Hurricane Harvey devastates Texas Oil Industry......As with a lot of other people I have been glued to CNN and the Weather Channel's coverage of Hurricane Harvey's devastation in Texas. According to news reports Texas refiners represent 45% of the refining capacity of the United States and Texas Oilfields represent 30% of oil production capacity in the United States. Until the skies finally clear officials will not be able to assess the extent of the damage caused to refineries, oil storage facilities, pipelines and oilfields but I suspect that the damage will be significant and that it will be sometime before the industry will be able to recover, fully, from the affects of the storm.
There are a number of Canadian oil and gas companies, including oilfield services companies, that have operations in the state of Texas and I suspect that they will have sustained significant damage and losses of warehouses, equipment maintanance yards, rigs, heavy equipment, trucks, etc.and they will be feeling the pain. Many, if not most, of their employees would be without a place to call home and they will not be in a mental state to think about returning to work when they are worried about finding a new place to live, dealing with insurance companies, medical bills and trying to find a way of returning to some degree of normalse for themselves and their children.
As for the oilfields, themselves, how flooded are the drilling leases, access roads, etc. from flash-flooding and the deluge of rain that has hit them? The ground is going to be so saturated with water that it is going to take a long time for the ground to finally dry out enough that oilfield personnel will be able to access the leases but not before having to rebuild washed out roads and utilities. How many rigs have begun to sink into the soupy mud and begun to buckle and become unstable? The land based big triples can weigh a combined total of 4000 tons while singles can weigh as little as 400 tons. Drilling rigs must be maintained in a steady level state because if they begin to shift slips, hydraulic cyclinders, top-drives can become misaligned and damaged under pressure and drill casing and pipe can be buckled near surface or down hole if crews were unable to pull the drill string out of the hole and cement off the well before securing the rig for the storm. Even if the fields sustained suprisingly little damage, as a result of the hurricane, even if personnel were able to reactivate the wells and get the rigs fired up again, without issue, then it would not matter how many wells they were able to bring into production. If pipelines, storage facilities and refineries were still incapacitated that oil wouldn't be going anywhere anyway until the downstream facilities were functioning once again.
For the United States to potentially loose 45% of it's refining capacity and 30% of it's oil and gas production capacity, even for a few weeks or months, could be a major financial and economic hit. The colonial pipeline, that was built at the beginning of the Second World War, to provide the vast quantities of refined gasoline to the east coast, that just could not be delivered any other way to meet the demands of the war effort, still provides gasoline to the east coast and is, if I recall, one of the only pipelines that does so. Without that pipeline delivering gasoline to the east-coast, in the quantities that are required to service that market gasoline shortages could result as east-coast refineries would be unable to meet the demand. There are just not enough of them and those that exist do not have the capacity to make up for the deficency. Consumers, living on the east coast, will experience large jumps in the price of gasoline and Canadians, living on the east coast, will not be ammuned to price hikes, as well, as the Colonial Pipeline provides gasoline to that market as well. I suspect that the Mayor of Montreal and the other mayors, in Quebec and Ontario, that had strongly opposed the Energy East Pipeline may start to rethink their positions on the construction of the pipeline as the cost of fuel climbs to the point where cities have no choice but to raise the price of passes for public transportation, pay for the fuel that runs their snow-removal equipment, etc. They will be hurting. As an additional footnote regarding the Canadian and US east-coast refineries, soon many of them will be shutting down for inspection, maintenance and preparation for the production of winter fuels which will put additional strain on the system. These refiners have to carry out these steps in order to prepare for the production of the winter fuels. They can not delay these actions for too long. Winter is not all that far away.
As for the XL pipeline. I suspect that there is a strong possibility that with the strong possibility of a loss in oil production capacity as a result of Hurricane Harvey that access to Alberta's oil reserves will, again, be seen as a strategic necessity and the US government will throw the rule book out the window and declare the construction of the pipeline to be needed to be built, with or without states' authority to provide for the emergency and strategic requirements of the nation. Others, I am sure, will strongly disagree, with this comment but it could be seen as a legitamate arguement.
So, where does Manitok Energy enter into all of this? Should it come to pass that Hurricane Harvey was able to do what OPEC and the Saudi's have been unable to do-get the price of oil back up above $55.00 a barrel and bring down the glut of oil now in storage around the world-the price of oil should climb and, once again, oil companies will be coming to Alberta looking for oil and Manitok Energy will be waiting for them along with all of the other oil and gas companies that were abandoned by the big US players who will be taking a huge hit to their bottom lines after Harvey gets through with them. Our OIL AND GAS BUST is about to turn back into a new OIL BOOM!
In the interest of full disclosure, I hold 50,000 shares of Manitok Energy.