Long Run Explor Ltd Ord WFREF

Oil... a commodity of societal importance.

[sapiensunus]

‘Tis the story of all commodities…up and down. This is part of an article from the New Yorker. “The shale-oil boom has added to uncertainty, too. OPEC has no control over what U.S. producers do. And even though shale-oil producers often face higher production costs than traditional drillers do (which should make them quick to cut production when prices fall), many also have debt payments to make and fixed costs to meet if they don’t want to go out of business. So they’re likely to keep pumping, since that keeps revenue coming in until (they hope) the price recovers. But continuing to pump, of course, makes it harder for prices to stabilize. It would be a mistake for oil producers to expect a return to the high, stable prices of recent years. By the same token, American consumers shouldn’t get too used to cheap gas, since in the long run low oil prices erode the conditions that brought them about. Producers are already starting to adjust: ConocoPhillips just announced that it’s cutting its drilling budget. And, because cheap oil gives everyone an economic boost, eventually it leads to higher demand. We’re awash in oil right now. Soon enough, we may be wondering where it all went. “ https://www.newyorker.com/magazine/2014/12/22/low-can-oil-go We all know that prices can go lower… but one thing is for certain – they won’t and can’t stay there for long because like all commodities – it’s a cyclical business. Sure they may cut the dividend again, but that will depend on net profit and market oil prices. It will also depend on how much they adjust production because they may do that at some point too. Can they stay in business? Well… let’s put it this way, they are in much better shape than an explorer that doesn’t produce and if they run into trouble you can rest assure that half of the oil market will be closing up by that point. Finally, like with all commodities (talk of gold at 500 – remember that)? A commodity can’t stay below average production price for long. The process of shutting in will only increase the commodity price. After all… this company just happens to have great assets in the best part of Canada, and that may even be worth something at some point – look at Talisman. Before the takeout bid the share price took a pounding and it’s debatable whether they have better assets. However, if this leads to a recession – then there’s no place to hide. GWH