mrbb wrote: my last post wasn't about ipl dividend sustainability or its financial, it was about oilsand producion cost. Production cost definition is not consistently spoken. Some may and some may not include cost of capital in their production cost. Here is a graph from CNRL
https://www.oilsandsmagazine.com/news/2018/12/6/canadian-natural-resources-cuts-capex-2019-growth-oil-sands-projects
Here is cnrl statement
Total SCO production volumes from both Horizon and Scotford upgrader averaged 394,000 bbl/day in Q3/2018. Operating costs, including mining and fuel, are expected to fall below C$25/bbl this year.
yes, thats including upgrading. SAGD production cost are even less. Here are more examples
Cenovus plans to spend about $385 million at Foster Creek next year, up about $145 million from this year's forecast. Production is expected to average 170,000 bbl/day, up about 10,000 bbl/day from 2019. Operating costs are forecasted to dip slightly to C$8.60 a barrel.
The company plans to spend $335 million at Christina Lake in 2020, down $25 million from this year's capital spending forecast. Production is expected to average about 230,000 bbl/day, up from 195,000 bbl/day in 2019. Operating costs are projected to fall 10% to about C$6.60 a barrel next year.
Suncor’s expected Oil Sands operations cash operating costs per barrel are $24.00 – $26.50 (US $18.25 – $20.15) reflecting lower 2020 planned maintenance.
From Meg (5.24+4.61+1.99) = 11.84 C$/bo
Annual net operating costs in 2019 averaged $5.24 per barrel, a 3% increase compared to 2018, directly impacted by higher natural gas purchase prices which were partially offset by higher sales of surplus power from MEG’s cogeneration facilities. Non-energy operating costs averaged a record low of $4.61 per barrel as the Corporation continues to drive efficiency gains into its operations while maintaining production levels. Net operating costs during the fourth quarter of 2019 were higher than the fourth quarter of 2018 mainly as a result of higher energy costs.
General and administrative (“G&A”) expense was $68 million, or $1.99 per barrel of production, in 2019 compared to $83 million, or $2.58 per barrel of production, in 2018.
As i've said in my previous post, oilsand opcost is 15-25 C$/bo.
Fantome wrote:
mrbb wrote:..
not many understood the business of oilsand. Actually opcost of surface mining and SAGD oilsand are not that high, 15-25$/bo ( i know some are under 10 initially) Yes, the all in cost is high when including high initial capital cost of surface production facilities. The big facilities are sunk cost and need to be paid back. Unlike conventional light oil, oilsand operation can't be turn off and on like a faucet tap. There is a big cost to shut it down, and even bigger cost to restart it. Oilsand producers can and would keep running operation for the FCF above the opcost or even losing a bit to avoid a shut down. As long as the debt is manageable and/or have line of credit, paying out the capital component can be stretch for much longer period. Suncor, cnrl, cve, husky didn't not shut down any oilsand operation back in 2008, 2015 price crash. Unlike shale oil which decline rate is 50-70%/yr, oilsand production decline is tiny to flat line. This is why the US Rockefeller Brothers Fund, the William & Flora Hewlett Foundation and the Tides Foundation want to shut down the canadian oilsand and pipelines.
With all due respect...I think your post paints an overly optimistic view of the cost of oil sands production...the sunk capital costs are an essentially factor in determining the actual production costs....SAGD costs are much lower than the mining side when you factor in all the costs....
Anyway...in my previous post I was not predicting a dividend cut but providing an insight on the way the "Grownups" who work on the Street are looking at the situation regarding IPL based on my years of experience working there
As I said earlier and repeated in the last post....the math for the dividend has been stretched in last couple of quarters combined with a somewhat disappointing set of numbers on the revenue side...the current situation will lead many to expect even lower numbers for the number of quarters depending on how long the price war lasts... a few years ago when the Saudis put downward pressure on oil prices..it lasted quite a while...will it be the same this time around??...it's anybody's guess
In my last post i also talked about the FRAC spreads...again it is uncertain what will happen here..but the activity contributes alot to earnings and is just another potential risk which has to be discounted by the market to arrive at a SP for IPL
If you sincerely believe that the price war will end soon and the impact on throughput will be small AND the impact on FRAC spreads will be small...then you should buy the stock at these depressed prices...if not..then it would be prudent to wait a bit and see how all this plays out...