30
Apr

Wrap – Week Ended 4/29/11

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Next week look for another swarm of mid cap E&P earnings, the natural gas supply slide show, ZLT performance year to date, a new idea or two, and a fresh catalyst list.

8 Responses to “Wrap – Week Ended 4/29/11”

  1. 1
    crysball Says:

    VTZ……..Re Your Opinion on the Duvernay
    Keith Schafer  had  an interesting writeup  that  Encana  had  just  spent  $300  at  an  Alberta  Lease  sale  purchasing  Duvernay  leasehold. Howevver  there  are  only two  well data  points  in the entire play, and  neither  of them  are  Encana  wells.
    Keith went on to say  the NGL's in the most recent well  are  highly  prized by Oil Sands  folks  to use for   blending,  and the  gas  has  an immediate  near  market  for SAIG  oil  sands.
    He  described  in detail  the two  companies  with  the Duvernay  wells.
    Is  the Duvernay  the next   big Gas field  in Canada…..and if  so  how would you play  it.? 

  2. 2
    VTZ Says:

    I can't comment on it too much and I don't track the companies specifically however Shell did buy out Duvernay oil and gas for their assets at the top of the last cycle when people were picking up Haynesville and other acreage like that and they paid a hefty premium. That might say something on the prospects. I believe they are the largest land holder in the area. I don't think the Duvernay shale is by any means a new story however the liquids portion sounds like new results. The Duvernay is typically included in the discussion about northeastern BC nat gas and the Montney shales.  
     
    As for the condensates from those fields, I can comment on the fact that we currently purchase them for blending and the prices are at a 5-10 $/bbl premium to light synthetic which is at a premium to WTI. They are used as a density cutter to meet pipeline specs (940 kg/m3 as a heavy or 875 kg/m3 as a light crude). Given that dry bitumen has a density higher than water you can see that the density cutting requirements are quite high volumetrically. Because condensate is lighter than light sweet synthetics and synthetics sell at a premium to WTI, condensates are better value for blending purposes because the volume that is blended into the crude is then discounted to heavy pricing (because it is being shipped on a heavy pipeline as part of the heavy crude blend).
     
    Two things about the condensate market in Alberta going forward. The struggle in Alberta will always be to maintain a balance between light and heavy crudes such that there is enough density cutter to ship products to refineries therefore that is the driver for upgrading because margins expand until there are new upgraders making more light product in the area or other condensates are brought into local terminals for import to the upgraders. That being said:
    -The Northwest Upgrader that is sponsored by the government is now going ahead to upgrade royalty bitumen, this should mean that there are more lights on the market for blending
    -The Southern Lights pipeline is being built and will be importing 80,000 bbl/day of condensate from the US and this should ease the supply constraints on the market.
    http://www.enbridge-expansion.com/expansion/main.aspx?id=1216
     
    It is however hard to say how the condensate market will look in Alberta because it's difficult to predict how many insitu/SAGD/CCS projects will be going ahead and their blending schemes. If I had to guess I would say that even with the 80,000 bbl/day coming back to the local pipeline terminals, there will still be a shortage beyond the intermediate term as a result of those projects which are simply too economic to pass up at these oil prices.
     
    Apologies for not being able to comment too much more on the actual Montney/Duvernay. I know there are many who are bullish on Celtic who is one of the smaller players in the area. That being said, there are many companies with pieces around that region as the acreage is rather large and fragmented. Even two years ago ECA was pounding the drum on the area as being one of the most economic plays in North America however the infrastructure was lacking and that area really is all trees. Now the infrastructure is somewhat improved and that should help development. NG prices aren't helping either.

  3. 3
    zman Says:

    Thanks for the color V

    Silver flash pullback

    http://www.marketwatch.com/story/silver-price-dives-gold-down-too-2011-05-01?link=MW_home_latest_news

  4. 4
    baylor3217 Says:

    osama bin laden dead.

    impact on market tomorrow?  Oil off 72 cents at 955pm CST

  5. 5
    Zorgnak Says:

    I don't know what crude will do but…
    To celebrate the death of Osama Bin Laden, tomorrow Starbucks will offer a .99 cent Osama Bin Latte…
    sorry that was pretty bad..  🙂

  6. 6
    baylor3217 Says:

    did SBUX merge with 99 cent stores?  That would be the cheapest thing ever offered there.

  7. 7
    baylor3217 Says:

    Apparently UBL had allowed his iPhone to "Set his current location".  Dang you AAPL!!!

  8. 8
    zman Says:

    The Monday post is up.

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