Low fuel prices.....lack of work !

[smartypants]

.....the true barometer will be once breakup is over with...i suspect 2nd and most of 3rd quarter may be sparse for some....it really depends on what corner of the patch you are in and who the clients are...i know of a few medium sized operators who plan on slightly increasing their 2015 drilling budgets to take advantage of the already falling drilling & service contractor rates. Plus it will give all the service outfits a chance to weed out the talentless losers and keep their core of good hands steady.

[The Elkster]

Originally Posted by omega50

Risk and reward sums up the oil patch to me if you work in that industry.

Not overly interested in hearing how someone has it sooo bad that they may have to sell off a toy.
Oil is the mainstay of the economy but every Canadian shoulders the burdens and rewards of a good economy.
People in the patch reap much greater financial rewards than average Joe Canadian and should try not to be too bitter towards those that are reaping the marginal short term benefits of lower fuel prices.

Soon enough it will go the other way.
Look at it a chance for personal growth-Get over yourselves
When things are good in the patch it is always Me Me Me
A downturn and suddenly it is We We We
Suddenly everyone is either French or has worms

Why the bitterness? Sounds a bit like sour grapes. I've kept an eye on all the discussions on the oil downturn and haven't heard any complaining. No requests for gov't intervention, no claims of being "wronged". Not every oilfield worker spent every cent they made on trucks with balls nor tried to rub their money in others faces.

What people have tried to point out is that this isn't just an oilfield issue. You simply don't pull billions of export dollars out of the economy and not have ripple affects throughout the country. Like it or not most of that evil oil money trickles into every aspect of the economy. If people and companies aren't making dough they won't be spending dough on all kinds of goods and services. That means all those companies will ultimately have to cut hours and people. Including people that think they are insulated from the oil industry and whom may have spent accordingly. I would warn everyone to spend cautiously and not assume you won't be affected.

Are lower gasoline price going to offset the loss of jobs and taxes? Sure there are some that will benefit from lower gas prices if they manage to hold onto their jobs and don't have hours cut, but as a whole, the country is going to NET lose with the contraction of billions in export dollars and capital spending. One shouldn't get too smug thinking one won't be affected.

[superuke]

Okay so oil is down, the Canadian dollar also came down. Bottom line is that everything that comes in from the USA or is paid for in USA dollars has gone up 13-15%. So the savings on gas means didly! Unless you are buying the groceries or importing from the USA many do not notice the big picture. Does not look good.

I would like to buy local but the local Pineapple tastes like corn!

Real picture is the banks are sweating big time as they are carrying heavy duty mortgages. The cash going into the banks will be reduced big time by
revenue reductions in the patch. Therefore banks will need cash intake.
If cash does not come in, the interest rates will go up. Therefore if you have a big mortgage, lock it in big time.

The manufacturing sector in Ontario and Quebec has not benefited by the drop in the Canadian dollar because they import most of the their supplies and material from USA or offshore. Their manufacturing cost have gone up.

Starting March and April the effects of the oil drop will kick in.

[dantonsen]

I think most people are still in the state or denial or disbelief. This oil and gas plunge is on par with 1991, 1999, and 2008.

Alberta had record home starts and home sales close to 2007 mania levels this year.

The oil price run up caused a construction boom, the construction boom caused a residential housing boom..... now the oil price has plummetted 50% and bitumen has pretty much crashed 65%.

It is essentially boom and bust all over again yet this time around house prices got even higher and there is waaay more debt loaded up in the process. The bust should be pretty heavy if prices stay in the gutter for a year or so.

There was alot of people piling into alberta real estate as an investment because they thought the 100$ oil was normal now.

Record new construction, record prices, record job growth making a hard u turn into the gutter is going to end bad.

I feel bad for the people that came here after throwing in the towel where they came from. Alot of canadians have moved over here to restart their lives because alberta was pretty much the only thing rolling since the 2008 finacial crash.

Having been here awhile now i dont mind the oil crash, it brings people back to reality.

[Wild&Free]

Anyone else find it disturbing that global economies are so closely tied to the value of a single commodity?

The system is broken. it's time to fix it.

[dantonsen]

Originally Posted by Wild&Free

Anyone else find it disturbing that global economies are so closely tied to the value of a single commodity?

The system is broken. it's time to fix it.

I think the 15 year commodity boom driven by china and other emerging economies is done. Every other commodity is in the dumps too. Oil was just late to the party..... or gutter in this case.

[Wild&Free]

Originally Posted by dantonsen

I think the 15 year commodity boom driven by china and other emerging economies is done. Every other commodity is in the dumps too. Oil was just late to the party..... or gutter in this case.

Or the incentive to manipulate the oil market for political gain is greater.

either way most of the people on the globe will suffer because of the price of a single commodity, one who's value being low should have the opposite effect of. cheap energy brought many great advances a century ago, now cheap energy indicates impending collapse.

[From The Hip]

Damn glad I got my home paid off free and clear last March.Yes I have some debt but I can wipe it out and still have cash in the bank with a "click" on the mouse whilst doing web banking.

Lots of fearmongers on this thread I will say.The price of oil crashed harder in 2009 when people with REAL money were speculating on it....and when I say REAL money I am talking in the millions of dollars on oil futures...that is what also drove the price of oil higher.The Saudie's dont like the USA shale oil developments nor do they like the oilsands as they are competition.When it comes down to it ALL of the oil pumped out of the ground in Saudi Arabia is sour dark crude which takes a lot of refining to make it into gasoline and deisel....not to mention the cost of the tankers.

Had Keystone and also the Northern Gateway pipelines got planned and built 15 years ago the blip of the price of oil would be nothing to Alberta due to the producing capacity.Sadly those 2 pipelines are mired down both south of the USA border and even here in Canada due to the BS propaganda of "climate change".Had they been planned 15 years ago and built 12 years ago and had oil pumping through them for 12 years all of the hoopla and propaganda of "climate change" would not even be brought up in arguement by the lefty tree hugging save the earth crowd(who are hypocrites as they use all of the benefits of oil but decry it's development)

Yes the price of oil has dropped but it will go back up eventually as supply and demand dictates.If the price of Natural Gas took off like a MOFO and prices hit $9 a GIG Alberta would be laughing as we ship a hell of a lot more gas than compared to oil....that of course would lead to people complaining about the cost to heat their homes

To counter some of the doomsayers I will say this....the price of oil has dropped BUT this is not like the NEP of the 1980's under Trudeau....back then ALL of the oil companies shut off ALL expansion and had no exploration budgets.As of now under the falling price of oil the vast majority of oil companies are making cuts and there are layoffs BUT there are still wells being drilled and solid companies that have a good balance sheet are still paying stock dividends.

When I moved back to Alberta back in 1997 the average oil exectutive was happier than a pig in his own pen at $20 oil......so they are not likely to be scared of $50 oil now.

FTH

[Wild&Free]

The saudis had more to do with the oil price drop in the 80s then the NEP did.

[The Elkster]

Hip economics have changed big time in the last 15 years. Oil volume per well is way down even on big dollar horizontal wells when cost vs bbls recovered is considered. Most multimillion dollar horizontal wells are only expected to Cum what previously would have been produced from a simple vertical well. That is why we require more $/bbl. We are scraping the bottom of the barrel with these tight plays. They are not a panacea. No fear mongering. I monitor the economics and production curves of wells on a daily basis. There are very few shale/tight wells that are economic at $50 these days and those margins will be slim. Add to that the fact that most of the known sweet spots that may be profitable at $50 in formations like the Cardium are already drilled up. Also consider the fact that companies don't tend to go whole hog into wildcat drilling for new plays during down times... negative formula.

The saving grace in the short term is hedging. If a company has a decent volume of oil hedged at +$70 over the next couple years they may keep drilling into this summer. Otherwise the brakes are going to get hit hard. This price isn't going to last forever but based on all available data it is becoming commonly accepted that this will be a couple years working itself out. And that belief will factor into company spending decisions. They are going to have to keep spending in line with cashflow PERIOD. I would expect a 30-40% cut across the board by summer and a steady decline from there as hedges end assuming prices remain in the $50 range or lower.

There is likely to be a number of mergers as well. There are a number of overleveraged companies that are going to be caught with their pants down and forced to sell. Unfortunately that also usually leads to layoffs.

[79ford]

For anyone who thinks it is just a minor dip.

Take a company like imperial or husky.

300 000bpd oil production times the roughly 50$ drop in the price of all grades of oil since june. Multiply that by 90 days for a quarter equals 1.36 billion dollars.

Alberta produces 3 million brrels per day. Multiply that by 50 and 90 or 365 which equals 13.5 billion or 54 billion.

With oil prices at current levels there will be 54 billion dollars less money flowing into alberta oil producers.

Not sure what planet some people are on who think this wont have an impact, that is just raw numbers, not fear mongering.

39 billion represents the entire capex budget for alberta oil and gas companies in 2014. A whole years worth of capex money will vapourize into thin air plus another 16 billion extra.

Add in the fact our government will be 7-10 billion short aswell.

If prices go down further or stay here there will be 60+ billion in dollars that will not be circulating in alberta that were circulating in 2014.


The goverment of alberta yearly budget is 60 billion$ for an idea of how much employment and services comes from 60 billion $$.

This could get pretty ugly unless some one starts cutting production some where

[-JR-]

Noticed again this week drilling company stocks are all down .
They used to be around $100.00 per share now they are all under $5.00

Only thing I see still up is the housing market.
It will not be long before they drop where they should be.
Banks lowered their interest rates ,hoping someone will bite and lock them selfs in to a house ,I just hope those people know 95% of there payments is just paying off the interest the first 10 years
All we can do is wait it out.

[Ricktye]

Hardly because of fuel prices; it's the low price of world crude. The low crude prices should set the price of fuel. Right now we're paying for ~$80 a barrel oil at the pumps when the actual price of crude is ~$45 a barrel. The general public is still getting ripped off! Gas is cheaper in Hawaii where every ounce comes in by boat, than Alberta where there are no shipping costs to speak of... Go figure!

Originally Posted by -JR-

Fuel prices have been dropping and I have heard a lot of rigs are not drilling because of this.

Any one hear not working ,or has a friend that is not because of the fuel price.

Will it get worse in the new year ?

[I_forget]

One word. Taxes