Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Are Canadian Energy Stocks Set for a Rebound?

Commodities / Oil Companies Nov 20, 2013 - 12:21 PM GMT

By: OilPrice_Com

Commodities

As Canadian energy stocks are finally seeing a bit of a push, and demand for Canadian commodities looks set to rise, juniors are confident that economics will ensure that Canadian oil—the cheapest in the world—will find its way to more markets, with or without Washington’s approval of Keystone XL. In the meantime, some sweet spots in the Western Canada Sedimentary Basin, like the Montney shale formation—are showing promise as gas turns into oil for the bigger players, while the juniors are hoping to piggyback on this new success. 


In an exclusive interview with Colin Soares, the CEO of High North Resources we discuss:

·         How Libya and Warren Buffet boosted Canadian energy stocks

·         Why we can expect stronger demand for Canadian commodities

·         Why simple economics favors Canada’s cheap crude

·         Why Canadian juniors are banking on $70 oil

·         Why oil price volatility will haunt us

·         Why we shouldn’t expect a big change in Canadian crude price differentials just yet

·         Why Washington’s approval of Keystone XL isn’t as critical as before

·         What we can expect from all the hush-hush over the Western Canadian Sedimentary Basin

·         How the key for juniors in the Montney shale is to piggyback off the shift from gas to oil exploration

James Stafford: For the first time in months, Canadian ETFs are seeing an increase in flows—especially for financial and energy stocks. What is pushing this? 

Colin Soares: I think there were a few factors. International money started flowing back into Canadian energy as global oil prices jumped 15%, on the back of Libya production falling down.  WTI followed suit and all of a sudden the Canadian oil price was over $100 a barrel.  Cash flow and profitability soared in Q3 2013.

Canadian management teams have got so used to deep oil price discounts, we focus only on developing top assets—ones that payout in a year on $75 oil.  That’s certainly true for the juniors—and there are hundreds of them in Canada.  We have become a lot more disciplined in the last year as investors switched from growth at all costs to sustainable growth; growing within cash flow.

Then I think you just combine all that with the fact that the valuations on Canadian oils were so cheap—from juniors like us right through to seniors like Suncor. Warren Buffett bought a big chunk of Suncor this year and I think that helped money flows into our sector as well.

James Stafford: Can we expect stronger demand for Canadian commodities?

Colin Soares: Absolutely. The Americans are not allowed to export their crude, and Canada is. We now have the cheapest oil in the world, and simple economics says it will find a way to a market. The light oil might go to the west coast via a new pipeline, or it might travel across Canada to the eastern Maritime provinces, but it will find a way—for both heavy and light oil.

The US will always want our heavy oil, as their refining complex is mostly heavy oil. And our heavy oil trades at a discount to both Mexican and Venezuelan heavy oil.

James Stafford: What does this mean for Canadian juniors?

Colin Soares: It means we can budget on at least $70 oil, which is what we’re doing. 

James Stafford: Canadian heavy crude is sold at a large discount to US and world crude, but analysts are now predicting the end of these big price “differentials” as they’re called, for Canadian heavy oil. Do you see an end to this volatility, and what factors will contribute to closing this gap?

Colin Soares: No, volatility will absolutely stay. Just having one refinery go down creates a big differential for a few days. And of course, pricing is seasonal as refinery maintenance happens in spring and fall, and oil prices are lower then, and the differentials are bigger then. You just get used to that and budget an overall price. Strong projects, with good economics will make money regardless of fluctuations in the oil price.

At High North we have been using a $70/barrel oil price to calculate our numbers and we are confident that we still have one of the fastest payouts of any wells in North America.

James Stafford: How do you see this playing out by the end of the year and into the first quarter of 2014?

Colin Soares: Differentials will stay larger than normal—though what’s normal anymore?—through Q1 2014 until more pipeline capacity gets into place around North America.  There is 800,000 barrels a day of refining capacity coming online in just the next two weeks!  That is more competition and will raise North American oil prices. 

And pipelines are racing to keep up to production increases and doing a good job.  TransCanada’s Keystone South project will be starting in just a few weeks taking oil from Cushing down to Houston.

James Stafford: How much depends on Washington’s approval of the northern leg, the Keystone XL pipeline?

Colin Soares: Fundamentally, not as much as before—because of huge increases in crude being transported by rail—but from a market point of view I think it’s still a big deal-- I  think market valuations would increase with Keystone approval.

But even with the approval of the Keystone XL, we are still a long way off until the pipeline is built and price differentials narrow to be really tight. Once again, good projects with strong economics will make money regardless of the fluctuations in the oil price. 

James Stafford: Will Canada continue to increasingly rely on rail transport for oil products despite the Quebec train disaster? 

Colin Soares: Yes, and in the US as well.  Right now Canada is transporting about 200,000 bopd of oil by rail, and experts are thinking that will more than double in two years. Until new pipelines are approved and built, oil products will rely more on rail.

James Stafford: As we head into a New Year, what will be the key drivers for the Canadian oil and gas industry? 

Colin Soares: I think the market will be more focused on balance sheet and financials, not just straight growth, or growth at any price.  It’s a lot more about sustainability now.  With a lower oil price, you will have to show you can grow inside cash flow, or very close to cash flow.  Plays where the wells payout their costs really quickly—like around a year--will get a premium.   And that’s the type of asset we have.

James Stafford: Canada’s National Energy Board just said the Montney Formation in the Western Canadian Sedimentary Basin is one of the largest gas deposits in the world—some 450 trillion cubic feet of gas, 14.5 billion barrels of liquids and 1.1 billion barrels of oil.  What does that mean for the Canadian energy industry?

Colin Soares: For gas, it means we have decades of supply—and low cost supply.  All those liquids like propane and condensate pay for the gas wells—so the gas has almost no cost to it.  The liquids make the gas very economic.

And so when everybody starts drilling these big gas wells, they’ve been finding oil as well.  And you’re seeing  a lot more exploration now targeting light oil to the North.  The oil is shallower, and so it’s cheaper to get it out of the ground—it’s actually a perfect play for a junior like High North.

James Stafford: How much can we expect to be spent on developing the Montney oil play for this year and next?

Colin Soares: There are several companies working in north-western Alberta who are having success developing the Montney oil play. Long Run Exploration recently announced a $110-million expenditure to develop its Montney oil project—they’re right beside us developing a big fairway. RMP Energy recently raised $50 million through GMP Securities, bringing their capital budget to $168 million for their Montney project.

James Stafford: What’s the sweet spot in the Montney formation for oil?

Colin Soares: That’s too early to say yet.  I would love to say we are in the sweet spot, being as Long Run is just to the north and east of us and RMP is just to the south and west, but the reality is that RMP right now looks like it has an initial sweet spot at Ante Creek.

But there is still a learning curve involved with drilling successful wells. The key for the juniors is to piggyback off the knowledge of larger players like Long Run and RMP.    

James Stafford: Colin, thanks for taking the time to join us today.

For those readers interested in finding out more about Colin and High North Resources please take a moment to visit their website: High North Resources

By. James Stafford Oilprice.com

© 2013 Copyright OilPrice.com- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules