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Total bunk
As you've pointed out; 'tis the prisoner's dilemma
Things are getting a bit shaky - layoffs finally becoming heavy. I knew energy company stock prices wouldn't stabilize until this happened. Unfortunately, I think we have more coming.
Word I get that blaming the U.S. is working and there are many people longing for the return of the 1970s
there's not much reason for there to be a connection between oil and food prices. Some oil is used to transport the food and drive harvesters etc but I suspect those fuel costs are relatively minor. The big hydrocarbon input to food is natural gas which is used to produce fertilizer and various *cides. Costs to farmers for those products are large. This is one of the reasons why companies like MON, DOW, and DD are quite happy with low NG prices.
Most oil is used for transporting humans - not food.
As a professional in the field making an informed WAG (Is there such a thing?) how much further percentage-wise are oil stocks likely to fall?
my qualitative WAG [for that certainly exists] is that even healthy oil company stocks have further to go before they catch up to the drop in oil; 10-20% more over next year wouldnt surprise me. I also wouldnt be shocked if PBR went to $3. I hope none of those things happen but hope hasnt proven to be a good strategy.
I think many companies have been budgeting for $80ish/bbl over past couple years and have been quite happy to get more but they havent gone hog wild on spending and are likewise reacting conservatively to the swing to $50ish/bbl.
On the depressing side: I've heard non-specific talk that N. Sea operations are hurting and see signs of project cutbacks in places you might not expect. Apparently, real estate prices are dropping in places that havent seen such things since 2010 and rental places in scenic Fort Mac are now easy to find. However, I havent heard of mass layoffs. There is paring but it's not a slaughter like 1986, 1999, or 2009. If oil prices stay as they are now or drop further over next 3-6 months, i think we'll see a lot of layoffs and pervasive cutbacks in drilling and that will put a bottom on oil. Alternatively, US economic growth could eat up the small surplus that currently exists and we'd be at the bottom about now. So I'm 'hoping' that you're one of those very talented stock prognosticators and I'm wrong.
Charlie
I suspect that over 5 yrs that your general comment is correct but I'll be very pleasantly surprised if we've seen bottom.
I agree about the Russians lack of skill. Is there enough oil/potential profits to interest U.S. companies?
There is not a lack of technical skill or knowledge on a personnel basis (some of the smartest, most capable folks i know in the oil biz are Russian). Many who were in Russia working for western companies have been relocated to the UK, Norway, Houston, etc. over the past several months. Those that were left behind have effectively disappeared into a blackhole. What Russian companies probably lack is organizational, supply, and infrastructure capability (and probably lower calibre technical personnel). Once upon a time, the USSR drilled what i think is still the deepest (vertical) well ever drilled and a lot of new technology needed to be developed to drill that well. I'm not sure if they used any western companies but I suspect not given its proximity to Archangel.
The answer to your 2nd question is almost certainly not for production companies. Any hydrocarbons are likely to be gas rather than oil. If there is gas, then that might be useful for the Cubans since they're a bit scarce of fuel resources. However, any gas production would be useless for export and Cuba doesnt have much money or political inclination to pay things like royalties. The only interested US companies would be on the drilling and service side and i'm pretty sure that they'd insist on an escrow arrangement.
What type of applications are you involved in? One of the divisions of the company I work for is heavily involved in low temperature applications in the pharma industry.
sorry took so long to get back to you. I'm involved in a wide range of thermo applications. My formal educational background is in aqueous electrolyte thermo (solution properties and solution+solid equilibria). The range of chemical systems i deal with now seems to be unlimited (i.e. not just aqueous systems and not limited to hydrocarbons). Applications range from recovering refined or synthetic hydrocarbons from drilling mud, sensor development, cement reactions, scaling, corrosion.... Even did a little experimental and modeling work on actinide reactions in a high temperature, sour gas field after a neutron source was lost in a well (which happens with surprising and disturbing frequency). While I'm horribly ignorant of biochemistry my principal project at the moment involves various biomass to kerogen, bitumen, and oil transformations and exchange/complexing reactions (both self sourced and between rocks). It is only related to "algae-oil" in that it involves algae (and other creatures) on one end and oil on the other. Really cool stuff but oil company people and bacteria is a difficult combination 8^). If anybody knows a source of gram-ish quantities of metalloenzymes (e.g. hydrogenase, nitrogenase, SoD) for cheap please let me know. Cheapest stuff i've found is urease which is suboptimal.
I do thermodynamics for a living.
Reading between the lines on your linked article and OB's: 1) the continued use of the word filtered suggests either that it is part of regulatory language or the blind are leading the blind and 2) the mention of $2500 per well suggests that the mechanism for reducing butane and propane is intended to be installed at the wellhead similar to a oil-water separator. The latter suggests that something like a vacuum unit will be 'strapped' on at every wellhead to 'boil' off the lightest hydrocarbons. The power to run such things won't be very costly, which is probably where the $0.10/bbl come from, however the cost of keeping the units running (think H2S corrosion) and penalties when they don't run or production has to be interrupted to fix a failed unit are probably much higher. In addition, it still doesn't address the disposition of the removed butane and propane. These are valuable products yet without pipelines they are orphaned. If they are flared then they'll increase the 'carbon footprint' dramatically and the environmentalists will then flog the producers for that without drawing the link back to themselves .
Sounds like a very poor choice of wording - probably on the part of the article's author - rather than in regulatory language. Filtering won't do squat. What they'll do is a very simple distillation which has the upside of qualifying the distillate for export under current federal rules.
Of corse, they gloss over the point of what happens to the butane and propane that they want removed. There would have to be a large increase in local barbecue grill sales to use it all.
The bottom line is a pipeline or 5 is needed and that requires being rid of obama.
I particularly liked this comment:
"I think this is going to cost industry a significant amount of money, but I don't think it will be substantial,..."
If u look at the production numbers for the last yr (world and major producers) you'll see that any 'oil glut' is not due to increased production. That means consumption is off and that isn't because Japan and Detroit are producing nothing but battery powered cars.
SA can withstand lower oil prices for quite a while. Venezuela can not. The Saudi concerns are not just shale production which I suspect has only a very small competitive relationship to Saudi oil.
Personally, I think the Saudis have effectively taken it upon themselves to provide a more effective stimulus plan for the world economy than all of the crap that has been done by the US, Japanese, EU, and PRC governments. And they get to stick it to Iran and Russia at the same time.
Are you being sarcastic?
As your link points out, solar thermal plants in So. Cal. have been sucking up tax payer dollars for 30+ yrs. They are quite impressive but I'm bemused by Hollywood environmentalists who find it abhorrent that people drive freely on BLM land but it's ok to cover several sq miles with these solar plants.
The plants will never be viable w/o subsidies.
Other than being in closer proximity to the controlling socialists, not more so than you. Most Canadians seem to be of the 'I'm happy to have big government take care of me' ilk and oil is the means by which that is possible. There is also the supplemental subset of 'aboriginals' who 'deserve' a share. I'd also say that a majority of the population will happily support a 'carbon tax' of some sort. So it's quite possible that oil companies in Canada could be treated like Petrobras with the important difference that they are not partially owned by the govt and they don't have a finite lifespan on existence. The one saving grace is that Canada has been thru a few boom and bust cycles for oil and taxation and there are more Canadians that can properly connect the dots and they don't tend to be as spoiled as the avg Californian.
these may be helpful
http://www.pwc.com/en_CA/ca/energy-utilities/publications/pwc-oil-gas-taxation-2012-10-en.pdf
And From http://www.policyschool.ucalgary.ca/sites/default/files/research/mintztechtaxoilgas.pdf
"Non-conventional Oil (Oil Sands)
The non-conventional royalty tax is assessed on the cash flow earned by oil companies engaged in oil sand production. Cash flow is equal to the revenues net of both current and capital costs incurred in undertaking the project. Interest expense is not deductible (since it would give undue advantage to investments since capital costs are already expensed) and unused deductions are carried forward to be written off in later years, indexed at the equivalent of the government bond rate (the investment allowance).
Until 2009, a minimum royalty of 1 percent of sales is applied when capital costs are written off but for the analysis below we ignore this payment (where this will have a small impact in increasing the effective tax rate when royalties are treated like taxes). After 2009, the royalty on sales is 1 percent for oil prices below $55 (Canadian dollar price for West Texas Intermediate) but rising up to a maximum of 9 percent when oil prices peak above $120. For this case, the previous equations for conventional oil and gas are relevant in determining the effective tax rate on oil sand investments if the minimum royalty is paid.
Prior to 2009, the cash flow royalty rate on oil sands was 25 percent and is paid if the amount is more than the minimum royalty as discussed above. Post 2009, the rate varies according to the price of oil. For prices below $55, the royalty rate remains 25 percent. The rate rises by 0.23 percent for each dollar increase in oil prices up to a maximum of 40 percent when prices of oil are more than $120."
On a long term basis I concur with the 'no brainer' thesis but over the next year or so I wouldn't bet on these stocks. I suspect many producers r marginally profitable at current prices. A better strategy may b long dated oil futures.
I suspect the man is correct. I agree with Biotech researcher and jbog's points about disruption of us production and dollar strength as contributors. I think there are additional contributors such as US govt willingness to take some short term pain to punish Russia. The current administration isn't exactly a fan of the oil industry so it's not a stretch. In addition, the Sunni producers are trying undercut Iran and Iraq as well as preserve market share from Russia. It's a perfect storm for lower prices but I do think it will be short term (1-2 yrs max) and the back swing will be equally violent.
<guilty of bribing nongovernment personnel>
Interesting phrase. Sounds like they screwed up by not bribing government personnel.
Hardly. It's either a fuel cell or an electrolytic cell that eats more power than it produces.
Prob something along the line of:
http://www.profbunsen.com.au/persistent/catalogue_files/products/saltwatercarinstructions.pdf
You can buy one at:
http://www.scientificsonline.com/product/salt-water-fuel-cell-car
I don't think this one will do 0 to 60 in 2.8 seconds (?!) but the fire will be smaller when it crashes
You know the US tax situation is truly screwed up when a company can save money by relocating to Canada.
Otherwise I'm quite pleased by this if it means more BK lounges pop up here. There are McDs everywhere but not so many BKs.
Sorry, I was a bit vague. The cars I was referring to were full. Of course, there were also empty trains headed NW and full ones headed east but I hadn't previously noticed full trains headed NW in western NB and eastern WY.
On the topic of MT smelters, what I remember as the former mine/smelter/superfund site in Helena looked like it had a new housing development built on it.
During my recent drive thru Wyoming, Colorado, Nebraska... I saw several coal trains going NW which was something new.
However, with the recent change in govt in Oz, US coal will face more competition.
I'm not exactly in 'tourist' central now so i don't have nearly the exposure to 'insight' that i did 2 yrs ago so put big error bars on my comments.
My guess is that the damage is done but i don't see the growth returning to what it's been over past 5 yrs. A bunch of service providers took hits when CLB took its 1st dive but the magnitudes were smaller and most of them have recovered while CLB hasnt. I suspect this is largely because of CLB's higher level of specialization, the greater number of competitors, constriction in exploration expenses by the big E&P companies over most of the past 5 yrs, and more exploration pulling back to the US.
When CLB took its 1st big hit a few months ago, WFT took a big jump. I would not be surprised if WFT took a good chunk of lab services that once went to CLB. That's speculation and i know CLB claimed that this wasnt the case (sort of) but a good chunk of WFT's business is lab analysis so I would pick them as CLB's most direct competitor of the big service companies. Conversely, when I googled core analysis last night SLB showed up above CLB. I know the person that runs SLB's lab services business and he is a very aggressive guy so I'm sure he spends a lot of time trying to take CLB's business but I'm also confident that he's not going to sacrifice profit margins in the process.
I don't know what fraction of CLB's business is due to core analysis versus other services but I can list things in addition to those i mentioned above that will affect the core analysis business. 1. the increase in relative number of horizontal wells. 2.'true' shales are not amenable to coring or core analysis so information is sought by other means. 3. related to #2, E&P companies may be using new logging tools to get that information (this was something explicitly referred to in today/yesterday's SLB investor conference). 4. while logging can be expensive so is coring; processing and interpretation of log data is faster and time is crucial when talking about multi-well pads.
the good news for CLB is that even with the recent whomping, their performance over the past 5 yrs dwarfs the other big service companies.
In the oil patch everyone does well in a thriving economy and that is the problem now. Over the next 2-3 yrs I think big oil is going to replace reserves thru acquisition rather than the drill bit and I suspect that might hurt CLB over that time frame. On the flipside real reserve replacement will inevitably have to occur, oil prices will rise, and then everyone will be happy (except for those folks who think windmills are efficient).
I concur on your comments regarding the pipeline.
On your other question re CLB I'll have to waffle. Dangerous question for me. Compare to Weatherford stock over past yr or so and note what SLB did today (after CEO presentation at investor conf).
I know at least 5 ex-corelab guys and none of them left CLB to go to oil companies outside the US (most of them were at CHK). It probably happens but I don't have the exposure to know. Most of exCLB folks I know left after 2010 so I don't think their leaving was related to the market dump in 2008-9. One of them was fired by CLB (he is a complete idiot but he somehow managed to land at CHK). Another is a horrible manager. The others are now elsewhere. I never heard any of the exCLB guys say anything really disparaging about CLB but I got whiffs of what sounded like a counter-productive internal business structure (different locations effectively bidding against each other).
While I have no reason to doubt the comment about 85% of revenue(?) coming from international oil fields, if a good chunk of that comes from middle-eastern NOCs, then I could see some damage to CLB's gross because those NOCs like to spread the work around so nobody knows too much. With more competitors to CLB, there are more folks to whom the wealth is spread; quality and consistency are not always paramount. As an example I know of one ME NOC that was considering having some of their core work done at CHK (I don't know if it materialized). CHK doesn't have the competency nor capacity to take on CLB but sometimes it takes clients a while to figure out their mistakes.
Wow, people from the UK offering opinions on food. I'm assuming that expertise stems from knowing what good food isnt. Next thing they'll be opining on proper dental care.
I was joking. Most of the stuff that was promised is not going to happen anytime soon but I figured that if the president didn't like the PM the best way to undermine him is to promise a bunch of stuff in his name when he knows it won't happen.
Btw my BS comment wasn't aimed at biotech-researcher but rather t-bone. I saw the interview and t-bone just pulled the 150 to 200 number out of his rear. The world has lived without Iraqi oil before w/o oil going anywhere near $200
Does President Mukherjee not like PM Modi?
;^)
Canada is a net NG exporter and 2012 was a record production/storage year so I don't think they will have any problems with natural gas (other than maybe having lots of it just like the US)
U may find this informative. The trend u showed is what has been going on for last few yrs
I agree with all you've said in this thread but I wouldn't underestimate the difficulty Russia will have in completing and maintaining the proposed pipeline network.
'greater beneficiary ... than anybody else' might be an exaggeration. I'm also suspicious of pegging growth to shale plays. I suspect only a tiny fraction of shale wells are cored. This is outside my expertise but I think that once a company has a good feel for the gamma ray signatures of the shale strata that they want to be in or avoid, they don't bother much with additional coring unless they're particularly interested in the geomechanical aspects and I don't think that is one of CLB's areas of expertise.
The thing about geographies has a downside. I don't know if it's still true but CLB operations in different areas used to be in competition with each other and there was some funkiness related to that which was entirely counter-productive (at least that was my impression when a former CLB person described their operations to me).
I also don't think the deep water biz is going gang busters these days. My impression is that companies want to be in N America and they want to be on land (in NAM). Elsewhere, being off in the ocean can be desirable. When I was at AAPG, one Brit I was talking to kept going on about how remarkable it was that non-NOC companies were pulling back to onshore US operations.
I do agree that 'service intensity' is ever increasing but who will do it is the question. I can't debate whether CLB has lost market share to their major service competitors but I wouldn't be surprised if the market is more insular and smaller now and thus the revenue drop. I'd examine how CLB parses their claims to ascertain how things are going (e.g. clients may be doing more work in-house and CLB isn't counting that as a market share loss).
I have to agree w Jim. I'll prob get my rear handed to me but since I can buy O&G stocks now, I've been piling in and there have been what I think are some good opportunities lately.
I'll get to your other point/question later
All of your comments are correct except the literal reading of the NYT comment and it's intended meaning are quite different and there is no regular crude.
Tangentially and ironically, if Obama would approve XL, some of the Bakken crude would probably make it's way north (not necessarily in the XL but if XL isn't going to get approved, then nobody is going to try for others). That Bakken crude would be used as diluent for the heavier Canadian crude. Lack of diluent will eventually be a huge problem.
No doubt about drilling for oil being dangerous. That's one reason why u won't find any Sierra Club members or NY Times writers who have worked on a rig.
Although it's against my libertarian principals; there really should be a rule requiring basic mathematical competency for newspaper writers and environmental club types (I regard myself as an environmentalist but I don't need to be in a club of fools). I figure if they had that, then they could figure out the absurdity of their statements about the oil industry and 'clean energy'.
Gene Epstein usually puts together much better articles and for this one he should've looked around a bit harder for sources.
Current wisdom is that N. American and some Middle Eastern producers may raise production to pressure Russia. This may not work: 1. trying to supplant the #3 or #4 producer in the world may be difficult and 2. China, Iran, and Venezuela (the #4, 5, and 10 producers) may do some deals with Russia to contradict US and western European efforts.
Some factual problems with the article:
1. Growth in oil consumption is already very low (world wide growth of 0.6% 2012 to 2013 and expected 2.0 % growth 2012 thru 2014). Growing or shrinking huge numbers by more than single digits is difficult without unpleasant consequences.
2. The US consumes 18-20 million barrels oil/day. The US produces ~10 million bbls oil/day. Anybody that thinks the US will be energy independent via only US oil production is either uneducated, delusional, or dishonest. A large percentage of the oil being produced from "shales" is very light oil with a large fraction of that not being amenable to gasoline or diesel production without catalytic reformation. Morse does go on to include Canada and Mexico as enablers of "North American energy independence" but Mexico and Canada won't do anything outside of their economic interests so worldwide supply disruptions won't miraculously spare the US from price fluctuations. Oil goes to the folks paying the highest price. Some oils are exceptions, e.g. Bakken, and are treated more like natural gas but that is a temporary phenomenon.
3. Yes, combustion engines can burn stuff other than gasoline or diesel but in the US there is an effective ban on pipeline construction that would enable greater utilization of those fuels. Note GE toning down/backing away from their NGL refueling stations. If readers are thinking electrical or hybrid vehicles, then they should try to grasp that electricity has to come from something and the most efficient sources of electrical power generation with sufficient capacity are either natural gas, coal, or nuclear energy - 2 of which are also politically currently disfavored and the 3rd would be if it were possible. The truly interested reader could do the math to figure out what kind of increase in wind and solar electrical power production would be required to supplant 10% of US oil consumption (what I'm guessing would be necessary to produce sustained $75/bbl). The numbers are enormous and given the loss of efficiency, most consumers would not be happy with the integrated costs which would feed back and drive oil back to >>$75/bbl.
4. The statements "... unconventional sources of crude oil totaling more than a trillion barrels ... have been discovered in the past five years. The majority is recoverable at $75 or less, and much is now being tapped." may be true, however, many of those barrels are not saleable at $75/bbl. Chesapeake Energy would be solvent if their liquids sold for $75/bbl. Unfortunately, for them, the going rate is closer to $40/bbl. If it cost folks in the Bakken $75/bbl to produce, then they would be charities at current prices. I suspect the source has conflated proven recoverable reserves vs resources as well as treating all liquids and geographic locations as equivalent. Morse says 1 trillion bbls discovered in past 5 yrs. 33 billion bbls/yr world consumed so I guess this is where he gets his 30 yrs of discovered supply but he doesn't differentiate the percentage of the 1 trillion that is natural gas liquids or condensate or whether his 1 trillion is currently economic. Not long ago Forbes listed the top 10 world wide oil discoveries in 2013. Not 1 exceeded 1 billion bbls (the 5 biggest being 700 to 900 million bbls). Either somebody is lying/misrepresenting "oil" or 2008 to 2012 were spectacularly more successful exploration years than 2013. Given the world wide recession of 2008-2010, I don't think there was a substantial increase in oil discoveries in 2009-2010 (EIA data/estimates support). Wikipedia lists existing total world proven oil reserves as being nearer 2 trillion bbls. This number will probably be stable for at least 10 yrs but I think the claimed 1 trillion addition in the last 5 yrs is ludicrous.
5. Brazilian vehicles running on things other than petroleum? That is a seriously deranged argument. What does he think enables the costs associated with running those 15 million vehicles on ethanol? Apparently, Morse hasn't taken a look at where the cash generated by Petrobras goes and what generates that cash. As for contributions to world oil supply from Uganda and India: color me skeptical. I suspect Indian production will be mostly very light oils and NG. I hope Uganda will become a big real oil producer and does so in an organized and socially productive manner but oil production in Africa doesn't have a lot of good examples.
Costs for finding and producing oil will not drop. Conversely, these and low reserve replacements are the very things that keep oil prices >$100/bbl in the face of very low growth in consumption. I wouldn't be shocked if oil dropped to $85/bbl over the next 5 yrs but I have real money bet on that not being a sustained price. Conversely, avg prices >$110/bbl are much more likely although I think approaching $300/bbl (in 5 yrs) is as absurd as $75/bbl.
Sorry didn't get back to u sooner. Been very busy.
Short answer is that I don't think anything has changed significantly in last 18 months but then I don't know a whole lot.
I saw a figure today that had CLB in 2nd place in some aspect of the subsea flow assurance biz.; far behind SLB with weatherford sucking wind. One of my friends from grad school now works for CLB. I'll probably see him in a couple weeks so I'll get his view of CLB. I've never been much impressed with weatherford so I'm hoping any growth CLB does in FA comes out of weatherford.
Batteries are useful for convenience and necessity. They are inherently inefficient and can not make 'alternative' power sources such as solar panels or windmills competitive with hydrocarbon, hydro, and nuclear power sources.
The batteries that Prof. Sadoway and friends are working on function at temperatures between 350 C to 1000 C. So the 1st questions u should ask are: how are those high temperatures generated and what is required to prevent those temperatures and the materials from behaving badly with their environments (environment including the user, containers, etc). The answers eat into efficiency rather dramatically.
The materials that the batteries are composed of should also give u a clue as to their inefficiency. One electrode is comprised of alkali or alkaline earth metals (stuff like sodium, potassium, magnesium and calcium). Those metals are generally found very strongly bound in silicate and carbonate minerals. It takes a great deal of energy to separate those metals from rocks. That's part of the reason why greenies have their eyes on the cement industry. Cement companies burn a lot of natural gas to cook CaCO3 down to CaO. Reducing the CaO to Ca is much more energy intensive.
One could argue that there is a lot of sodium and magnesium in seawater and it is cheap but removing all the water and then reducing the NaCl and MgSO4 to the metals is again very energy intensive.
I don't have any problem with batteries but anybody that pretends they are more efficient than other readily available power sources or environmentally friendly is either extremely ignorant or dishonest (I'm not stating Sadoway fits in that realm just in case any folks with reading comprehension problems might think so.). I do find it amazing that Time magazine couldn't find a few 100000 people more influential than Prof Sadoway.
Europeans have stabbed themselves in their rears by outlawing fracking, nuclear power, and coal and having antiquated mineral rights laws.
This crisis makes it obvious that their 'green' energy policies don't quite cut it. If windmills and solar panels are so great, why are they hostage to Russia?