It’s nice to finally see a positive week for oil prices given how much doom and gloom there is overall in the energy sector what with layoffs, capital market volatility, pipeline uncertainty and banking and reserve woes. Notwithstanding the excitement $50 WTI has engendered, risk is everywhere in the energy market so rather than pop corks on the champagne bottles, I decided to pass the time catching up on some reading.   One article that caught my eye made me think back to the “Black Swan” blog last week and it had to do with a letter […]

No, not that super-scary pub in South Calgary and not the awful, awful movie with Natalie Portman.   Rather, a “black swan event” which is typically defined as an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.   In the oil and gas sector, there are many such instances where some global event caused a spike or collapse in energy prices that fit this description. Events like the Arab Spring, the collapse of Libya, any of the Arab-Israeli wars, the […]

No significant metaphorical blog this week, just a theoretical meandering and a bit of crankiness.   This week saw a number of energy-related stories draw lots of attention here in Canada, probably the most significant one being Democratric Presidential hopeful Hilary Clinton finally coming off the fence and saying that she was against approving the completion of the Keystone XL pipeline. The announcement created a big flap and firmly placed 1,800 km of pipeline into the middle of the U.S. election campaign since, as much as the Democratic Party likes to posture against the pipeline, the […]

When I was a kid growing up in Montreal, I spent a lot of time playing around in the metro (subway) stations, in particular on the escalators.   Why? One reason was that I went to school for a time at a location that required me to take the metro, the other reason was that it was a lot of fun. Montreal’s metro system is in some spaces deep underground and the escalators are long and the space between the up and down escalator was smooth metal. So there were two games we played that were particularly […]

Where the last several weeks were pretty volatile for prices, this past week has, mercifully, been somewhat tame. Oil prices will definitely finish out the week on a downward note, but it appears that the build in storage isn’t as much cause for alarm as is typically the case.   While generally inclined to put the relative quiet in the markets to the start of the NFL season this weekend, the reality is that market participants are going to require several weeks to assess the overall space as we wind down the peak demand driving season […]

As we head into September, which as many in the Canadian oilpatch know is a critical time for the industry given that is when budgets are set for the coming winter, many people are on edge as the volatility and uncertainty surrounding the price of oil seems to be increasing just when some much needed stability is what is required so that companies can get down to some rational planning.   Scouring the range of forecasts out there can nothing short of exasperating, as the range defies the imagination. We have seen some as low […]

Well that week was a bit of a ride, wasn’t it? Sign of the times? A harbinger of ECONOMIC DOOM? Much ado about nothing? Blink and you miss it? A potent example that maybe summer has gone on long enough and that maybe it’s time to go back to work? I am inclined to the latter, but not blind to the circumstances giving rise to the chaos, collapse and ultimate resurrection of the market this week. That said – short post this week as we are preparing dinner for a 10 year old’s birthday. And anyone hazard […]

One of the questions we are constantly being asked in these times of commodity uncertainty is whether there are actually any energy service deals being done.   In our experience, there are always deals getting done in any market, although it is currently slower than normal, but the short answer is “yes”, but there are qualifications to the answer, mostly led by “what” – specifically what types of deals, what buyers and what price.   Let’s start first with what types of deals. In a market like this the types of deals that get done […]

Apologies for the tardiness of this missive – call it an abbreviated and late vacation version.   After the week of oil price carnage that we have just endured, a person could be forgiven for thinking that the energy industry is in some form of supply/demand purgatory from which any escape attempt is futile.   It certainly seems that way with oil testing $41 a barrel during the week, OPEC continuing to ramp up production, and Iran’s oil gusher imminent… However, from poolside in Phoenix (because Calgary just wasn’t hot enough), on vacation, relaxing, it […]

So, what’s up with natural gas anyway?   Lost in the ongoing chaos of the oil market, natural gas markets continue to plug along, conveniently ignored, shunted to the side.   Part of the reason for this is that the oil market is way more exciting, rife as it is with international  players, shadowy bogeymen and terms like “The Prize”, “The Great Game”, “Glut” and “Rout”.   But the reality is that natural gas and its accompanying infrastructure, production and consumption is in many ways just as important to the energy world as is oil. The […]

The interesting thing about the middle of summer is that there is so little to talk about yet so much to discuss ad nauseum.   From Tom Brady and deflated balls to the collapsing Chinese equity markets to a potential Canadian Federal Election call to Donald Drumpf to GDP to the US Fed to Oil to Iran, it is hard to get a word in edgewise.   Spend hours in a car driving around Alberta as I did this week, with nothing to keep you company but satellite radio and news and sports talk shows, it’s […]

Another week, another roller-coaster ride for commodity prices, the Canadian dollar and investors. There is currently too much noise and conflicting interpretations of too many news items for anything to comfortably settle and provide a direction in commodity prices. Suffice it to say, we live in uncertain times. However, OPEC leaders say this will be short-lived and sicne they control the taps, who are we to argue?   We have long felt that the second and third quarter of this year are when the real damage of the fall in oil prices was going to […]

So what to make of Kanye West playing the closing ceremonies at the Pan Am games in Toronto?   Before we look at that question though, we need to look at other banal weekly news.   In Greece, the anti-austerity government knuckled under and agreed to even more austere austerity measures than the previous austerity package they voted against in last week’s referendum. In exchange for concessions (among other thing) on pensions, taxes, and government payrolls, the Greeks get roughly 90 billion euros in new loans, a reprieve from getting dumped from the Euro and, […]

Well that was sure an interesting week for oil prices.   Between the unravelling situation in Greece and its debt problems, the stock bubble bursting in China, the ongoing price influence and speculation about the Iranian nuclear negotiations, it was hard to come up for air, let alone figure what was going on in the world. So like any good Calgarian faced with a barrage of uncertainty, I went to the Stampede with my kids to clear my head, go on some rides, eat some food I shouldn’t and get some perspective.   So… Sure […]

So here I sit comfortably ensconced in the luxury of a Via Rail trip from Montreal to Toronto on Canada Day and I am thinking that in honour of this prestigious day, it might be useful to review some basic oil and gas statistics about the Canadian energy industry. A lot of this is familiar ground but worth repeating.   Reserves – Oil Canada is home to the third largest reserves in the world behind only Saudi Arabia and Venezuela at 176 billion barrels of oil, the majority of which are located in the oil […]

Over the last week or so, we have been drilling into some data from Texas and North Dakota (the two major tight oil areas in the U.S. that account for the lion’s share of new production growth) to see what the impact of the current price environment has been on a comparative year to date basis. Interest in this data has been motivated by what appear to be stubborn production numbers reported in the EIA weekly reports.   Accordingly, rather than look solely to production numbers, the thought was that some of the statistics worthy […]

Last week’s chart on drilling intensity of US tight oil versus Saudi Arabia spurred some thought about what the industry looked like in previous years.   For completely self-serving reasons (birthday or something), I decided to look back 50 years to 1965 to check some industry data and see what was happening in the world at the time. It is remarkable how much has changed since then but also how much of it maybe hasn’t changed all that much.   Interesting data-points to consider: In 1965, North America produced about 10.9 million bpd (32% of […]

The image below is an interesting follow up to the last several weeks’ discussion on the nature of US (and to a lesser extent Canadian) tight oil and natural gas economics.   Sourced from Schlumberger, It shows the number of wells drilled in the big three “10+ million barrel per day” producers for the year ended December 31, 2014, which is somewhat indicative of the level of activity required to sustain (never mind grow) production in those areas.   The message here is that to maintain productive equivalency with Russia and Saudi Arabia, the US […]

Well that was certainly exciting.   After pre-meetings and the formal session today, OPEC announced that it would… leave its current output quota unchanged at 30 million barrels a day. Which is wonderful, except that OPEC is currently producing an estimated 31.5 million barrels a day, which marks the 12th straight month that OPEC has produced above its quota that everyone seems so obsessed about. Which raises an interesting question – is this actually even a quota? Or is OPEC just producing as much as it can and calling it a quota to keep up […]

A slimmed down musing for the week, but some information to consider.   There are many differing points of view about the tight oil and shale gas “revolution” such as whether it will be long or short-lived or whether it’s a game-changer for US energy independence and spells the end of OPEC or the whole 100 year gas supply and all sorts of similar hyperbole. That is a discussion/debate for another day. What is undeniable though is the unprecedented amount of capital that has been poured into what is an expensive to produce resource play […]

As the week closes, we see oil prices poised to post their tenth consecutive weekly gain, something that apparently hasn’t happened since 2012.   What are we to make of this? Is it a breakout? Are prices stabilizing? Are we setting the stage for a sustained rally as production numbers decline in the US and rig counts continue to fall?   It’s hard to be a true believer just yet. At this stage, the market is trading off of marginal bullish signals and there is a capital reallocation happening from an over-valued US stock market. […]

As this is being drafted the sun is finally coming out and a well-deserved Canadian long weekend is upon us. Typically this is the time where Canadian service companies take some time to catch their breath and recharge after a frantic winter drilling season, I suspect this time it is more likely most will be reflecting on what the next few quarters are going to deliver as the industry tries to find its legs and recover from this latest cyclical downturn.   It was interesting to note in the last week some of the punditry […]

I know it has been awhile since this document came out, however it is now time to publish this on a regular basis again. I hope it hasn’t been missed too much.   The big news of the week by far was the election in Alberta of the provincial NDP party led by Rachel Notley, toppling the 44-year reign of the Progressive Conservatives. While the scale of the loss was unexpected, the result had generally been predicted by polls leading up to the vote. The NDP platform pledged to unwind most of the PC budget […]