Bean, I agree with you.
Encana 2015 budget should be based on a realistic price deck - $67 WTI and $3.9 Nat gas.
Only a good leader can take a sharp turn based on what is in front of him and not what is behind.
Hey bean, you seem offended. Good.
What is wrong with Encana choosing to use their optionality? A word that they have coined.
Not saying the market is stupid. Just the market has been taking Encana as an oil company and has no option.
Don't you be worried now. I'm sure you are the POTUS.
All Encana needs to do is to declare that they are a Nat gas company in their 2015 budget!
Market has forgotten that Encana is still a significant Nat gas player.
It isn't working out right now which doesn't mean it won't work in the future, after a lot of US oil production got destroyed.
Encana can stay in profitable by Nat gas alone. Nat gas price is 10% higher than last year.
This is called "Optionality".
Read my "Optionality" post. It is something unique to Encana.
Other pure oil companies have no option. Encana definitely has an out.
Turn the Nat gas on Full!
Nat gas price is 10% higher than last year on average.
Divorce from oil for a year. Do minimum to maximize oil cash flow.
This is the right decision based on today's condition. Announce it on the 2015 budget. The stock will recover nicely.
I suspect he got the costs from COP company info.
For a fact, I heard in the last EOG conference call that they can get 10% return with $40 oil in their Permian, similar to COP.
I'm the same way, discounting Seeking Alpha if I read them as most are self serving.
Their costs is below $75. Makes 10% return at $40 oil.
This is from the horse's mouth, no generalization.
Encana has the same play too.
Oil is up 1.87% today.
ECA is up 3% today.
Halliburton interested in Baker Hughs is a testament that the energy sector is cheap after a across the board 30% drop! It also signals HAL sees the oil will go back up.
IEA projects a $80-$90 2015 oil price. This, the Halliburton and the US oil inventory/gasoline stock draws seem to have turn the oil psychology around.
Halliburton is talking to buy Baker Hughs. After the recent 30% decline, it is just cheap.
HAL is also calling a turn around on oil.
ECA ejected Prairie Sky so it is take-over-able now. I can see someone make an offer of U$24 to buy ECA.
yes, sell , sell sell and makes a good buying opp for the visionary investors.
At 52-week low and all that ECA has done in their transformation. It is a good deal.
Oil price has always been up and down, nothing unusual.
Today oil inventory has gone down by 1.5M barrels in US. Is this glut? A lot of psychology with the oil price.
ECA said they will spend their cap exp according to the cash flow (no asset sale or debt). Net back on Permian is $50/barrel based on $90 oil. So $75 oil still have a positive net back of $35/barrel. This is still more superior than the gas netback they had before, $8/barrel eq.
So do you see the reason for the transformation from a low margin gas to high margin oil?
They are working on their 2015 budget looking at various price scenario, $75 oil included.
I think your criticism is unfound and imaginary.
I agree that TMS might not go commercial unless the oil price is $100+ again. So not likely in the short term.
HK is pulling back from TMS and back to their core play. GDP is hanging on but might adjust lower with the oil price.
About the oil price...
No one really knows what will come.
But here is my two cents.
Saudi has fired their warning shot across the US shale players' bow...slow down your investment. They succeed. Expensive projects are called off and cap exp are trimmed for 2015 for some already.
Of course, Kuwait oil minister still sound tough and said he doesn't see any cut on Nov 27 OPEC meeting on Monday. He needs to keep the pressure on the US shale companies.
No one can't live at this oil price, $77. Even OPEC wants it to be around $90 but not too high to encourage more drilling in the US. So how would they achieve that? Just announce a cut on Nov 27. Doesn't matter if it is just a lip service. The word "cut" will stablize the oil price to $80-90. Job done.
If OPEC says "no cut", then this is amount to a mutual destruction and war on US, which a sane person would not do. Any more price tanking would not be viewed as friendly by the US. US wants to continue to march to energy independent. This is strategic. US might have to put a tax on oil import if it needs to protect the US oil producers and its energy independent objective.