What do "We" think of Penn West" ?

[Guest]

Re: What do "We" think of Penn West" ?

Now, about my American wife project, what news?
Mike

Can someone please instruct Mike in the meaning of "political correctness"? American colleges banned sexist humor a decade ago Miker. Haven't you heard?

[The Outback Oracle]

Re: What do "We" think of Penn West" ?

Can someone please instruct Mike in the meaning of "political correctness"? American colleges banned sexist humor a decade ago Miker. Haven't you heard?

Pommies have been regarded as a barbarian lot by the rest of Europe for centuries, why change? Mind you, I'm not sure what that says about their antipodean offshoot that the Poms themselves think are barbarians!

[Guest]

Re: What do "We" think of Penn West" ?

Pommies have been regarded as a barbarian lot by the rest of Europe for centuries, why change? Mind you, I'm not sure what that says about their antipodean offshoot that the Poms themselves think are barbarians!

Aussie Oracle - my only comment - skip the 'reason for editing' polite disclaimers and let yer chips fall where they may.

Anyone here who upholds political correctness (God save us all from gratuitously sexist comments - as women are our better half anyway and will have first dibs on all the best berths in heaven), we can always threaten to unleash Metalman on them.

Then they'll really be sorry!

Metalman's "school for good drawing room manners' churns out "Ambassadors" that look very similar to those giant digging machines - you know, those mechanical monsters you see at the blind end of mining tunnels with the three dozen whirring carbide grinders at the ends? (Mish, run for your life - they are only digging after 'da-flation' mulch!)

Here's a "Metalman Ambassador" (very self-effacing chap)

METALLIC-AMBASSADOR-01.jpg
METALLIC-AMBASSADOR-02.jpg
METALLIC-AMBASSADOR-03.jpg
METALLIC-AMBASSADOR-04.jpg

[raja]

Re: What do "We" think of Penn West" ?

careful, india announced $300B oil drilling program, and so clearly the DEMAND is and will remain there.

Perhaps India is not expecting a worldwide recession, and should one occur, their drilling program will have been a mistake.

[Guest]

Re: What do "We" think of Penn West" ?

Perhaps India is not expecting a worldwide recession, and should one occur, their drilling program will have been a mistake.

Raja - with utmost respect, I do notice many of your observations seem to take a very short time horizon. India's oil drilling program, a mistake, because it's initiated at the start of an anticipated global recesssion? Quite apart from the question whether this much anticipated global recession will ever even arrive - in today's macro environment for oil (impending critical supply crunch with 5-7 years) how could any nation's drilling program for oil within their own territory be remotely conceived as a mistake? :confused:

[The Outback Oracle]

Re: What do "We" think of Penn West" ?

Yeah Luke! I just love that machine...it might even beat the hell out of my old CAT D7D!

[raja]

Re: What do "We" think of Penn West" ?

Raja - with utmost respect, I do notice many of your observations seem to take a very short time horizon. India's oil drilling program, a mistake, because it's initiated at the start of an anticipated global recesssion? Quite apart from the question whether this much anticipated global recession will ever even arrive - in today's macro environment for oil (impending critical supply crunch with 5-7 years) how could any nation's drilling program for oil within their own territory be remotely conceived as a mistake? :confused:

I guess it depends on India's timeline and the length and depth of the recession . . . .
If they're expecting or needing to make profits soon, and they don't because of demand destruction due to recession, then I'd say it was a mistake . . . just like investing in silver 15 years ago -- the long-term direction was right, but the timing was wrong.

[Guest]

Re: What do "We" think of Penn West" ?

I guess ... length and depth of the recession ...

Raja - eventually you'll come around to a different point of view. I give it two or three more years (ask Rajiv!). There is no such thing any more as a recessionary collapse in global petroleum demand. Forget it. It ain't gonna happen no more. Not ... any ... more.

All those 'but it's never different this time' guys are going to be stood on their heads. Soon.

[GRG55]

Re: What do "We" think of Penn West" ?

Your thoughts?
Mike

FYI. From Penn West 1st Q 08 report...

http://ca.news.finance.yahoo.com/s/0...ter-ended.html
The first quarter of 2008 was a time of great activity throughout Penn West. Our asset base expanded considerably in mid-January as we closed the acquisitions of Canetic Resources Trust ("Canetic") and Vault Energy Trust ("Vault"). While certainly not without challenges, we have been pleased with the integration process to date and are comfortable that the successes seen throughout the first quarter will continue. Operationally, Penn West executed a $278 million capital development program during the first quarter and drilled a total of 115 net wells at costs lower than budgeted.

Pro forma production for the quarter, with Canetic and Vault included from January 1, 2008 averaged 201,800 barrels of oil equivalent ("boe") per day, in-line with our expectations particularly given the cold weather experienced throughout February. Average operating netbacks were robust at $40.57 per boe compared to $29.51 per boe in the first quarter of 2007. Netbacks from light oil and natural gas liquids reached $49.82 per boe, which was an increase of 47 percent year-over-year. Much of this increase can be attributed to recent record commodity prices, which have continued to rise subsequent to quarter end. Funds flow, with Canetic and Vault included post-close was $632 million ($1.76 per unit basic) in the first quarter of 2008, 103 percent higher than in the same quarter of 2007. Our distribution payout ratio in the first quarter of 2008 was below our targeted 60 percent.

The forecasted 2008 capital development budget of $960 million includes approximately $60 million for the Peace River Oil Sands, $65 million for CO2 and waterflood improvements, $170 million for optimization activities and $50 million for environmental activities. Current guidance is for pro forma production volumes to average between 195,000 - 205,000 boe per day for 2008. Using assumed commodity prices of US$107.00 per bbl WTI oil, $8.50 per GJ at AECO for natural gas and an average CAD/USD exchange rate of par for 2008, Penn West's funds flow is expected to be $2.7 billion to $2.9 billion for this year. Should commodity prices remain reasonably close to the current forward strip prices, our payout ratio would remain below our targeted range. This lower payout ratio(1) would afford us the opportunity to apply additional funds to debt repayment, adding strength to our balance sheet(2).

In the first quarter of 2008, oil prices reached record highs in U.S. dollar terms, and natural gas prices rallied. The Canadian dollar remained relatively solid against the U.S. dollar while financial markets continue to be volatile as longer-term bond yields remain at historically depressed levels. Current commodity prices remain strong, and oil prices continue to break record highs.

Greenhouse gas emissions are increasingly moving to the fore of the political agenda both federally and provincially. This signals a significant step forward in our growing enhanced oil recovery ("EOR") programs as both governments and CO2 emitters seek a means through which they can reduce the amount of greenhouse gases released each year. We are actively working with all stakeholders to secure appropriate and adequate CO2 sources for our growing EOR projects. Bill Andrew has been appointed to sit on the Alberta Carbon Capture and Storage Development Council. This council will develop Alberta's plan to move ahead with carbon capture and storage projects throughout Alberta by the fall of 2008.

We will continue to focus on our potential, and follow a strategy that facilitates future development of our extensive asset base. With our strong track record in light oil, waterflood recovery and enhanced recovery, it follows that we should look for similar light oil pools in other basins. As well as offering opportunity to recapitalize and re-energize assets through new ideas and technologies, we see these as structural options providing improved portfolio and risk management, which are important for a producer of our magnitude.

Penn West exited the first quarter of 2008 with unprecedented strength, including a suite of high-quality conventional and unconventional projects with mid to long-term exploration, development and enhanced oil recovery potential, industry-leading ownership of western Canada's largest legacy light oil pools, and an enterprise value in excess of $15 billion. We are committed to realizing the maximum value of Penn West for our unitholders.

There were several key additions to the management team at Penn West during the first quarter. Of note was the addition of Murray Nunns as President and Chief Operating Officer. Mr. Nunns has 29 years of growth oriented oil and natural gas experience, and brings to Penn West a long history of consistent success as an exploration and operational executive. Subsequent to the end of the quarter, Ms. Hilary Foulkes joined the management team as Senior Vice President, Acquisitions and Divestitures. Ms. Foulkes arrives at Penn West having spent the last eight years with one of the most prominent oil and gas asset clearing houses in North America. Ms. Foulkes is a professional geologist with more than 20 years experience in the oil and gas industry. Her wealth of experience and keen insight into deal flow both here in Canada as well as the U.S. will position Penn West to better capitalize on opportunities as we seek to rationalize our extensive portfolio of assets.

We continue to assess and apply new technology aimed at increasing ultimate recovery rates to the largest portfolio of light oil properties in the Western Canadian Sedimentary Basin. During the first quarter of 2008, we drilled two vertical in-fill wells within the Pembina 'A' Lease pilot and expect the Horizontal CO2 pilot construction at Pembina to be completed and on-stream mid-second quarter of 2008. The CO2 pilot in South Swan Hills is currently in the final stages of construction with an expected on-stream time of early next quarter. Our pilot projects at Pembina and South Swan Hills continue to enhance our long-term potential for enhanced light oil recovery and sequestration of greenhouse gases using CO2 injection miscible flooding.

Subsequent to the end of the first quarter, we took actions to diversify our capital structure. On April 30, 2008 we announced a proposed offering of notes to be issued on a private placement basis, primarily in the United States, with an aggregate principal amount of US$480 million of guaranteed senior notes plus $30 million in Canadian dollar denominated notes maturing from eight to 12 years. We will use the proceeds of the notes to repay a portion of our outstanding bank debt. We are focused on continuing to maintain a strong and diversified balance sheet.

[Guest]

Re: What do "We" think of Penn West" ?

I guess it depends on India's timeline and the length and depth of the recession . . . .
If they're expecting or needing to make profits soon, and they don't because of demand destruction due to recession, then I'd say it was a mistake . . . just like investing in silver 15 years ago -- the long-term direction was right, but the timing was wrong.

I read yesterday while researching that oil from relatively hard to extract tar sands becomes profitable at a price of $30/barrel. If that's the case, considering that oil is now about $120 I'd say there's plenty of room for a recession based drop in demand AND some hefty profits from good old drilling based extraction.

[sadsack]

Re: What do "We" think of Penn West" ?

No complaints, at least in the short term.

PWE is up ~15% (in addition to the 10+ percent dividend) since I bought on the 3/20 dip.

The only question is: how far down along the tiger's tail have I grasped?

[Shakespear]

Re: What do "We" think of Penn West" ?

If that's the case, considering that oil is now about $120 I'd say there's plenty of room for a recession based drop in demand AND some hefty profits from good old drilling based extraction.

The is the Big Question, how much will demand drop. So far not much. All those Chinese driving motorcycles are not going to stop doing it any time soon.

As for drilling being profitable, one problem here. Cost involved in drilling and producing have gone through the sky !!!! So producing those tar sands will not be so cheap when you start looking at the water demand and energy costs required to do it. Not to mention environmental mess that it will entail.

[GRG55]

Re: What do "We" think of Penn West" ?

I read yesterday while researching that oil from relatively hard to extract tar sands becomes profitable at a price of $30/barrel. If that's the case, considering that oil is now about $120 I'd say there's plenty of room for a recession based drop in demand AND some hefty profits from good old drilling based extraction.

Canadian tar sands is not profitable to develop at $30. Not even close.

It's debatable if it's even profitable to produce [from existing, completed oil sands projects] at $30 when one includes any reasonable ROCE (return on capital employed) measure. Only the older, largely depreciated facilities would generate adequate returns at that oil price. And that assumes that the fuel, natural gas, falls proportionately to oil at $30 [I would not expect it will, but that's just my opinion].

Edit Added: By the way, there is no "one number" for the price of crude oil that makes Canadian oil sands or heavy oil projects profitable. Talking heads on Bubblevision conveniently fail to mention that the threshold oil price to make any individual oil sands/heavy oil project profitable depends on many factors including:

• is the final product going to be bitumen, upgraded oil, or synthetic crude;
• what's the spread between bitumen and synthetic crude, and which way will it move next;
• is a mining or in-situ production project;
• if it's in-situ, does it require steam injection or is it cold production;
• how deep is the ore;
• what grade is the ore [both of these vary considerably across the Athabasca oil sands region];
• is it an expansion added to an existing operation (e.g. Suncor or Syncrude), or is it a greenfield project;
• if the oil is being upgraded is that going to be done many miles of pipeline away in an expanded refinery (e.g. Shell Scottford or PetroCanada) or in a newbuild upgrader (e.g. Nexen Long Lake)

...and so forth.

For those that think oil sands are wildly profitable to develop just because WTI is north of $120/bbl, an examination of the price [per reserve barrel] that oil sands lease holder Synenco was recently sold to France's Total should dispel that notion.

[GRG55]

Re: What do "We" think of Penn West" ?

Another day, another acquisition. Watch for more in the Cdn oil patch...

http://www.pennwest.com/documents/PWT-ENE.pdf

[bill]

Re: What do "We" think of Penn West" ?

Another day, another acquisition. Watch for more in the Cdn oil patch...

http://www.pennwest.com/documents/PWT-ENE.pdf

production on its way south?

http://www.willbros.com/fw/main/default.asp