EnCana says could cut Alberta spending by $1 billion

JAHinYYC · Post by **JAHinYYC** » Sat Sep 29, 2007 10:43 am

SierraPoppa wrote:Errr Encana is only one of many.

Point taken.

Realistically, the Western Canadian Sedimentary basin is too mature for multinationals anyway. Those that do work here are focused on non conventional reserves (oil sands, deep gas, NWT gas) because the size of the prize is too small to go after conventional reserves.

SierraPoppa · Post by **SierraPoppa** » Sat Sep 29, 2007 10:49 am

JAHinYYC wrote:
SierraPoppa wrote:Errr Encana is only one of many.
Point taken.

Realistically, the Western Canadian Sedimentary basin is too mature for multinationals anyway. Those that do work here are focused on non conventional reserves (oil sands, deep gas, NWT gas) because the size of the prize is too small to go after conventional reserves.

If what we are all seeing in the press is true, Alberta has the lowest royalty rates of virtually every jurisdiction in the world.

If this is true are you trying to tell us that oil and gas companies everywhere else but Alberta are losing money because of the royalty regimes in other places.

The proposal is not to move Alberta to the top of the pack but somewhere closer to the middle.

goates · Post by **goates** » Sat Sep 29, 2007 12:24 pm

b) What nobody appreciates is that it is risky this business of drilling holes in the ground to produce oil. Sometimes you spend $1million dollars to drill a well and get $2million worth of reserves back. Sometimes you spend $1million and only get back $1million in which case you break even on paper and lose money when you factor in the cost of capital.

And you can spend $5 million or more for the deeper gas wells the big companies are going after and come up empty handed.

Errr Encana is only one of many.

And then there is Talisman, CNRL, Canadian Oil Sands Trust and dozens of other Canadian, or mostly Canadian companies, that stand to suffer as much or more than the big multinational corporations.

Most of the companies have said they are willing to make adjustments to the royalty system, just not whole sale changes that make many of their projects uneconomical. There are a lot of gas wells out there that would simply have not been drilled under the proposed changes, making the claim that Alberta would have made $2 billion more last year at the best inaccurate.

And as I pointed out before, the royalty review excluded land sale bonuses that amounted to more than $3 billion last year. Under the proposed system, this amount will drop significantly. Nationalizing oil and gas would probably remove this completely.

Canada has the largest "PROVEN" oil reserves in the world. Why do we let Saudi and the rest of the middle east set "World Prices"?

Oil in Saudi Arabia flows out of the ground quite easily. Oil in the oil sands doesn't. And seeing as much of the oil sands are too far below ground to even mine, it is far more expensive to extract. And then once you do get it out, it needs more refining before it's of much use to anyone.

Saudi Arabia also won't let anyone conduct an independent audit of their reserves, leading some to question exactly how much they really do have. Some think they're already at or close to the max they can produce. If this is true, they couldn't just open the taps and keep them flowing for long.

SierraPoppa · Post by **SierraPoppa** » Sat Sep 29, 2007 12:53 pm

goates wrote:And you can spend $5 million or more for the deeper gas wells the big companies are going after and come up empty handed.

You know this kind of whining is getting tiresome.

Encana made a 6 Billion dollar profit last year how many $5 Million dollar dry holes did they drill.

6 BILLION profit for gods sake and they have the nerve whine about a 20% increase in royalties.

Give me a break.

JAHinYYC · Post by **JAHinYYC** » Sat Sep 29, 2007 8:49 pm

[quote="SierraPoppa"]Encana made a 6 Billion dollar profit last year how many $5 Million dollar dry holes did they drill.[quote]

Encana earned $6billion dollars last year. $3Billion came from the sale of corporate assets, so in reality only $3.2Billion came from operations.

Based on $17Billion dollars of shareholder's capital the return on each shareholders investment was 18%.

By contrast Air Canada had operating income of $259million based on $274million in shareholders capital for a return on investment of 94%.

Wow. Those oil guys sure seem like bandits.

SierraPoppa · Post by **SierraPoppa** » Sun Sep 30, 2007 7:35 am

JAHinYYC wrote:

Based on $17Billion dollars of shareholder's capital the return on each shareholders investment was 18%.

By contrast Air Canada had operating income of $259million based on $274million in shareholders capital for a return on investment of 94%.

Wow. Those oil guys sure seem like bandits.

Isn't wonderful how we can always find someone who made more money in order to justify our position. (sarcasm intended)

An 18% return on investment is pretty damned good in anyone's books.

It just goes to prove they can afford to pay higher royalties doesn't it?

Nice of you to prove my point.

redbull · Post by **redbull** » Sun Sep 30, 2007 6:10 pm

at $80 bucks a barrel, I don't think you will see any slowdown in Alberta!!

Krashman · Post by **Krashman** » Sun Sep 30, 2007 6:22 pm

I would like to see our oil sector nationalized. Produce enough to supply our demands and a modest export revenue.

I was told that Canada's refining capabilities are limited though?

A bit of a communist response don't you think?

Why don't we just close up the border then... that would solve all our 'Canadian' problems wouldn't it?

goates · Post by **goates** » Sun Sep 30, 2007 8:04 pm

redbull wrote:at $80 bucks a barrel, I don't think you will see any slowdown in Alberta!!

Gas isn't at $80 a barrel and gas is what makes up most of the conventional side of the oil and gas industry in Alberta. There is more to it than just oil and the oil sands.

North Shore · Post by **North Shore** » Mon Oct 01, 2007 12:08 am

I would like to see our oil sector nationalized. Produce enough to supply our demands and a modest export revenue.

I was told that Canada's refining capabilities are limited though?

Err, Alti, you have it all wrong...it isn't "our oil"....it's Alberta's oil - big difference.

redbull · Post by **redbull** » Mon Oct 01, 2007 8:27 am

sky's the limit wrote

"All I can say is, you people in Alberta better get whatever you can out them now, because your province is being ruined, and when it's gone, you're going to have precious little to show for it. I've flown every square inch of the Tar Sands, the Gas Patch and beyond, and it's nothing short of a mess. Moose wandering around with growth's the size of basketballs, waterways ruined, and air quality that makes Hamilton look nice.

I have lived in Northern Alberta my whole life. I have never seen a moose with a growth nor do I breath air that is any worse than anywhere in Southern Alberta or Southern Ontario or most places in Canada. I laugh when I hear this from people who have never been here.

Rubberbiscuit · Post by **Rubberbiscuit** » Mon Oct 01, 2007 8:27 am

I am seeing it as an attempt to drive up the prices on natural gas with the winter around the corner.

privateer · Post by **privateer** » Mon Oct 01, 2007 8:45 am

The question is would Encana still be based in Alberta or would they move to BC? If they stay in AB I don't think companies like Northern Cariboo and Sunwest would be effected that much. It would just be a question of flights heading into BC not Northern Alberta.

JAHinYYC · Post by **JAHinYYC** » Mon Oct 01, 2007 9:36 am

SierraPoppa wrote:An 18% return on investment is pretty damned good in anyone's books.

It just goes to prove they can afford to pay higher royalties doesn't it?

Nice of you to prove my point.

Point? What was your point? That simply because Encana was profitable - it should be able to pay higher royalties. Based on that logic, simply because you have extra money each month that you don't spend on rent, food, or clothing - that we should boost the income tax rate since you obviously can afford to pay more.

An 18% return on investment in the grocery business is outstanding, in the oil and gas sector is it merely okay.

Why? You need to adjust for risk. The 18% is supposed to compensate for all the cost presures and commodity price risk and for the time (which happens every so often) when it isn't 18%, but -18%.

So simple question: How much is enough to be fair to shareholders? Because in reality, its not Encana's money it belongs to the shareholder which includes pretty much every Canadian since the CPP invests retirement money in the stockmarket.

Take a look at the trends:
In 2004, 24% return on investment.
In 2005, 21% return on investment.
In 2006 18% return on investment.
In the first three months of 2007, 12% return on investment.

Do you notice a negative trend here? The amount of money that Encana is making is decreasing at a time when supposedly the price for its main product is increasing.

(In reality the price for natural gas has been off historic highs for well over a year)

Why? Because operational costs are increasing. Additional royalties mean more costs.

The whole point of Encana's announcement is, don't make it too expensive or else we will shift to do business in a lower cost environment such as BC. (A statement which is riotously funny when you consider the industry's general opinion that BC stands for "Bring Cash" and is an expensive place to operate.)

sky's the limit · Post by **sky's the limit** » Mon Oct 01, 2007 10:48 am

redbull wrote:sky's the limit wrote

"All I can say is, you people in Alberta better get whatever you can out them now, because your province is being ruined, and when it's gone, you're going to have precious little to show for it. I've flown every square inch of the Tar Sands, the Gas Patch and beyond, and it's nothing short of a mess. Moose wandering around with growth's the size of basketballs, waterways ruined, and air quality that makes Hamilton look nice.

I have lived in Northern Alberta my whole life. I have never seen a moose with a growth nor do I breath air that is any worse than anywhere in Southern Alberta or Southern Ontario or most places in Canada. I laugh when I hear this from people who have never been here.

I laugh when I hear people talking out their ass, and in complete and utter denial... But hey, what do I know? It's you Province, do what you like with it, but don't come crying to me for help when you make the big realization.

1)They are all over the place, I've surveyed them. And fish too, but I guess you won't believe me there either.

2)Yes you do, I've set, serviced and helped monitor air quality towers all over NE Alberta.

3)I've almost certainly been over/on more of N. Alberta than about 99.999% of Albertans. Next.

stl

MUSKEG · Post by **MUSKEG** » Mon Oct 01, 2007 11:28 am

And you have trapped those Moose and identified the growth as directly related to oil and gas right. Or could it maybe be that these animals injure their antlers in the heavy growth stage and this produces weird and wonderful shapes. Until you have concrete proof that they are caused by polutants my opinion is as valid as yours. An expert is just a drip that used to be under pressure. You'll find a lot of them in the civil service.

sky's the limit · Post by **sky's the limit** » Mon Oct 01, 2007 11:53 am

LMAO.

You guys must really be on the Kool-Aid. Future West Jet employees I guess.

stl

JAHinYYC · Post by **JAHinYYC** » Mon Oct 01, 2007 12:03 pm

sky's the limit wrote:You guys must really be on the Kool-Aid. Future West Jet employees I guess.

I am not sure what that means.

I am more of an Air Canada guy myself. I am a whore for Aeroplan points.

sky's the limit · Post by **sky's the limit** » Mon Oct 01, 2007 12:17 pm

JAHinYYC wrote:
sky's the limit wrote:You guys must really be on the Kool-Aid. Future West Jet employees I guess.
I am not sure what that means.

I am more of an Air Canada guy myself. I am a whore for Aeroplan points.

Ooops. Sorry about that.

stl

redbull · Post by **redbull** » Mon Oct 01, 2007 1:06 pm

sky:

I guess you are right, what would I know? I have only lived here for 34 yrs. I am sure you know more about the oil industry then all of us folks from Fort Mac. After all you have flown over most of Alberta!!

sky's the limit · Post by **sky's the limit** » Mon Oct 01, 2007 3:48 pm

redbull wrote:sky:

I guess you are right, what would I know? I have only lived here for 34 yrs. I am sure you know more about the oil industry then all of us folks from Fort Mac. After all you have flown over most of Alberta!!

I know people who have lived in the same house for 70yrs and don't know anything outside their back yard.... So exactly WHAT is your point? I never claimed to know "everything about the oil industry," but I sure as hell wander around with my eyes open, unlike many who can't seem to see past their wallets.

I've had the opportunity to work some interesting projects in all over Canada, Alberta being one of those places. If you think for one second the Oil industry is not raping the Alberta landscape, think again. The things I've commented on, I've seen first hand, it's not speculation. I don't care how many years people have lived in a particular location, none of us live in China, yet we can all know with certainty the things that are going on there.

stl

MUSKEG · Post by **MUSKEG** » Mon Oct 01, 2007 4:41 pm

Ok I won't argue that but I still say you are fear mongering if you run around and tell people the moose antlers are deformed without having proof. Those antlers get damaged all the time and result in spectacular weird growth. Stick to the facts. And I agree the oil companies are raping the country.

sky's the limit · Post by **sky's the limit** » Mon Oct 01, 2007 6:14 pm

MUSKEG wrote:Ok I won't argue that but I still say you are fear mongering if you run around and tell people the moose antlers are deformed without having proof. Those antlers get damaged all the time and result in spectacular weird growth. Stick to the facts. And I agree the oil companies are raping the country.

I never said anything about antlers, I was talking about baseball sized growths on bellies, shoulders, and necks. The fact is, I've seen them, believe me or not. Fear mongering? No. But the 'other' side of the Oil Boom needs to be presented to people, especially those who live there. Am I the one to do it? No way.

As I said, it's your Province, do with it as you like. I don't work there anymore intentionally, and can't see me going back for anything more than a lung healthy forest fire....

stl

Four1oh · Post by **Four1oh** » Tue Oct 02, 2007 6:41 pm

if 'god forbid' Encana pulls out, where are they going to go? Also, can you imagine the line up of companies that WOULD be willing to pay a 20% royalty just to get a crack at the obviously lucrative resources?

Kelowna Pilot · Post by **Kelowna Pilot** » Tue Oct 02, 2007 11:23 pm

The time is now...