CNRL to Ft. Mac subcontractors - get your poop together and reduce costs

[avb3]

In talking to the Ft. McMurray Chamber of Commerce, CNRL President advised that sub contractors and suppliers need to get out of "made in Ft. Mac" price thinking, and get with the real world.

That means the welder who is used to the big dollars will have to accept average dollars, the electrician average dollars, and the add ons will be reduced drastically.

Yeah, it's an adjustment for sure, but better to have some income than none. Those who did not extend their credit to the umptheenth degree will be able to adjust, those who are mortgaged and credit carded to the max, will suffer.

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/cnrls-warning-to-oil-sands-cut-costs-or-face-death-spiral/article23108318/

This is the new Alberta.

[Iron Brew]

.

[greywolf]

The sad thing about this is when it's all said and done, the CNRL president Mr Laut will probably give himself a pat on the back and a big raise because of his successful cost cutting.

[CaberTosser]

The sad thing about this is when it's all said and done, the CNRL president Mr Laut will probably give himself a pat on the back and a big raise because of his successful cost cutting.

Yep, the management that's not getting fired will be taking 'performance bonuses' when the perpetual global marketplace cycles raise the price of oil again. The poor yutz's on the tools actually mining & refining the oil & providing support services can take their wage corrections and say "Yes Sir, may I please have another?"

I would say to any exec giving that kind of proposal to show us the pay cuts they're personally taking, how is the example being set? No BS with hiding pay in a pile of stock options either. Take a pay cut doofus, especially seeing as they likely already have enough to retire in high style as it is.

[avb3]

Yep, the management that's not getting fired will be taking 'performance bonuses' when the perpetual global marketplace cycles raise the price of oil again. The poor yutz's on the tools actually mining & refining the oil & providing support services can take their wage corrections and say "Yes Sir, may I please have another?"

I would say to any exec giving that kind of proposal to show us the pay cuts they're personally taking, how is the example being set? No BS with hiding pay in a pile of stock options either. Take a pay cut doofus, especially seeing as they likely already have enough to retire in high style as it is.

Although I understand the desire for leaders to set an example (come on down, Jim Prentice), we also need to look at the cumulative effect.

I have no idea how many people are involved that are paid by CNRL, either directly or indirectly. However, I can surmise it is in the many 1,000s. As such, the impact of those reductions would be far greater than one persons.

It is a fact that revenues are far smaller this year from last. Something drastic has to give.

[omega50]

Has CNRL laid off any of it's own employees at Horizon this year?

[Elk Hunter17]

CNRL is cheap enough when oil is high, I would rather sit on my couch then give them anymore breaks.

[smith88]

It is his/their own fault for having such high costs because they wanted to expand as fast and as much as they did.

[7mmremmag]

I work for CNRL. They may be cheap, but they are always busy. Ill take 200$ a day less and work 300 days a year, 45 minutes from home.
Not sure how busy everyone else is right now, but im quite busy still.

[benamen]

CNRL is not the only major oil producer looking for major cuts from its suppliers. I have heard Husky is looking at similar reductions.

[Xbolt7mm]

The company I work for stopped accepting bid packages from them 10 years ago because they demand the best, get it and won't pay, they are the worst oil company up north and have no business ethics at all. Nothing I would like better than to see them go broke.

[rugatika]

schadenfreude

[Weedy1]

Just another blip in life to teach our young ones what work ethic is.
We live in a very cold environment, it's put up or freeze.
I somewhat welcome this downturn, tired of working with entitled lazy azz dd immature kids.

[rocpilefsj]

CNRL is not the only major oil producer looking for major cuts from its suppliers. I have heard Husky is looking at similar reductions.

We have received letters from almost all our customers requesting rate decreases, not just a couple. Some requesting as much as 25% or more, our profit margin isn't even that high... Unlike many service companies we didn't jack our rates after things went back to normal after 2008, we just actually rolled out our first price increase since then about 8 months ago. Just in time to cut them again lol. 2008 didn't phase us at all and looks like we should stay fairly busy for the next while also. Just have to play the oil & gas companies game for the time being.

[fishunter327]

About time ! If gas didn't cost so much the price of everything would be lower.
:thinking-006:

[DiabeticKripple]

if only their pipeline division would get their poop in a group. maybe instead of cost cutting they should look at actually taking care of their lines.... oops did i say that out loud

[ctd]

I can understand getting costs in line, but many people cant work for less then they already charge.
You need 1000 welders yesterday, you demand no older then 2 years old for truck and welder. You want them to have all kinds of safety equipment added, That costs money.

Well Servicing/ stimulation, you want a huge discount, only use them a few times a year, you drop them for the next company who is a $500 cheaper a day on a $30,000 bill. You demand only one new guy per crew. You want 10 years experience and want them to spend 3 days prep prior to the job, with out paying them for it.

All this equipment costs money, some of it upwards of 2.5 million dollars per piece.
You demand that they put equipment on standby but wont pay for it.

I think it is time that the Contractors stop working for Company's who hold a carrot over their heads. Demand the best and pay the least.

[Nova]

No sympathy for CNRL here either. In my wireline days they were one of the worst companies to work for. Expected the world of you for next to nothing. Somehow in our salesman agreed to a deal that included free standby, and they were sure to abuse it nearly every day by having us on location 2+ hours early. In busy times they'd go as far as booking trucks for first thing knowing full well they wouldn't be ready til early afternoon, just to guarantee they would not be waiting on the truck to finish up another job first. It was hard enough to get 6-8 hours sleep in a night, sitting on site for free was absolutely demoralizing.

[I_forget]

Not sure why guys go to horizon with their PLAs. Time and a half on weekends what's the point ? The whole point of double time weekends was so companies would allow workers to have time off for their families etc.

[big zeke]

Laut is simply doing his job, with oil at $50, lowering costs is one of the few ways they can add to the balance sheet and reset his cost base...this is what he is paid to do. Many other producers (including the one I work for) are doing the same thing. I know many set high standards and this affects costs, many times those standards are set by code or industry.

I can list countless instances where incompetent contractors have demanded huge rates, grudgingly we've paid them; the rates were never in line with reality nor in line with wages for similar trades in other industries. In many cases the contractors had no impetus to be more efficient and high-grade their staff as long as some oil company was willing to pay for the inefficiency.

I guess what I am trying to say is that in some cases the rates paid in 2010-2014 were a fantasy...today we need to get back to reality. The standard litany of toys that came with working in the patch might have been fantasy as well. A lower, realistic wage might be better than none...most oil patch guys won't qualify for EI.

[FishingMOM]

I wrote contracts before dealing with cnrl and never had guys sitting unpaid.
Yes they were time wasters but they paid for every second of every day.

[58thecat]

CNRL is not the only major oil producer looking for major cuts from its suppliers. I have heard Husky is looking at similar reductions.

The oil,patch in General is cutting back but as a company taking over a contract and you low ball the remaining employees the good ones will leave,you will be left with scabs,quality of work will tapper off, incidents will rise. You sure see the character of a company during hard times, some are awesome and some well...

[58thecat]

schadenfreude

:thinking-006:

[Bolete]

CNRL is cheap enough when oil is high, I would rather sit on my couch then give them anymore breaks.

I think there is going to be a lot of couch sitting going on. Not a shot at you directly.

[Prairiewolf]

Every producer will be looking to cut costs. A 25% decrease in costs? You bet, the price of oil has dropped ~50% since the summer, so the producer's margins are still harder hit relative to most suppliers. Remember, the producers need to make enough money in one year to fund the following years' capital program - you know, the work that will keep many of us employed. This will be evident in the Q4 2014 results many companies will be posting soon, and very evident in Q1 2015 results, where the oil price was low throughout. Cash flow and OPEX ($/bbl). The impacts of this price depression haven't even hit home yet.

Some will remember when $50/bbl oil was a godsend. What changed? Costs. Unfortunately, we don't have a low oil price problem, we have a high cost problem.

[cccan]

Nova.....Troy Freeman ring a bell:)

[C Taylor]

This isn't just a guys wages being too high. Look at all costs, motel rooms are twice as much as just a few yr ago. Fuel has dropped but is going back up.
I havnt increased my rates for acouple years now an won't be dropping them now.
Seems I'm getting busier all the time now

[I_forget]

I wonder how much the CEOs salary and compensation has grown since 2004. Same with the rest of the board. As well as the rest of the office workers, site operators etc.

[lmtada]

When a Safety Hand, makes more than an Operations Engineer. Than I said I would Quit. Guess what I Quit. Costs out of control.

[blackpheasant]

As a CNQ shareholder I'm ok with this news, they are a well managed company, the market loves this company :)

[justsomeguy]

This isn't just a guys wages being too high. Look at all costs, motel rooms are twice as much as just a few yr ago. Fuel has dropped but is going back up.
I havnt increased my rates for acouple years now an won't be dropping them now.
Seems I'm getting busier all the time now

This is key, and it goes beyond that, it is through the entire AB economy. If this goes on long it will ripple through the entire economy and general costs will come in line with the rest of the country. I know I've taken a haircut (not nearly as bad as many), but in response I've told the guys quoting work to me that I expect them to cut their rates as well for home reno's they're quoting. Reply is "I can't, my sub-trades and suppliers costs give me only XX margin to live on". My reply is "go tell then you're losing work because your customers who work in Oil and Gas are taking a hair cut and they expect the pain to be spread around". Right now reply is go pound sand, and my reply was I'll call you in 6-12 months.

It sounds harsh but in order for AB to get it's cost structure in line this needs to unwind through the entire economy. Oil and Gas drives this province and is the root of a large portion of the income in this province. The oil worker who got no raise or a pay cut needs to tell his reno guy to cut his rates, and he needs to go tell his sub-trades and suppliers to cut their rates, and so on!

Without this growth in AB will slow down dramatically in the coming years. Oil is going to need to be above $80-90 for a long time before investors allow companies to start building multi billion dollar projects again.

Brutal part is housing is a big component, and unwinding that is going to be extreme pain that I don't know if our economy can handle.

This will also allow allow us to diversify our economy and allow other industries like forestry and agriculture to sustain.

[lmtada]

Lil Birdie, whispered that the PECTIN, may cancel project near Peace Region. :fighting0030:

[Thunder Elk Hunter]

What is the true price of oil in Canadian dollars? About $60 and that oil company is playing about 20% less in royalties. Most got a large % of their oil hedged at 90+ a barrel. So lets not cry for the poor oil companies and especially the large ones. Some of us have not got back to the rates of 2008-09. Now they want us to take a pay cut! The price to do business sure has not came down only the price at the pumps and not that much there. Think when oil was 150 a barrel we paid 1.50 a liter. Now oil is at 50-60 a barrel we are paying 0.90.
We will see when the first and second quarter profits come out. They will still make millions, it may be down from last year but don't worry they will make money.

[gevarm guy]

Been in oil business for going on 40 years and seen my share of downturns and upside in the oil patch. Basically when oil is high, Service Companies BEND OVER the Oil companies with everything they can think of to add on ticket.
Then when oil is low they finally get there day in the sun by BENDING OVER the service companies. Been going on forever, what goes around comes around. :fighting0030:

[blackpheasant]

Been in oil business for going on 40 years and seen my share of downturns and upside in the oil patch. Basically when oil is high, Service Companies BEND OVER the Oil companies with everything they can think of to add on ticket.
Then when oil is low they finally get there day in the sun by BENDING OVER the service companies. Been going on forever, what goes around comes around. :fighting0030:

So very true :)

[Talking moose]

Been in oil business for going on 40 years and seen my share of downturns and upside in the oil patch. Basically when oil is high, Service Companies BEND OVER the Oil companies with everything they can think of to add on ticket.
Then when oil is low they finally get there day in the sun by BENDING OVER the service companies. Been going on forever, what goes around comes around. :fighting0030:

Yup. Adding xtra hrs to a ticket, charging from town to the job site even though they were 4 km down the road anyway at the time.....adding Km's on a ticket... Now it's slowed down and time to earn your cheque in a more honest manner. Boo hoo. Should of banked all those stolen hrs for when times get slow.(now)

[Sundancefisher]

What is the true price of oil in Canadian dollars? About $60 and that oil company is playing about 20% less in royalties. Most got a large % of their oil hedged at 90+ a barrel. So lets not cry for the poor oil companies and especially the large ones. Some of us have not got back to the rates of 2008-09. Now they want us to take a pay cut! The price to do business sure has not came down only the price at the pumps and not that much there. Think when oil was 150 a barrel we paid 1.50 a liter. Now oil is at 50-60 a barrel we are paying 0.90.
We will see when the first and second quarter profits come out. They will still make millions, it may be down from last year but don't worry they will make money.

Why pull misinformation out of thin air and post? You know you will be called out.

With the US dollar high as it is $50 US a bbl means about $65 canadian.

Royalties are not reduced by price. They get the same percentage. Royalties are reduced in low rate wells which have higher operating costs.

Most companies DO NOT hedge. A few do. Some who just got financed or bought an expensive property get forced to hedge by the lending bank.

Here is a lesson on hedges. A company has to gamble prices are not going up but rather going down. It may be fixed or it may be a range. A company pays a large fee to buy a hedge. Akin to gambling...many managers have been burned with a loss in a hedge hence they shy away from it. Hedges are short term and many hedges have come off...a majority of others come off in the summer and most of the balance at year end with a small number a bit longer.

Also feel free to let us know when oil was at $150/bbl.

I challenge you to go to google finance website and find 5 companies making an unreasonable profit for the size of their company. I know you can't back up your concerns about profit. They were low before and now will be horrible. Companies with gas stations are likely trying to make some money to offset losses on the other sides of the business. Historical gasoline prices are a low profit margin business. Most profit is made in the attached convenience stores.

People have to get out of the union mentality. Companies need to survive these brutal times otherwise there are no jobs period. In order to not lose money sacrifices are needed. Strengthening a company helps all remaining staff.

Tough times are never easy.

https://bizlib247.files.wordpress.com/2011/01/oilprice-datastream.png


http://cdn3.chartsbin.com/chartimages/l_oau_dff4ad5a049ca559d9105471f82bf873


http://kirklindstrom.com/Charts/2012/0621_WTIC_Crude_Oil_Prices_Per_Barrel_History.png

[Trochu]

Might as well ask for a discount, but I'd think a majority of the people living in Fort Mac are there for the money. If a welder, plumber, electrician, etc. living in Fort Mac is recieving the same wage as his peer in Edmonton/Red Deer/Loyd/etc., there may be a few less people in town.

Maybe its time companies like CNRL looked internally before looking at subcontractors. Maybe subcontractor rates are through the roof as employees look at "kids" with a high school diploma getting $100k a year, in essence forcing the subcontractors to pay more as their employee has a skill. I know of shops who have been asked to reduce prices by 25% when their margin on some items, like parts for example, is only 20%. Every single person at my shop, owners included, were working overtime today, except one, as we can't keep up. I know what would happen if someone asked us to cut our rates by 25%....

[Nova]

Nova.....Troy Freeman ring a bell:)

Hahahaha, yep. Still wondering what kind of compromising pictures CNRL had of him to get the deal they had.

[Thunder Elk Hunter]

yes why pull misinformation out of thin air?
Check out this globe and mail article http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/for-oil-producers-that-hedged-less-pain-from-the-plunge/article21136761/ [

As well as the pdf at the bottom about royalties Check Alberta energy about royalties.

Sorry oil only got to the price on June 27, 2008, touched $141.71/barrel or futures reached 142.99





QUOTE=Sundancefisher;2743466]Why pull misinformation out of thin air and post? You know you will be called out.

With the US dollar high as it is $50 US a bbl means about $65 canadian.

Royalties are not reduced by price. They get the same percentage. Royalties are reduced in low rate wells which have higher operating costs.

Most companies DO NOT hedge. A few do. Some who just got financed or bought an expensive property get forced to hedge by the lending bank.

Here is a lesson on hedges. A company has to gamble prices are not going up but rather going down. It may be fixed or it may be a range. A company pays a large fee to buy a hedge. Akin to gambling...many managers have been burned with a loss in a hedge hence they shy away from it. Hedges are short term and many hedges have come off...a majority of others come off in the summer and most of the balance at year end with a small number a bit longer.

Also feel free to let us know when oil was at $150/bbl.

I challenge you to go to google finance website and find 5 companies making an unreasonable profit for the size of their company. I know you can't back up your concerns about profit. They were low before and now will be horrible. Companies with gas stations are likely trying to make some money to offset losses on the other sides of the business. Historical gasoline prices are a low profit margin business. Most profit is made in the attached convenience stores.

People have to get out of the union mentality. Companies need to survive these brutal times otherwise there are no jobs period. In order to not lose money sacrifices are needed. Strengthening a company helps all remaining staff.

Tough times are never easy.

https://bizlib247.files.wordpress.com/2011/01/oilprice-datastream.png


http://cdn3.chartsbin.com/chartimages/l_oau_dff4ad5a049ca559d9105471f82bf873


http://kirklindstrom.com/Charts/2012/0621_WTIC_Crude_Oil_Prices_Per_Barrel_History.png[/QUOTE]

[CanuckShooter]

They were low before and now will be horrible. Companies with gas stations are likely trying to make some money to offset losses on the other sides of the business. Historical gasoline prices are a low profit margin business. Most profit is made in the attached convenience stores.



So how do those stations with no convenience store make money?? From smokes? That has got to be one of the biggest lies the gas companies have ever put out there.

[Sundancefisher]

yes why pull misinformation out of thin air?
Check out this globe and mail article http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/for-oil-producers-that-hedged-less-pain-from-the-plunge/article21136761/ [

As well as the pdf at the bottom about royalties Check Alberta energy about royalties.

Sorry oil only got to the price on June 27, 2008, touched $141.71/barrel or futures reached 142.99





QUOTE=Sundancefisher;2743466]Why pull misinformation out of thin air and post? You know you will be called out.

With the US dollar high as it is $50 US a bbl means about $65 canadian.

Royalties are not reduced by price. They get the same percentage. Royalties are reduced in low rate wells which have higher operating costs.

Most companies DO NOT hedge. A few do. Some who just got financed or bought an expensive property get forced to hedge by the lending bank.

Here is a lesson on hedges. A company has to gamble prices are not going up but rather going down. It may be fixed or it may be a range. A company pays a large fee to buy a hedge. Akin to gambling...many managers have been burned with a loss in a hedge hence they shy away from it. Hedges are short term and many hedges have come off...a majority of others come off in the summer and most of the balance at year end with a small number a bit longer.

Also feel free to let us know when oil was at $150/bbl.

I challenge you to go to google finance website and find 5 companies making an unreasonable profit for the size of their company. I know you can't back up your concerns about profit. They were low before and now will be horrible. Companies with gas stations are likely trying to make some money to offset losses on the other sides of the business. Historical gasoline prices are a low profit margin business. Most profit is made in the attached convenience stores.

People have to get out of the union mentality. Companies need to survive these brutal times otherwise there are no jobs period. In order to not lose money sacrifices are needed. Strengthening a company helps all remaining staff.

Tough times are never easy.
[/QUOTE]

Like any news article you have to take it with a grain of salt.

Note the losses Crescent Point reported.

My summary of hedges is accurate...theirs is just entertainment.

[Penner]

I'll give the Oil producers a break once they give me and my province one. They get it handed to them on a silver platter up here.

[Sundancefisher]

I'll give the Oil producers a break once they give me and my province one. They get it handed to them on a silver platter up here.

Given they pay a large portion of the wages in the province...they pay a lot of provincial and federal taxes...the municipal taxes they pay where they operate keep residential taxes lower and helps pay for maintenance and improvements...their charitable givings fund many campaigns in the province. Employees spend lots of money to keep the economy strong. Royalty revenues paid funds all our social programs. Oil companies take 100% of the economic risk in order to provide all of the above...

Not sure what else you want? Maybe a hug? Fortunately those are free even while oil companies take a beating from low commodity prices and extra beatings from guys like you.

[Skytop B]

I'll give the Oil producers a break once they give me and my province one. They get it handed to them on a silver platter up here.

What is stopping you from getting a drilling license and drilling a few wells? I wish you luck, hope you hit a boomer! Had a service hand out last week, staying in a Hotel in Drayton, hotel dead but they still want $150 a night for a standard room? Everybody needs to sharpen their pencils, I know I have.

[Skytop B]

Yup. Adding xtra hrs to a ticket, charging from town to the job site even though they were 4 km down the road anyway at the time.....adding Km's on a ticket... Now it's slowed down and time to earn your cheque in a more honest manner. Boo hoo. Should of banked all those stolen hrs for when times get slow.(now)

Yup, most truckers think there is 36 hours in a day! Companies charging 12K standby for a snubbing unit per day and then you find out they were working 10 miles down the road for someone else. Outfits charging full mileage from the city when they are only driving a few miles to the next job. It never used to bother me that much when I was new but it really starts to get old after a while. Then you are an ******* when you call them on it. Not too long ago hired someone to come out for a job, they were broke down for 8 hours holding up a million + job and they have the nerve to hand you a 20 hour bill at the end of the day. It's like taking your car in to get new tires and it takes them a week to do the work and then hand you a bill for 5 days shop time, how would that go over. Don't feel sorry for a lot of these service companies at all.


Example:
You hire a truck to come out for 06:00, you are an hour from their shop. They are on location four hours and then released back to base. They give you a bill for 12-14 hours at $300/hr. So you are being charged from the time the guys alarm clock goes off, returns to base, goes home, showers and has supper + a few extra hours for good measure, it get's ridiculous. Multiply this 100 or so times per job.

[Leafy]

Yup, most truckers think there is 36 hours in a day! Companies charging 12K standby for a snubbing unit per day and then you find out they were working 10 miles down the road for someone else. Outfits charging full mileage from the city when they are only driving a few miles to the next job. It never used to bother me that much when I was new but it really starts to get old after a while. Then you are an ******* when you call them on it. Not too long ago hired someone to come out for a job, they were broke down for 8 hours holding up a million + job and they have the nerve to hand you a 20 hour bill at the end of the day. It's like taking your car in to get new tires and it takes them a week to do the work and then hand you a bill for 5 days shop time, how would that go over. Don't feel sorry for a lot of these service companies at all.


Example:
You hire a truck to come out for 06:00, you are an hour from their shop. They are on location four hours and then released back to base. They give you a bill for 12-14 hours at $300/hr. So you are being charged from the time the guys alarm clock goes off, returns to base, goes home, showers and has supper + a few extra hours for good measure, it get's ridiculous. Multiply this 100 or so times per job.

Interesting, O & G appears to allow "thief" as a cost of doing business leaving this unchecked until market conditions correct globally...

Sad actually that these companies then with a wide brush expect all service providers to roll back pricing in the 20 plus percent range. Honest service companies don't operate at these margins, guess the cycle will continue as only the corrupt will survive with this model.

[Skytop B]

Interesting, O & G appears to allow "thief" as a cost of doing business leaving this unchecked until market conditions correct globally...

Sad actually that these companies then with a wide brush expect all service providers to roll back pricing in the 20 plus percent range. Honest service companies don't operate at these margins, guess the cycle will continue as only the corrupt will survive with this model.

I never said they get approved, just an example of the greed and entitlement issues in the province.

[79ford]

Oil companies get hosed by contractors, i see it everyday, i badger them a bit to keep things going but it is soo out of hand there isnt much one person can do.... and companies are soo used to being over budget and behind schedule they have been conditioned over time to think it is normal

[rugatika]

Yup, most truckers think there is 36 hours in a day! Companies charging 12K standby for a snubbing unit per day and then you find out they were working 10 miles down the road for someone else. Outfits charging full mileage from the city when they are only driving a few miles to the next job. It never used to bother me that much when I was new but it really starts to get old after a while. Then you are an ******* when you call them on it. Not too long ago hired someone to come out for a job, they were broke down for 8 hours holding up a million + job and they have the nerve to hand you a 20 hour bill at the end of the day. It's like taking your car in to get new tires and it takes them a week to do the work and then hand you a bill for 5 days shop time, how would that go over. Don't feel sorry for a lot of these service companies at all.


Example:
You hire a truck to come out for 06:00, you are an hour from their shop. They are on location four hours and then released back to base. They give you a bill for 12-14 hours at $300/hr. So you are being charged from the time the guys alarm clock goes off, returns to base, goes home, showers and has supper + a few extra hours for good measure, it get's ridiculous. Multiply this 100 or so times per job.

This, I do have to agree with. The stories I've heard of service companies raping oil companies with scams like this are not uncommon, and I would almost go so far as to say standard practice.

I don't think we've increased our rates (other than mileage rates) since 2006 ish. I believe we're still getting asked to cut our rates though by some companies.

I remember when I first started in the patch and I was working for another company, I went out to do a job, and I had to do a time ticket on site. I filled out my hours and kilometers...(actual hours and actual kilometers). When I got back to the shop I had two of the senior engineers almost have heart attacks when they found out I had billed my actual hours and kilometers! Once they calmed down they told me it was OK as they would "fix" it. :thinking-006:

[Leafy]

I never said they get approved, just an example of the greed and entitlement issues in the province.

They must get approved as the requests now from the O & G producers for role backs is asinine really.... Billion dollar O & G companies don't clear 20%, how the heck can they demand service providers to scale back this amount ?

[Skytop B]

They must get approved as the requests now from the O & G producers for role backs is asinine really.... Billion dollar O & G companies don't clear 20%, how the heck can they demand service providers to scale back this amount ?

Of course a lot of them sneak through the cracks and get paid. Funny, I am currently waiting on a broke down truck so we can start a $1.4 million job here, operating costs to sit here and do nothing are about $7000/hr. One example of money ****ed away, I don't think little Jonny here will be picking up that tab. I'm just another contractor like the rest of them but I sure don't try to sneak in a few extra day rates on my invoices.

[justsomeguy]

Their income has dropped 50%, they expect service providers to cut by 20% not by giving up all their profit, but by feeling the squeeze enough for them to continue the cut requests down the line. The expect the service providers to deal with waste and BS charges but what they really want them to do is tell their workers they're taking a 10% wage cut, and their equipment suppliers to take a cut. They then expect the workers to go home and tell the wife she has to trim spending, and call their plumber and tell him he needs to shave 10% off his quote to clear that plugged drain, and the local garage they need to cut their shop rates 10% to fix his car, who then have to tell their employees they need to cut wages.

It is an attempt to unwind the cost structure of the entire province! If oil stays low long enough they will succeed as those that don't cut will lose business. Those companies that have not raised rates and don't BS their quotes should be competitive even if they don't offer rate cuts, so should still keep work.

[Leafy]

Of course a lot of them sneak through the cracks and get paid. Funny, I am currently waiting on a broke down truck so we can start a $1.4 million job here, operating costs to sit here and do nothing are about $7000/hr. One example of money ****ed away, I don't think little Jonny here will be picking up that tab. It is huge money to drill, complete and tie in a well and there are no guarantees.

I don't buy into this Sky, those thieves who slipped through the cracks should be black listed and a reputable organization hired to provide an honest service.

Pretty sure there is no private individuals who allow repeated theft of their dollars, why does the O & G industry ?

It actually pizzes me off to be honest, I told big Oil to pound sand when these requests came across my desk... I'll down size before I work to go broke.

[Skytop B]

I don't buy into this Sky, those thieves who slipped through the cracks should be black listed and a reputable organization hired to provide an honest service.

Pretty sure there is no private individuals who allow repeated theft of their dollars, why does the O & G industry ?

It actually pizzes me off to be honest, I told big Oil to pound sand when these requests came across my desk... I'll down size before I work to go broke.

Sorry, I just work here (NOT CNRL), just telling it like I see it from another perspective. When it is busy and there is a shortage of suppliers they don't really have much choice but to pay and the suppliers know it. Just the way it is and the cycle continues, will never change.

Kind of like the local gun store charging $50-60 for a pound of powder, same concept, they know the customer will bite their tongue and pay it.

[Zuludog]

Yup, most truckers think there is 36 hours in a day! Companies charging 12K standby for a snubbing unit per day and then you find out they were working 10 miles down the road for someone else. Outfits charging full mileage from the city when they are only driving a few miles to the next job. It never used to bother me that much when I was new but it really starts to get old after a while. Then you are an ******* when you call them on it. Not too long ago hired someone to come out for a job, they were broke down for 8 hours holding up a million + job and they have the nerve to hand you a 20 hour bill at the end of the day. It's like taking your car in to get new tires and it takes them a week to do the work and then hand you a bill for 5 days shop time, how would that go over. Don't feel sorry for a lot of these service companies at all.


Example:
You hire a truck to come out for 06:00, you are an hour from their shop. They are on location four hours and then released back to base. They give you a bill for 12-14 hours at $300/hr. So you are being charged from the time the guys alarm clock goes off, returns to base, goes home, showers and has supper + a few extra hours for good measure, it get's ridiculous. Multiply this 100 or so times per job.

This doesn't happen where I work. We keep pretty tight reigns on our guys and we don't tolerate fleecing of our customers. We kept our prices stable and only had one modest increase from 2008 until today. I do know what you mean about gouging though. One of my drivers had his trailer slide off the road just off the lease by Conklin earlier this year. Guy in a bed truck pulled the back end of his trailer back on the road. We got a bill for$2600. $400/hr for the truck and $75/hr for the swamper and a $1600 supervisor day rate. Lol wtf? :mad0100::mad0100: The truck was on the lease already billing the oil company stand by at the time too. So for it to drive two minutes, hook up a winch line and yank out our trailer was less than half an hour and they sent us a $2600 invoice. What happened to the days when you were in the "bush" and people helped others for free? We paid them for their two hour minimum charge but told them where to stick the supervisor day rate. BTW there wasn't even a supervisor present he was in camp. Lol

[Winch101]

I read this story a few days ago , I figure this type of whining is the
Beginning of the industry grinding the Govt for more handouts ,
Lower royalties etc . Net profits to small going to Houston .....
Cost cutting is code for gimme gimme .

There is the faintest possibility that the Feds may pander to the lefty
Attitude that the whole industry should be shut down ,to Save The Children.

I can't believe those eastern beggars ,Quebec , Maritimes , Ontario
Aren't all over promoting the patch .....don't they know their Pogey
Is in jeopardy .

[hillbillyreefer]

You guys do know that making CNRL shareholders money is his job? Right?

[blackpheasant]

You guys do know that making CNRL shareholders money is his job? Right?

Exactly...and over the years they have managed to keep shareholders fairly happy, they are a very well managed CANADIAN company that some people love to hate, I actually worked for them for a few years and enjoyed it :)

[jethunter]

CNRL isn't exactly the best managed oil company in existence...

The best I can say about CNRL is that they are 2nd or 3rd rate, under-funded, and have historically been poorly mangaged. CNRL is famous for turning diamonds into coal.

CNRL hasn't been able to get their own **** togther for years so it's a bit of a clown act if they are calling for their contractors to do so.

[blackpheasant]

CNRL isn't exactly the best managed oil company in existence...

The best I can say about CNRL is that they are 2nd or 3rd rate, under-funded, and have historically been poorly mangaged. CNRL is famous for turning diamonds into coal.

CNRL hasn't been able to get their own **** togther for years so it's a bit of a clown act if they are calling for their contractors to do so.

Most portfolio/fund managers would disagree...

[79ford]

I came from a forestry back ground, logging, pulp and paper.... i started working in the processing end of O&G and WOW!! Is there ever alot of money thrown right out the window.

Perfectly acceptable for contractors to 'milk' a whole day for every job, the amount of bureacracy to get oil changed and other dumb stuff is outrageous. I watched 15000$ worth of scaffolding go up for stuff we used ladders for at a mill. There is guys that do this bbs program getting paid six figures for what is essentially secretary work.

I know for a fact if companies put the foot down and cut rates some one will do the job, when the work dries up the serious outfits make it happen at a smaller cost.

The adjustment will be rude but it will have to happen. Go to any other province or any other industry and you will see what it means to get moving. Oil and gas in alberta better start moving or it will crumple.

Suncor used to report profits at 50$ oil.... oil averaged 83$ for them last quarter and they only made 88million. They need 82$ to report an overall profit!!??

[brownbomber]

Most portfolio/fund managers would disagree...

I would disagree as well. Cnrl has made me a lot of money directly as a previous and current employee and indirectly working as a service provider for them as well as investing in them made me a nice chunk of change. I would say they are better managed and do more without the fancy bells and whistles that many other producers do. They might not always make friends but they can make budget and they can make dollars.

[79ford]

Something else that really ticks me off. Apperantly costs werent out of control 8 months ago, no one batted an eye when a project went over budget and behind schedule.

Now all these monkeys that sat by signing off the cheques during the good times are seeing red ink all of a sudden its a big deal? It wasnt a bad idea to waste tonnes of money 8 months ago. ?


These companies need to take a quick look in the mirror to see who organizes contractors before they poop all over the rates.... Contractors get orders from the company personel, if you could keep them busy all day vs throwing one or two jobs at them they could get more done. I can think of piles of work that could be done but there is no administration done on the companies sides etc

When you see five contractors standing around one working on a half hour job... that isnt the cotractor coming up with that idea tjats some company guy only filing enough papers to keep staff busy for one hour. Who comes to work to pull a few gaskets or something dumb then go home after half an hour? That contractor is going to make a day out of it if they have to be there

[I_forget]

I came from a forestry back ground, logging, pulp and paper.... i started working in the processing end of O&G and WOW!! Is there ever alot of money thrown right out the window.

Perfectly acceptable for contractors to 'milk' a whole day for every job, the amount of bureacracy to get oil changed and other dumb stuff is outrageous. I watched 15000$ worth of scaffolding go up for stuff we used ladders for at a mill. There is guys that do this bbs program getting paid six figures for what is essentially secretary work.

I know for a fact if companies put the foot down and cut rates some one will do the job, when the work dries up the serious outfits make it happen at a smaller cost.

The adjustment will be rude but it will have to happen. Go to any other province or any other industry and you will see what it means to get moving. Oil and gas in alberta better start moving or it will crumple.

Suncor used to report profits at 50$ oil.... oil averaged 83$ for them last quarter and they only made 88million. They need 82$ to report an overall profit!!??

No one is forcing these oil companies to overpay for service. There is no gun to their heads. Responsible spending is up to them.
Suncor had low profit because of growth projects like fort hills etc. Without expansions they could make money at $40

[79ford]

No one is forcing these oil companies to overpay for service. There is no gun to their heads. Responsible spending is up to them.
Suncor had low profit because of growth projects like fort hills etc. Without expansions they could make money at $40

Ya pretty much what i am getting at... most of the misery and extra cost is their own doing. I am just a bug on the floor where i am at so i dont point it out much anymore. I sit back and drink the koolaid while watching the show, everyone is all serious now but once oil is over 80$ again everything will fly off the handle again.

I guess thats oil, haha, a year after people go belly up on their truck and house the money will be flowing and you would have no idea something like 2008 happened.

I figured 2008/2009 might be close in peoples memories but apperantly not:)

[Zuludog]

I get the feeling this will be a lot worse than 2008.

[79ford]

I get the feeling this will be a lot worse than 2008.

I think you have to look back to 1993 to find rig counts this abysmal.... once the 60 something billion revenue cut filters through it is going to hurt in alberta. Most oil and gas companies have been spending all their revenue and then some so the 60 billion in missing revenue on the 3 million barrels we pump everyday is going to nail everyone on the food chain.

Once q1 reports come in contractors will be under bidding each other to grab what work comes up. I watched forestry nose dive in bc and this will be simililar, when the bank comes calling the equipment and people start moving.

[justsomeguy]

I get the feeling this will be a lot worse than 2008.

I think 2008/09 is part of the problem. many folks who went though it, even those who lost work, were back at it full time within 9 months as it was such a quick re-bound. Folks are assuming the same thing again and don't even have it in their heads that this could be a multi-year thing.

Ford is right, BC use to ride the boom/bust cycle, every 7 years pulp and paper went into a nose dive, but pulled out within 12-18 month and the hiring started over again. Last place I worked guys had been laid off 6-7 times from the same place, only to be called back. Then in the late 90's it went into a downturn, everyone tightened their belts to get ready to ride out another dip.....but it never came back.

Ford, welcome to the pulp and paper refugee club....there are many of us around.

[I_forget]

Oil will creep up over the next 12 months. Companies will have to learn to make money in the $60-$70 barrel range I guess.

[79ford]

Oil will creep up over the next 12 months. Companies will have to learn to make money in the $60-$70 barrel range I guess.

If prices dont creep up much oilsand is going to have to go head to head with usa shale and their oil imports.

People just have to look back ten years or so to see a time when oil was profitable at 60$ barrel..... The companies are getting more than that right now with the exchange rate. It really wasnt that long ago that 100$ oil was just a fantasy now its a caystrophy that oil isnt 100$???lol

[Bigwoodsman]

Oil will creep up over the next 12 months. Companies will have to learn to make money in the $60-$70 barrel range I guess.

It was about a decade ago that oil broke the 50.00 mark and the province went nuts. Now they're racking the rigs and sending people home. It's really all about greed.

BW

[Nichevo]

I worked multiple hitches on 3 different platforms for CNRI in the North Sea; I can confidently say that CNRL/CNRI is terribly mismanaged.

They want to get another 10 years out of their Ninian Platforms, but they are being held together with scaffolding. When they bought the platforms they were in great shape. An ounce of prevention would have saved them a pound of cure that they now are obliged to put into these platforms. Why? Because the idiots at the top were concerned with the quarterly results over the long term...

This isn't to mention the sheen of oil that came off the platforms, daily; nor the BS safety 'theater' that mired the rigs in red tape, while adding absolutely nothing to safety. I personally witnessed a multi-million dollar safety stand-down event over an event that basically came down to management penny pinching, and putting more faith in paper credentials than proper feedback mechanisms to gauge worker competence.

IMO CNRL is just another clueless company being run by lawyers and accountants, get out while there is still something left.

[The Elkster]

If prices dont creep up much oilsand is going to have to go head to head with usa shale and their oil imports.

People just have to look back ten years or so to see a time when oil was profitable at 60$ barrel..... The companies are getting more than that right now with the exchange rate. It really wasnt that long ago that 100$ oil was just a fantasy now its a caystrophy that oil isnt 100$???lol

That is how much things have changed yes. I watch the numbers for a living both production/reserves and capital spending. There are two factors at play with the conventional/non-oilsands developments. #1 cost have risen significantly #2 more importantly the average amount of oil and gas being found per well is continually going down relative to the money that is spent. That changes the cost/bbl formula significantly. Sure there is lots of spin from public companies trying to sell themselves in a public market. They continually tout the best of the best wells and everyone gets the perception that every well is like that. Forget the dusters and the fact that 90% of a pool (that they have projected as being future greatness) is NOT the sweet spot. I was just looking at a few older vertical wells that other day both have produced over a million barrels of oil in their lifetime and probably cost a million bucks give or take. There is no way we are finding that today. Today we are drilling multi-million dollar horizontal wells in hopes of getting 50-100k bbls/well. Or 1/10 to 1/20th the amount for triple the dollars. Drop the reserves/well by 10 or 20 fold and you get a significant rise in your cost/bbl.

The reality is that the shale oil/gas boom has been greatly oversold as a savior. It is in fact a scraping of the proverbial barrel here in AB aside from oilsands. This tight stuff has been known about for years its just never been worth going after until prices hit above $70. We've had to greatly increase effort for a historically small amount of product and that is what has most affected Canadian cost/bbl number over the last 15 years. Unfortunately we can only do so much to improve reserves/well. Otherwise the only option is to cut costs enough to make the overall cost/bbl competitive in the world market at todays price...or we don't drill. The Saudi's knew that. This isn't some company game or greed, its global competition in an oversupplied market. High price guy loses business.

Prices will either drop enough to make this development profitable again or equipment will sit. Could be awhile from the looks of it.

[fish_e_o]

everyone knows that costs are out of control there any time we quote a job for up north they call to ask if we didn't mess up. we come in at half or less almost every time and we are making good money paying guys good wages at that price

[Takemeoutside]

It was about a decade ago that oil broke the 50.00 mark and the province went nuts. Now they're racking the rigs and sending people home. It's really all about greed.

BW


And it starts at the bottom.

[RescueDiver]

About time ! If gas didn't cost so much the price of everything would be lower.
:thinking-006:

The price of gas has fallen and I don't see stores lowering their prices. But if it starts going up again you will see them raising prices of course.

I remember back when gas prices started to go up and all the companies started raising prices and or charging a fuel charge. I noticed a big jump in prices at the local Safeway (about 20%) and ask a manager what was going on....he confirmed that prices did go up about that much and it was because of the price of gas.

Problem with that is that although gas was up 20% the actual cost to get that product to the store for sale didn't go up 20%.....transportation cost to get products to the store are only about 5% of the total cost of that product (on average).....so in fact Safeway's costs only went up 1% not 20%. But a great excuse to raise prices and put more money in the pocket of the shareholders.

[Deo101]

That is how much things have changed yes. I watch the numbers for a living both production/reserves and capital spending. There are two factors at play with the conventional/non-oilsands developments. #1 cost have risen significantly #2 more importantly the average amount of oil and gas being found per well is continually going down relative to the money that is spent. That changes the cost/bbl formula significantly. Sure there is lots of spin from public companies trying to sell themselves in a public market. They continually tout the best of the best wells and everyone gets the perception that every well is like that. Forget the dusters and the fact that 90% of a pool (that they have projected as being future greatness) is NOT the sweet spot. I was just looking at a few older vertical wells that other day both have produced over a million barrels of oil in their lifetime and probably cost a million bucks give or take. There is no way we are finding that today. Today we are drilling multi-million dollar horizontal wells in hopes of getting 50-100k bbls/well. Or 1/10 to 1/20th the amount for triple the dollars. Drop the reserves/well by 10 or 20 fold and you get a significant rise in your cost/bbl.

The reality is that the shale oil/gas boom has been greatly oversold as a savior. It is in fact a scraping of the proverbial barrel here in AB aside from oilsands. This tight stuff has been known about for years its just never been worth going after until prices hit above $70. We've had to greatly increase effort for a historically small amount of product and that is what has most affected Canadian cost/bbl number over the last 15 years. Unfortunately we can only do so much to improve reserves/well. Otherwise the only option is to cut costs enough to make the overall cost/bbl competitive in the world market at todays price...or we don't drill. The Saudi's knew that. This isn't some company game or greed, its global competition in an oversupplied market. High price guy loses business.

Prices will either drop enough to make this development profitable again or equipment will sit. Could be awhile from the looks of it.

IMO

The knee jerk reaction to rack all rigs in the US and Canada will lead us to an undersupplied market quickly. Like you said these wells have been over sold and without a continuous drilling program you don't keep facilities full and the market quenched. I also don't believe Saudi Arabia can keep up and have read reports of this. They always have wells on tap that they can flood the market with but dollars to donuts, these are also over hyped wells that will decline. Not to mention that a lot of our oil is from very volatile places like Venezuela, Iraq, Saudi Arabia etc. One terrorist strike, or political move and they could double tomorrow.

Most have covered this here but this is mostly Oil/Gas companies driving prices down just because they can. The particular field I worked in, for CNRL had a 3$/Boe op cost in 08. That was the best in the company but still wasn't good enough. There is water flood fields that are closer to 26$. Even at 26 and 50 dollar oil theres still profit. Now the oil sands guys have much higher costs but they sure didn't start all the projects without knowing the risk of oil dropping to $50 bucks.

Hang in there folks, I'm fairly optimistic and in a year or so everyone can get back to charging $100 a day for their wheel barrow and shovel rental.

[The Elkster]

Sorry Deo but you are missing some key points. Op costs are only a part of a companies costs. You have initial capital costs, royalties, taxes, debt costs, processing, infrastructure upgrades. Companies are not shutting in existing production to any great extent because as you say op costs are lower than current oil price. They need any cash flow over and above op costs to pay the banks. Keep in mind they have already incurred debt for that production and at todays price anything net above the op cost is needed just to pay the bank.

For a well to profit it has to be done cheap enough and make enough oil at a high enough price to pay out the huge capital spend over and above op costs etc. At +3 million to drill, complete and tie-in a single well oil prices are simply not sufficient to expect a reasonable return for our company. It is still possible to drill the odd well at a profit even today but unfortunately a company has to figure the dusters and underperformers into the equation. Debt on a poor well doesn't just get written off. It has to be paid using the money from the best wells. That drags all returns down. Keep that in mind as its an important dynamic with perception here. Most times when you hear people talk well performance or op costs its almost inevitably in regards to the best performers. Not really analogous of the overall average that dictates a companies overall finances.

So that leaves a company two options. Either stop spending no questions asked until the prices rise. Or go to your employees and suppliers etc and give them the chance to take some wage hits to keep some work going. That's the reality of it. If you want to work you'll work for less or there simply won't be work because its not profitable. I don't know of one employee that doesn't work for profit and likewise I don't know any oil company that is going to spend big dollars without the solid prospect of a profit. Companies are not employment charities.

[HalfBreed]

Just out of curiosity and possibly off topic, when the wells were torched during desert storm, did the price at the pump reflect that? I simply don't remember. It seems that any little thing affects oil pricing these days.

[From The Hip]

I would say in reponse to capital budgets getting slashed companies have to either cut their rates or they will be cutting their own throats.

The only thing worse than having a job is looking for one.

FTH

[Deo101]

Sorry Deo but you are missing some key points. Op costs are only a part of a companies costs. You have initial capital costs, royalties, taxes, debt costs, processing, infrastructure upgrades. Companies are not shutting in existing production to any great extent because as you say op costs are lower than current oil price. They need any cash flow over and above op costs to pay the banks. Keep in mind they have already incurred debt for that production and at todays price anything net above the op cost is needed just to pay the bank.

For a well to profit it has to be done cheap enough and make enough oil at a high enough price to pay out the huge capital spend over and above op costs etc. At +3 million to drill, complete and tie-in a single well oil prices are simply not sufficient to expect a reasonable return for our company. It is still possible to drill the odd well at a profit even today but unfortunately a company has to figure the dusters and underperformers into the equation. Debt on a poor well doesn't just get written off. It has to be paid using the money from the best wells. That drags all returns down. Keep that in mind as its an important dynamic with perception here. Most times when you hear people talk well performance or op costs its almost inevitably in regards to the best performers. Not really analogous of the overall average that dictates a companies overall finances.

So that leaves a company two options. Either stop spending no questions asked until the prices rise. Or go to your employees and suppliers etc and give them the chance to take some wage hits to keep some work going. That's the reality of it. If you want to work you'll work for less or there simply won't be work because its not profitable. I don't know of one employee that doesn't work for profit and likewise I don't know any oil company that is going to spend big dollars without the solid prospect of a profit. Companies are not employment charities.

Lets use 3million for a well. 3million means in order to pay that well in 1 year (standard for some companies) you're wanting around 150bbl of oil per day avg. (gas excluded) Not an unreasonable volume for a hz. Also don't forget a lot of costs are offset by hz pad drilling so your next few are substantially cheaper. Especially if you start fracking two at a time. You can double the cost (6mill) and be paid out in 2 years with 150bbl which others are happy with. I'm not right up on royalties so they aren't accounted for but I'm pretty sure there is a hz credit and the royalties don't kick in tell the well is basically paid for. Maybe you can fill in the rest in regards to the credit.

Like I stated earlier, I feel this is mostly posturing on the oil companies parts to drive prices down. They have quickly, dropped drilling and asked for services to lower prices. Time will tell but I hope to revisit this thread in a years time and see where we're at. I'm keeping my optimism. Maybe it's because I'm fortunate to be working for a company that is about to kick off a drilling program that, if is as promising as the pilot well will make serious money. Even at 55 dollar oil and 3 dollar gas. Buy low, sell high right?

[Bushleague]

I can understand getting costs in line, but many people cant work for less then they already charge.
You need 1000 welders yesterday, you demand no older then 2 years old for truck and welder. You want them to have all kinds of safety equipment added, That costs money.

Well Servicing/ stimulation, you want a huge discount, only use them a few times a year, you drop them for the next company who is a $500 cheaper a day on a $30,000 bill. You demand only one new guy per crew. You want 10 years experience and want them to spend 3 days prep prior to the job, with out paying them for it.

All this equipment costs money, some of it upwards of 2.5 million dollars per piece.
You demand that they put equipment on standby but wont pay for it.

I think it is time that the Contractors stop working for Company's who hold a carrot over their heads. Demand the best and pay the least.

This, they want to charge whatever they can get for their product, but resent their service suppliers doing the same. Then add in how much more expensive its gotten to jump through the ever multiplying hoops just to work for the oil companies and its just not worth it. I got out of oil and gas a few years back and have not regretted it.

I remember stopping in at a roadside diner a few years back, the lady that ran the thing noticed my welding rig and kept up an ongoing tirade about how welders charge too much, nobody could possibly need to charge that much. When I was done eating I asked how much my hamburger cost, she answered $12 bucks... then I had my say.

[Nova]

Like I stated earlier, I feel this is mostly posturing on the oil companies parts to drive prices down. They have quickly, dropped drilling and asked for services to lower prices.

I've always felt that the "slow times" were a bit of a game by both the oil companies and the service providers. Maybe the extent of this one, not as much. Getting jerked around made me more than happy to put my wireline "career" behind me. Lots of competition in wireline, in my time I never really saw it as the type of service that really had any opportunity to gouge customers. I still think back to 2008/9. We were understaffed late in 2008 and working our butts off. First quarter of 2009 was still really busy but talk of the slow down was really starting to circle. Warmer weather comes in March and suddenly there is layoffs before work really slows. Then as soon as breakup comes they hit those of us left with a 15% pay cut on our salary and removed special bonuses. And yet we never really slowed down. Cased hole logging jobs were done dirt cheap and we practically gave abandonments away for nothing, had lots of 14 hour days where I made under $40 bonus. I worked the majority of 2009 for what worked out to around $15/h. Of course we were told how much our commitment to the company was valued and that we'd be rewarded when things were better. When prices rebounded and work got back to normal the company sure dragged their heels reinstating our bonus. It wasn't until they had a significant number of senior employees company wide go work for competitors that they finally gave our 15% back. The same trend started happening again in 2011, and that is when I finally pulled the pin. Stayed in touch with my co-workers a bit and 2012/2013 were pretty miserable for them. Can't imagine what they are going through now.

[u_cant_rope_the_wind]

I think the picture says it all

[lmtada]

$3,000,000.00 well. Cheap like borsch. Costs have dropped significantly. I was in the Arctic in 80's over $ 1,000,000.00/day. Sometimes $3,000,000.00/day. Vertical holes. Oil was below $15.00/barrel. :fighting0074::fighting0074::snapoutofit:





Lets use 3million for a well. 3million means in order to pay that well in 1 year (standard for some companies) you're wanting around 150bbl of oil per day avg. (gas excluded) Not an unreasonable volume for a hz. Also don't forget a lot of costs are offset by hz pad drilling so your next few are substantially cheaper. Especially if you start fracking two at a time. You can double the cost (6mill) and be paid out in 2 years with 150bbl which others are happy with. I'm not right up on royalties so they aren't accounted for but I'm pretty sure there is a hz credit and the royalties don't kick in tell the well is basically paid for. Maybe you can fill in the rest in regards to the credit.

Like I stated earlier, I feel this is mostly posturing on the oil companies parts to drive prices down. They have quickly, dropped drilling and asked for services to lower prices. Time will tell but I hope to revisit this thread in a years time and see where we're at. I'm keeping my optimism. Maybe it's because I'm fortunate to be working for a company that is about to kick off a drilling program that, if is as promising as the pilot well will make serious money. Even at 55 dollar oil and 3 dollar gas. Buy low, sell high right?

[The Elkster]

Arctic exploration is just that...pure exploration. Exploratory wells are not drilled to be profitable on their own. They are info gathering. Its not done based on stand alone economics its done for proof of concept so if they decide to move into that area they have the background info on the reservoir and what the reserves will justify as far as development. Huge upfront costs but sometimes there is no choice to secure future supply. Keep in mind that exploratory work to secure future reserves adds to debt and also has to be financed out of cash flow from the conventional wells we are generally talking about. That is yet another source of debt.

So when you run economics take price of oil and cost per well then subtract - 20% royalty right off the top add the cost of dusters and underperforming wells that have to be carried by the profit of other wells - op costs - debt obligations - infrastructure capital and maintenance costs ie pipelines - G&A costs for stuff like licensing and regulatory work and security and exchange commission reporting requirements.

If people think margins are so great then I would suggest you pool your money and get in the game. It appears there are some companies going tits up so land should be available. Use your superior knowledge of the oil industry and make a killing. Let me know how it goes. I wish you nothing but luck.

[dogpound]

I have owned and ran a service company for over 18 years, production/completions side. Margins have went from 40% to 20% in about 2 months. 20% margins on half the equipment working that you had last year isn't making any money, its about keeping the lights on and your good people as busy as possible.

We are cutting wages and reducing other costs to enable us to cut our rates.

This is going to be a very deep downturn, many companies will fail and the job losses and reduced incomes will be severe. Housing prices will crash, the construction sector in Alberta will see major changes that will affect many people that seem to think they are not dependent on the oil patch. Too many people are over levered living cheque to cheque with no cash reserves to handle a year of reduced activity.

Oil will recover in 12 to 18 months, u shaped recovery not a V like 2008 where the Fed spurred easy money into hard assets like commodities. We will see $35 before we see $70

This flush is unfortunate for some but will create opportunity for others, important part of our industry that we have been insulated from for too long.

[RescueDiver]

I have owned and ran a service company for over 18 years, production/completions side. Margins have went from 40% to 20% in about 2 months. 20% margins on half the equipment working that you had last year isn't making any money, its about keeping the lights on and your good people as busy as possible.

We are cutting wages and reducing other costs to enable us to cut our rates.

This is going to be a very deep downturn, many companies will fail and the job losses and reduced incomes will be severe. Housing prices will crash, the construction sector in Alberta will see major changes that will affect many people that seem to think they are not dependent on the oil patch. Too many people are over levered living cheque to cheque with no cash reserves to handle a year of reduced activity.

Oil will recover in 12 to 18 months, u shaped recovery not a V like 2008 where the Fed spurred easy money into hard assets like commodities. We will see $35 before we see $70

This flush is unfortunate for some but will create opportunity for others, important part of our industry that we have been insulated from for too long.

X2 ....Someone who gets it.

The people and companies that just say screw you to the oil companies when it comes to lowering their costs will be out of business within the next year or two.