Looking for serious discussion on economics of our unconventional assets. I keep hearing that they have not generated sufficient cash flow to date but I also hear that the new wells far exceed our hurdle rate. Which is true; are they economical or not?
11 replies (most recent on top)
2x. Moron
Bingo. Eagle Ford and ugly step sisters Bakken, Delaware and Niobrara have been a cash flow loss with no chance of reaching break even in a $40-$60 oil price environment. COP has hidden this fact from the analysts (hey analysts, how about asking questions. Come on Merrill, JP Morgan, Goldman, Deutshebank. Start doing your job. Get COP on public record regarding shale performance to date). Internally, the employees know the magnitude of the cash flow losses for each of the plays. Pull the data from SAP. Come on ELT, share the data in the worthless town halls. You are on record as this is the future "growth area". It is all we have and we can not reach break even. If this does get out, look for stock price to be adversely affected.
You serious? Not sure the company can stand the truth. The previous Economics manager was severed because he told the truth. The next one was fired. The current one is a Brit so the ELT is sure to get the pucture they want.
Hint: look at cumulative ATNI for Eagleford, our best unconventional asset. Nothing more need be said.
judgmental hoser!
The way things are funded in the L48, any well exceeds the hurdle rate because well AFE economics only include well facilities, drilling and completions. Infrastructure (i.e. pipelines, processing, compression/boosting that is required to actually sell products) is funded on a separate AFE (with the same barrels we already used to justify the well AFE). They will say, "that's why the L48 hurdle rate is higher than the corporate rate" ... I'm not sure the higher hurdle rate accounts for at least double dipping on barrels but "that's why we have the LRP." As I'm sure you're aware, we only run point forward economics which means it doesn't matter how much we've already sunk into the assets, just have to look ahead where we always assume we make more product for less money because we are always improving!
Short answer: xhf is correct, the data is a cluster and it appears nearly impossible to get any transparency - internally and externally.
You are exaggerating, the original AFE was for $3.5B. Stop trying to make us look bad!
- Capital Projects Canada
The esteemed capital projects group and their fearless leader turned Surmont 2 into a $10B project, a far cry from the intital $3B AFE. Does that answer your question?
We do not talk about such things. Just go with the flow. "I know nothing"-Sgt. Shultz
Grass is green, sky is blue.
Is this serious enough for yall
This has been a big question for not just COP but other independents too. None of the operators to my knowledge are giving pure data showing this aspect.
Any well is economical if you put a big enough forecast on it or include unrealistic assumptions as part of the analysis.