Reading between the lines They expected oil prices to be higher in Dec 2022
They expect oil prices to be higher in the next month
They want to continue to emphasize their heavy oil business. At current oil prices they are better off focusing on their light oil business
If prices do not improve over the next 4-6 weeks (by the end of Jan/23) they will switch to mainly Cardiam and Viking light oil drilling with a few exploration / evaluation Clearwater and bluesky wells
$70-75 ish is the pivot point. Above that number heavy oil wells are more profitable. Below that number light oil is more profitable
Right now WTI is at about $75 and WCS is about $48
2023 is expected to have much higher oil prices. WTI in the $100-$110 range is a common forecast. Current differentials would put WCS at $75-82
If those forecasts are correct (or low) then they should budget 2023 similar to 2022 with heavy and light oil development
If current oil prices stay where they are in 2023 then they are better off switching to light oil Cardium and Viking drilling
They like their heavy oil results and want to keep drilling and building that business and are reluctant to slow it down in 2023. For that reason they are putting off the decision for 4-6 weeks
By the end of 2023 the trans mountain pipeline expansion should be open. This should significantly reduce the WCS discount
In that context it makes sense to expand heavy oil production over 2023 to get max advantage of higher WCS prices by the end of 2023. However if light oil is more profitable until then, they are better off deferring 2023 heavy oil production until trans mountain expansion is finished
You can see the strategic conflict
The solution OBE has adopted is one of flexibility. Ie wait another 4-6 weeks to see what oil prices do
This is the smart choice. Deployment of capital where it will get the best return.
Today that means focus on the light oil business. However gut feeling says that's not the best choice because oil prices are temporarily low and will be higher next year.
They are going with their gut and holding off a switch to light oil focus for a bit longer
Note they are essentially unhedged in oil - they think oil will be higher soon
The same logic is being applied to their 2023 drilling strategy
If oil prices do firm up, as I personally expect they will, then OBE will be fully exposed to that improvement