RE:Is this a dumb idea?I dont think this can happen the way you envision it (shutting down entirely) but the concept is probably viable for a portion of production. It is definitely viable if you think about it industry wise. Particular producers may also defer maintenance and sacrifice volumes with this type of strategy. One way or another they will be creative. This is a resilient industry with a long track record of navigating ups and downs. Some producers could
Chris_toronto wrote: AECO's spot is rising quickly today in anticipation of the coming cold spill over Alberta. That's what you get when you have a commodity that is hard to store or transport; extreme price volatility based on weather conditions right now. Still, $1.71 in January is pretty low.
If in the summer months aeco spot averages something like $.40 or $.50 then Peyto would be better off shutting down competelyduring that period and not producing any gas. Give the workers a well-deserved summertime off. Save the production costs and meet your supply obligations which they hedged at an average price of $2.30 by buying them from the spot market for $.40. And selling only 60% of their capacity during that period. Does this makes sense, anybody think it is possible they could do that?
They will make $2.30 - $0.40 per boe/d by basically turning into a trading desk during that difficult period.
They would save having to pay the royalties on these barrels and the operating costs and the transport costs. And of course cancel the dividend for that period. They would still have to pay the interest, the executive salaries and the G&A costs.