Canadas economy is done.

[ryeguy21]

i know this is difficult for you to grasp but stocks can be sold... Their prediction of albertas future must be pretty bleak to cut their losses while lowering their exposure to alberta.

No matter how you spin it that is not good for alberta or canada.

[TBD]

Originally Posted by Okotokian

Zero. Corporations don't formulate strategic decisions involving tens of billions of dollars on ten second sound bites.

OKO - so you do billion dollar board deals in Albertas oil&gas industry ?


One question ?


Where does a guy of your stature find the time to make 25,000 posts on AO ...

[Map Maker]

Originally Posted by ryeguy21

i know this is difficult for you to grasp but stocks can be sold... Their prediction of albertas future must be pretty bleak to cut their losses while lowering their exposure to alberta.

No matter how you spin it that is not good for alberta or canada.

Are you grasping that for stocks to be sold, someone has to be willing to buy them or they are worthless.

Shell sold and CNRL bought. Its not in Shell's long term plan but its in CNRL long term plan.
It is better for CNRL, Alberta, and Canada long term.
CNQ being up 10% today is a good indication of that. That means more people want to buy in then there are people that want to sell.
Simple as that.

[HyperMOA]

Originally Posted by ryeguy21

there is no benefit by having one less major global oil company turn their back on their investments in the oilsands.

Its clear that they think the money isnt there... whats the reason for it? You dont bail after so many years and bullions in investment unless your 100% sure its not worth your time.

That should terrify everyone when third world countries and many other dangerous regions of the world are better bets for shell then here in AB.

One benefit would be when the oilsands heat up again in, say, 7 years. For Shell to come back would mean big investment in a few new plays.

[From The Hip]

Originally Posted by sjd

Got nothing to do with Alberta or Canadian Government. If the government is going to change in 2 years, why would you abandon a 50 year play?

Shell see the writing on the wall that the ability to make money in the oilsands with its high costs and high emissions for the next 40 years, when all governments are making commitments that they are going to reduce greenhouse gases mean that oilsands is not where you want to be.

They sold to CNRL for sure, but will be interesting to see what kind of a loss they took getting out. 7 billion doesn't seem like much for all those reserves and steel in the ground.

This ^ X 1000

Shell wanted out of the oilsands not out of Canada.CNRL made a damn good deal and the stock market reaction today clearly agrees with the deal because at one point CNRL stock was up 9% today though it finished a bit lower.CNRL's oilsands extraction cost per barrel is around $20,transfer that efficiency to the new holdings and the board at CNRL were licking their chops over this deal.Try looking at the positive side of things a Canadian oilsands company just got a lot bigger and has clearly said WE ARE HERE TO STAY.

The only better consolidation I have seen was when Suncor swallowed up Canadian Oilsands last year.Suncor picked up that company super cheap when the stock price was severely beaten down.Suncor now owns 100% of the SYNCRUDE facility/operation that produces 94,000 barrels of refined synthetic crude a day with pipeline access and production will be upped in the near future.Sure would have sucked as a COS share holder though if you bought in at $30+ and then had that deal go through.

I dont see the CNRL deal as negative.I see it as a positive for a Canadian company expanding and getting bigger knowing they can make it work with their expertise.

FTH

[ryeguy21]

Originally Posted by HyperMOA

One benefit would be when the oilsands heat up again in, say, 7 years. For Shell to come back would mean big investment in a few new plays.

you dont take billions in losses if you plan to come back in a few years...

[lmtada]

Originally Posted by ryeguy21

you dont take billions in losses if you plan to come back in a few years...

Yup!!
Interest rates will rise faster than people think and by natural laws asset prices will have to react accordingly regardless of what people want or think. Wage inflation and household formation in the US is hot and this is without implemented Trump policies yet. The Fed is clearly wanting to get ahead of what they might see as a rapid rising inflation especially with new jobless claims already at a 44 year low.

The irony is while Trudeau was telling major energy players how Canada is a great place to do business, Shell announced they’ve sold their oilsands operations (with more AB asset sales to come) to CNRL. The conspiratorial theorist comes out in me thinking this was a direct shot (planned announcement date) at all levels of government in Canada.

I can tell you the majors multi nationals/US co’s have been exiting Canada since 2014. Soon to be all gone along with thousands of more jobs and a huge decommissioning liability that taxpayers will be picking up the tab for.

Alberta’s pain, and thus the entire country, is only the beginning even though over two years have passed. People were too complacent thinking the economy would bounce back “like it always does” but not this time. Not with interest rates on the rise and the CAD operating as a petro currency.

As I said before, Canadian policy makers should be embarrassed and ashamed that every major important institution in the world has called out Canada for its stupidity and yet they continue on the opposite direction of simple economics. Since the US is Canada’s biggest creditor, and nobody has the guts to implement sensible policy, if we hit a wall, Trump might be welcoming some new US states formerly called Canada.

[jstubbs]

Originally Posted by lmtada

Yup!!
Interest rates will rise faster than people think and by natural laws asset prices will have to react accordingly regardless of what people want or think. Wage inflation and household formation in the US is hot and this is without implemented Trump policies yet. The Fed is clearly wanting to get ahead of what they might see as a rapid rising inflation especially with new jobless claims already at a 44 year low.

The irony is while Trudeau was telling major energy players how Canada is a great place to do business, Shell announced they’ve sold their oilsands operations (with more AB asset sales to come) to CNRL. The conspiratorial theorist comes out in me thinking this was a direct shot (planned announcement date) at all levels of government in Canada.

I can tell you the majors multi nationals/US co’s have been exiting Canada since 2014. Soon to be all gone along with thousands of more jobs and a huge decommissioning liability that taxpayers will be picking up the tab for.

Alberta’s pain, and thus the entire country, is only the beginning even though over two years have passed. People were too complacent thinking the economy would bounce back “like it always does” but not this time. Not with interest rates on the rise and the CAD operating as a petro currency.

As I said before, Canadian policy makers should be embarrassed and ashamed that every major important institution in the world has called out Canada for its stupidity and yet they continue on the opposite direction of simple economics. Since the US is Canada’s biggest creditor, and nobody has the guts to implement sensible policy, if we hit a wall, Trump might be welcoming some new US states formerly called Canada.

We're all guilty of spouting hot air rhetoric on this forum, but can you back any of this up? Or give us some background info as to why any of this might happen?

Feds across the world all keep interest rates low as possible and have no interest in letting them rise, because then economies around the world would cripple under severe debt servicing. Mortgage rates have bumped up a hair in the last bit but that's largely due to statutes. Wage inflation and household formation rising? Any evidence to back those numbers up?

What are the many multinationals that have exited Canada since 2014?

Genuinely curious, not attacking.

[Deer Hunter]

Good summary

2017-03-09 20:18 ET - Market Summary

by Stockwatch Business Reporter

The oil patch took notice as Shell and Marathon Oil became the second and third majors in less than three months to retreat from the Alberta oil sands. Shell announced this morning that it has signed two agreements to sell all of its in situ and undeveloped oil sands assets and reduce its share in the Athabasca oil sands project (AOSP) to 10 per cent from 60 per cent. AOSP consists of the Shell Albian Sands extraction operations as well as the Scotford upgrader and the Quest carbon capture and storage (CCS) project. Under the terms of the first agreement, Shell will sell its in situ and undeveloped oil sands assets and its 60-per-cent interest in AOSP to Canadian Natural Resources Ltd. (CNQ: $43.31) for $8.5-billion (U.S.), comprising $5.4-billion (U.S.) cash and 98 million shares of Canadian Natural. Under the second agreement, Shell and Canadian Natural will each pay $1.25-billion (U.S.) for equal interests in Marathon Oil's Canadian subsidiary, which holds a 20-per-cent interest in AOSP.

Once the dust settles, expected in mid-2017, Shell will own a 10-per-cent interest in AOSP and will continue to be the operator of the Scotford upgrader and the Quest CCS project. It will have the option to exchange its 10-per-cent interest in AOSP for 20 per cent of the upgrader and CCS project. If it did so, it would fully exit the extraction side of the business. Marathon, for its part, is jettisoning its oil sands business completely.

The retreats of Shell and Marathon come on the heels of Statoil's mid-December decision to sell its oil sands business to Athabasca Oil Corp. (ATH: $1.53) for up to $832-million. Each company gave different reasons for selling. Statoil said it had other priorities within its 37-country portfolio, but added that it still likes Canada very much; in fact it considers offshore Newfoundland to be one of its "core activities globally." Shell noted that its sale will make a dent in its $30-billion (U.S.) asset disposition goal (which is intended to help the company pay down debt following last year's $54-billion (U.S.) acquisition of BG Group). Shell nonetheless took pains to add that it is "very proud" of its oil sands assets and is looking forward to continuing its downstream operations. Marathon had little time for such niceties. "Historically, our interest in the Canadian oil sands has represented about a third of our company's other operating and production expenses, yet only about 12 per cent of our production volumes," was the blunt assessment of president and chief executive officer Lee Tillman. He made it clear that the company wants to focus on lower-cost, higher-margin plays in the United States. To that end, at the same time as it announced the $2.5-billion (U.S.) sale of its Canadian business, it trumpeted a $1.1-billion (U.S.) acquisition of assets in the prolific Permian basin of Texas and Mexico.

Marathon is just the latest producer to feel the pull of the Permian. The play has seen well over $40-billion (U.S.) in deals closed or announced since the mid-2016 resurgence in U.S. merger and acquisition activity. That includes nearly $20-billion (U.S.) in Permian deals so far in 2017, highlighted by a $6.6-billion (U.S.) acquisition by ExxonMobil, a $2.8-billion (U.S.) acquisition by Parsley Energy and a $2.7-billion (U.S.) acquisition by Noble Energy. Now Marathon will be joining the Permian's billion-dollar-deal club. American companies dominate this club, but they are not the only members. In September, 2014, Canada's EnCana Corp. (ECA: $14.20) made its entry into the Permian by taking over Athlon Energy for $7.1-billion (U.S.). In some ways, it was a homecoming for EnCana's president and CEO, Doug Suttles, whose grandfather began working in the play in the 1930s. Mr. Suttles has since put the Permian toward the top of EnCana's priority list. Under the company's five-year plan, announced last year, the Permian will see more than half of the proposed spending.

[lmtada]

Originally Posted by jstubbs

We're all guilty of spouting hot air rhetoric on this forum, but can you back any of this up? Or give us some background info as to why any of this might happen?

Feds across the world all keep interest rates low as possible and have no interest in letting them rise, because then economies around the world would cripple under severe debt servicing. Mortgage rates have bumped up a hair in the last bit but that's largely due to statutes. Wage inflation and household formation rising? Any evidence to back those numbers up?

What are the many multinationals that have exited Canada since 2014?

Genuinely curious, not attacking.

Wait until next week. Fed hike 90% quaranteed. We had 1/4 point in December. march. 2-3 hikes this year.

[79ford]

I think alot of companies blew their brains out building oilsands projects that went double or triple the budget only to be stuck in a multi year low oil price environment.... these guys were building on the assumption of 80-100$ oil to make some return on investment in the next decade.

Huge cost overuns, poorly built projects that suffered huge delays and major disappointments on the production front coupled with poor oil prices. Remember the bituminbubble where bitumin was getting 45-60$ per barrel while oil was at 90-100?

Kearl lake cost 18.7 billion in total and they have never gotten the thing to produce near name plate or promised capacity..... they are building a Nuclear FUSION...... NOT FISSION, FUUUSSSSION power plant in eurape for the same price and the thing heats hydrogen to 150 million degrees celcius to fuse hydrogen atoms in what is basically a magnetic vauum chamber... they are building it for the first time and it is costing about as much as a tarsand mine that ships tarsand diluted with perfectly good light oil to pump down a pipeline.

The business case for extracting the cheapest priced lousiest oil in north america and using 30% light oil/condensate to ship the stuff is insane.... there are companies piping it to a rail terminal then throwing the dilbit in rail cars.... the trains are 30% loaded with condensate which is more expensive that light oil,lol

it takes some real gumption like a cnrl or suncor to make this insanity work lol

[Deer Hunter]

Horizontal well technology has opened up cheaper supplies of oil. Combined with expensive labour/construction costs, increased taxes and lack of markets, canadian oil sands is now economically inferior.

[HyperMOA]

Originally Posted by ryeguy21

you dont take billions in losses if you plan to come back in a few years...

They lost a lot more trying to drill the Arctic. Are you telling me they will never try drilling the Arctic either?

[79ford]

Originally Posted by Deer Hunter

Horizontal well technology has opened up cheaper supplies of oil. Combined with expensive labour/construction costs, increased taxes and lack of markets, canadian oil sands is now economically inferior.

Prior to 2013/2014 the oilsands was viewed as the last major undeveloped reserves of oil. There was a race to get in on it even though costs were outrageous to extract and ship. now shale oil seems plentiful. Shale oil is in the southern usa near civilization and the biggest petrochemical refining complex in the world....really is a no brainer to opt for oil that is close to the market and near civilization.


Companies have been getting out of the oilsands since 2013/2014 on the account of high costs and lack of market access.... the bitumin bubble that started in those years was the first nail in the coffin.

The horrendous budget blowing and money squandering on underperforming oilsands projects that dont make a tonne of money or in most cases lose money has probably scared investors in the companies off.

Look at imperial oil....18 billion on kearl and they just had to write the value of the entire project off because it cant turn a profit for 5 years on projected oil prices. After something like that i am sure investors in the company probably dont want to hear even a whiff of an idea of building another oilsands project. Look at imperial oils share price, it has been about 40$ for the last decade. May aswell have just kept those paper money canadian bills they had ten years ago atleast they would be a collector item vs a imperial oil stock,lol

[lmtada]

Originally Posted by jstubbs

We're all guilty of spouting hot air rhetoric on this forum, but can you back any of this up? Or give us some background info as to why any of this might happen?

Feds across the world all keep interest rates low as possible and have no interest in letting them rise, because then economies around the world would cripple under severe debt servicing. Mortgage rates have bumped up a hair in the last bit but that's largely due to statutes. Wage inflation and household formation rising? Any evidence to back those numbers up?

What are the many multinationals that have exited Canada since 2014?

Genuinely curious, not attacking.

Link


http://business.financialpost.com/ne...ource-projects

[Deer Hunter]

Good link
Thanks for posting

[densetsu]

It looks like Shell is actually calling for governments to impose carbon taxes. They're looking to invest in renewable energy and want to get ahead of the curve compared to their competitors.

So much for the theory that Notley scared Shell out of the province. It just reveals that their strategic plan is to move efforts to renewables; nothing to do with the NDP.

Oil giant Shell warns public faith in fossil fuel industry is 'disappearing' and calls for carbon taxes

[does it ALL outdoors]

Originally Posted by TBD

PS ... just one of the things that can happen when peoples of a country vote in a substitute drama teacher as PM

You are minimizing his credentials.

He was also a part time snowboard instructor

Thanks eastern Canada

[ESOXangler]

Originally Posted by philintheblank

I would have to agree with this. sounds like CNRL is setting themselves up to be a powerhouse in Alberta. Don't they own 50% of NWR as well?

never a bad thing to have a Canadian company running the show for Canadian recourses.

also, if Shell sells their play and gets a butt load of shares from CNRL, then they have freed up a huge some of cash and are still going to see some revenue without the liability of actually running the infrastructure.

just how I see it anyways.

50% of NWR for sure, but think of what they just bought! Basically two upgraders, CCS facility and pipeline all for 8 billion. And as a limited time bonus they got the entire Albian mine and tons of leases. What a fire sale! NWR is going to cost more than all that out together. For only 50000 barrels of diesel.

[Deer Hunter]

Originally Posted by ESOXangler

50% of NWR for sure, but think of what they just bought! Basically two upgraders, CCS facility and pipeline all for 8 billion. And as a limited time bonus they got the entire Albian mine and tons of leases. What a fire sale! NWR is going to cost more than all that out together. For only 50000 barrels of diesel.

But the northwest upgrader is being financed by the alberta govt.
did you think it would come in under budget using tax payers money?

[Newview01]

Originally Posted by densetsu

It looks like Shell is actually calling for governments to impose carbon taxes. They're looking to invest in renewable energy and want to get ahead of the curve compared to their competitors.

So much for the theory that Notley scared Shell out of the province. It just reveals that their strategic plan is to move efforts to renewables; nothing to do with the NDP.

Oil giant Shell warns public faith in fossil fuel industry is 'disappearing' and calls for carbon taxes

This seems pretty likely.

The Dutch are pretty smart people

Which would also mean they are smart enough to get out while they are ahead.

If we would have a fossil fuel friendly govt we would probably not be having this conversation.

[ESOXangler]

Originally Posted by Deer Hunter

But the northwest upgrader is being financed by the alberta govt.
did you think it would come in under budget using tax payers money?

$500 million from the gubermint. Drop in the bucket. And nobody comes in under. It's not cool!

[Deer Hunter]

https://www.albertaoilmagazine.com/2...finery-primer/

Two months later, the government announced that cost overruns had driven the total construction costs to $8.5 billion, and the expected completion date was extended 12 months to 2017. In addition, the province would now loan North West $300 million to help with interim financing. The original $6.5-billion cap was nowhere mentioned. What would this 50 per cent cost increase mean for the government of Alberta’s toll payments? The province is now on the hook for $26 billion in processing payments – up from $19 billion – which translates into a processing cost of $35 a barrel, making it even less likely that the investment will break even.

With the price of oil being this low, and the cost over run of the refinery, it appears that this entire venture will cost the tax payer $26 billion.

[ryeguy21]

Originally Posted by densetsu

It looks like Shell is actually calling for governments to impose carbon taxes. They're looking to invest in renewable energy and want to get ahead of the curve compared to their competitors.

So much for the theory that Notley scared Shell out of the province. It just reveals that their strategic plan is to move efforts to renewables; nothing to do with the NDP.

Oil giant Shell warns public faith in fossil fuel industry is 'disappearing' and calls for carbon taxes

no where in that UK articke did i say any investment is slated for AB just that 1b out of 25b they invest world wid would go to renewable resources or development.

Im shocked at how stupid people must be to think less competition and less companies competing in the oil sands is a good thing. Think of the trick down effect of less investment and less jobs...

[lmtada]

Steering back to "Canada Economy is done". This is from Armstrong Economics.

https://www.armstrongeconomics.com/u...-all-together/

[Deer Hunter]

Good read

Alberta’s mass exodus of multinational oil companies continues


March 9, 20171:59 PM James Rose


Over the past three years Canada, and specifically Alberta, have seen an unprecedented exit of capital. This has been caused by several factors – topping the list of course is the collapse of oil prices.

With today’s announcement that both Shell and Marathon Oil are by and large exiting the oilsands play, the trend of foreign owned energy companies decamping from Albertan energy assets continues.

Today’s blockbuster deal comes on the heels of other noteworthy divestitures from Alberta energy assets as well. In the fall of 2016, Shell sold close to $1.4 billion worth of Deep Basin and Montney assets to Tourmaline. In December, Statoil announced it was selling its Thermal Oil assets to Athabasca Oil Corp, and shortly thereafter, Koch Oil Sands sent a letter to Alberta’s Energy Regulator requesting the cancellation of a SAGD project on account of the province’s burdensome red tape and carbon tax.

Of course the entire oil industry has been hit the hard, but why have multinationals left Alberta and western Canada when, concurrently, they have maintained (and in some cases increased) operational activity in other parts of the world? There are three reasons for this: higher operating costs, limited access to markets for their product and an unfriendly political climate.

And as a reminder, before breaking these three factors down, lets list some examples of multinational oil companies who have either left or substantially reduced their exposure in western Canada.

In February 2014 Devon Energy sold $3.125 billion of seets to CNRL
In March 2014, Apache sold a large portion of their Western Canada assets for $374 million
In September 2014 Statoil put an oilsands project on hold for 3 years as it grappled with rising costs
In December 2014, EOG Resources divested the majority of its Canadian assets
In February 2015, Shell withdrew an application for a new oilsands mine
ConocoPhillips sold a massive land package in November 2015
In April 2016, Murphy Oil sold its 5% interest in Syncrude to Suncor for $937 million
In June 2016 Chevron announced it was looking to unload more assets in Western Canada
In December 2016, Statoil sold its Canadian Thermal Oil assets to Athabasca Oil Corp for $582 million
In October of 2016, Koch Oil Sands issues letter to AER requesting canellation of SAGD project
In December of 2016, Shell sells Montney and Deep Basin assets to Tourmaline for $1.4 billion
In March 2017, Shell divests oilsands assets to CNRL for $7.25 billion
In March 2017, Marathon divests oilsands assets to CNRL for $2.5 billion
High Operating Costs

It’s no secret Western Canadian oil has tremendously high operating costs. This is due to several factors: deep drilling in parts of the Western Canadian Sedimentary Basin, tougher weather conditions, heavier crude oil in some parts and relatively high labour costs. Canadian crude currently is among the world’s most expensive to extract. A majority of producers in the area are now focused purely on survival vs. growth.

Several high-cost Alberta producers, in the first quarter of 2016 had production expenses accounting for 46% of the realized sale price per barrel (not including royalty charges or transportation expenses). This is in stark contrast to other basins in North America.

In Texas, the Permian basin is widely considered to be one of the most attractive basins in North America. Diamondback Energy, which focuses only on the Permian basin, had production expenses accounting for 29% of the realized sale price per barrel (not including royalty charges or transportation expenses).

Other United States plays are equally as good as the Permian if not better. Continental Resources Inc. says its best wells today are in the Oklahoma Stack play. The company says its drilling there can yield a 75% return with oil at $45 a barrel.

“A common thread running through both segments [oilsands and shale/conventional] is the high cost of labour, distance to markets and lack of pipeline access that discounts the value of Canadian oil,” says Yadullah Hussain reporting for the Financial Post. “Add the sniping between provinces on pipelines, lengthy reviews of major projects and new regulations around climate-change policies, and the price tag of operating in Canada can be daunting.”

Access to Market

With limited pipeline availability, Canadian crude oil trades at discounts to WTI and Brent from $5/bbl all the way to $15/bbl. There is likely no country on the planet that has greater difficulty getting its product to market than Canada. Even with depressed prices, there are still times when a glut of oil is present due to pipeline constraint. Even looking at CEPA’s pipeline map it’s easy to see that for a country which produces ~4 mmbbl/d, there is clearly not enough pipeline infrastructure.

Political Unfriendliness

Since the Alberta NDP took power, Albertans have seen many companies raise alarms over several key decisions. For example, several companies put plans on hold over the impending royalty review earlier in the year, and the newly instituted carbon tax will only increase costs for oil and gas companies. Increased regulations and taxes have simply made Alberta a less profitable venture for oil companies. For multinational oil companies, capital allocation is global and will seek, all else being equal, the highest investment returns.

Furthermore, it is impossible to ignore the blatantly anti-oil and gas sentiment which several members of the provincial NDP have showcased. High ranking ministers have demonstrated against pipelines, written forwards for anti-hydrocarbon books, and have made some fairly troubling statements against approving pipeline projects. Even Premier Notley stood up in the legislature and stated she was opposed to the most viable pipeline option which would move nearly 800,000 bbl/d to the US: Keystone XL.

Any one of the above issues would pose a problem for any oil producing jurisdiction. When grouped together, Western Canada (and specifically Alberta) has recently positioned itself as a difficult region for multinationals to do business.

[79ford]

One could argue it is all the foreigners who are packing it in as the going gets tough. At 80-100$ pretty much any backwards upside down buggered idea made money no matter how far over budget it was or poorly it performed.

I would be worried if no one was interested in these assets or companies like cnrl could not raise the debt to buy these things.

[jstubbs]

Lots of good reads and info here. Thanks.

The one thing that article failed to mention regarding the challenges to doing business in Alberta/western Canada, is the United States (and elsewhere) funded, anti-oil "environmental" lobbyists and First Nations bands that protest or hold everything they can up in court. I certainly would have little interest in doing any sort of business in the Canadian oil sands if I were the chief executive of a multinational energy corporation.

At least the United States is finally getting a taste of their own medicine with incidents such as Standing Rock protests in North Dakota.

[59whiskers]

The NDP and Liberal governments have made it uneconomical to go forward with new energy developments in Canada at this point in time. As a investor in this sector I have seen many Canadian companies focus on investing in other international jurisdictions that are now easier to do business with than in Canada. As one executive from Shell said the other day we have governments in Canada that are more focused on turning Canada into one big National Park.