We need the refineries to come on, 2 weeks to recovery I don’t think that VII Generation is really trading with respect to WTI, because with WTI at 60 dollars that should put the price of condensate north of 78 dollars Canadian. and that would be a great price, Edmonton condensate is currently trading a 57 Canadian. Its just nervous investors in the oil and gas space.
U.S. Gas is approaching 4 dollars U.S. in almost all markets in the U.S. so there is North American uncertainty around gas supply and it will be spiking to 5 dollars very soon.
With gas prices spiking all the NGL’s will be spiking as well, so really VII generation is just caught up in a sideways market right now. We still have not had our first gas draw, but everyone knows a lot more is not going into storage, and storage levels are low.
VII generation is pushing 180,000 boe of condensate production from the third quarter into the fourth. So, I expect fourth quarter production to be 230,000 to 240,000 boe. Condensate production 95,000 boe a day.
The refineries in the U.S. are running at 90% in two weeks they will be running at 93% and their will be an oil draw, until then oil will be flat.
In the Canadian marketplace condensate is still trading about 30% above 18 dollars above synthetic, and 23 dollars above sweet, and 34 dollars above select.
There is about 200,000 boe a day shortfall in condensate required in Western Canada, so no one is going to ship condensate valued at 78 dollars a boe, add 10 dollars for shipping = 88 dollars to Canada and sell it 57 dollars.
So, I think the refineries need to start working and these oil inventory drop a bit, condensate will get back to at least 78 dollars. Especially the colder it gets the more condensate they need. This is a buying opportunity. Last year average production was 175,000 boe. This year average production will be around 200,000 boe. Next year with a 10% discount in drilling costs, likely 225,000-235,000 boe is my guess. 150,000 boe of liquids. Cash from operations 1.8 – 2.2 billion.
IMHO