U.S. oil and gas producers are among companies hit hardest by new restrictions on tax relief for interest payments, an analysis of the impact of the reforms has shown… […]
Steve Pruett has seen more than his share of booms in three decades in the oil business. None, though, as strange as the one gripping the Permian basin right now…. “Oil men are innately optimistic,” he said, “and sometimes our optimism is our own worst enemy.”…By this point, “we’ve given up all of our profit margin,” he said, referring to the industry. “We’re over-capitalized, we’re over-drilling and, if prices don’t rise, we might be facing a double dip in drilling.” […]
Since 2010, the United States has been in an oil-and-gas boom. In 2015, domestic production was at near-record levels, and we now produce more petroleum products than any other country in the world. President Trump said he plans to double down on the oil and gas industry, lifting regulations and drilling on federal land. Here is the state of the petroleum extraction industry that the new administration will inherit. […]
“[Certainty can] seem like a good idea, but actually lead us into trouble… The story here revolved primarily around the stochastic nature of product development… Succeeding in product development requires the discovery and exploitation of options where there is an asymmetry to the payoff function.” […]
There are dozens of different mathematical constructions that yield bell-shaped curves. The “Hubbert” or “Peak Oil” curve is actually a special case of a class of s-shaped functions called sigmoids. While most sigmoid functions begin and end at different values, Hubbert’s curve is constrained to begin and end at zero by the formula and boundary conditions imposed that represent a perfect mathematical translation of Hubbert’s worldview. The curve reflects a battle between two competing forces or trends – one for growth and one for contraction – where the balance shifts between the two along the way. […]
Date of Source: 21 Oct 2016
Fifteen years ago it was common knowledge that oil and gas production in North America was in terminal decline. After decades of exploration, all of the profitable onshore oil and gas in Canada and the U.S. had already been discovered… While the attention of the majors was elsewhere, close to home something happened. Small companies run by entrepreneurial management teams cracked the code on vast amounts of oil and gas located here in North America. […]
Image source: Imperial Oil Corp. Corporate Overview – Winter-Spring 2017. pg. 5
- Imperial Oil Corp is a rationally integrated enterprise — assessing any given business segment in isolation ignores synergies which are especially important during the lower half of the commodities cycle.
- The upstream business segment, by far the largest in terms of capital investment, is heavily exposed to Canadian oil sands projects which are marginal in the current commodity prices environment.
- Yet, records profits from the downstream and chemical business segments demonstrate how they have benefited from cost advantaged feeds.
- In the current commodity price environment, IMO’s common shares are likely fairly valued $22 to $32 per share; there is significant uncertainty in that estimate.
- Given non-compelling valuation and risks, I do not hold the equity outright. However, I believe that call options may provide favorable risk-reward characteristics given their leverage to crude oil prices.
- Cenovus’ expanded asset base, following the $C17.7 Bn acquisition from ConocoPhillips, will be largely of high quality and is expected to more than double 2017 production.
- Its oil sands position is not terribly exciting in terms of growth, but it does promise commodity-price resilient cash flows which can be used to fund future growth.
- The companies largely expanded position in the Canadian Deep Basin may be largely under-recognized as a leading foothold in what my be aptly called “The Permian in the North”.
- Pre-acquisition, I posit that the current stock price of around $10 moderately undervalues the company and largely discounts potential commodity price driven and/or geological upside.
- Given the dearth of apparent opportunity in the upstream oil and gas space, CVE is favorite yet long idea of 2017.