Business writers have been hyperventilating over the market impacts of the Hunter Royalty Review Report on oil sands share prices. Globe and Mail today has an example of an over reaction quotes: “Oil companies’ share prices have tumbled on investor concerns that incomes will be adversely affected and make future project less viable.”
A decrease in the TSX in the past day has been blamed on the Royalty Review Report recommendations as well. Horsefeathers! The Globe Index Drags today shows the cause was mostly by Research In Motion, three big Banks and Suncor was the only oil company reported. BTW, the smallest of these stock market "drags" only has a capitalization of over $31B.
Well yes some of the oil stock declined – more of a dip than a “tumble and only for a day. CNRL shares dropped 5.9% on Wednesday and the Chairman is leading the pack from the oil patch against the Royalty Review. BTW he is reported to own about $830,000,000.00 in CNRL stock so a 5.9% hit in one day hurts, "technically" but he is hardly homeless.
For the record CNRL stock rose $.21 or 0.2% yesterday and so far today it is up $1.73 or 2.29%. It has traded in a 52 week range between a low of $40.29 and $78.90. Still trading in spitting distance of its 52 week high is hardly a disaster for the company and its investors.
Albertans need to be sure the oil patch rhetoric over the veracity of the Royalty Review Report calculations tempered and evidence based. The facts need to be protected from the fantasies and the tenants need to start rethinking their roles and responsibilities to the resource owners…and show the owners a little respect too. They are citizens and therefore - voters. come to think of it, these same citizens may be shareholders in Alberta-based oil companies where they are voters too.
Are you suggesting that Charles Frank is hyperventilating?
ReplyDeleteRoyalty report called 'draconian' by oil icon
Charles Frank
Calgary Herald
Friday, September 21, 2007
CREDIT: Mikael Kjellstrom, CanWest News Service
Murray Edwards, vice-chairman of Canadian Natural Resources, at the Global Business Forum in Banff on Thursday.
Premier Ed Stelmach gave the opening address at the Global Business Forum here Thursday, telling business leaders from across North America that his government is determined to "get it right" when it implements changes to the province's energy royalties structure.
But offstage, oilpatch icon Murray Edwards warned that the government needs to take a very discerning look at the 104-page report delivered by a provincially appointed review panel earlier this week and listen carefully to what industry has to say before it decides on any course of action.
Edwards is the first high-profile oilman to speak openly about the six-member panel's report -- but he hopes he won't be the last as Big Oil looks for ways to draw attention to what the vice-chair of Canadian Natural Resources called the "draconian" recommendations contained in the report.
Choosing his words carefully, but clearly upset, Edwards pointed out that concern over what the Stelmach government might or might not do with respect to the report -- euphemistically entitled Our Fair Share -- is reverberating around the world.
"I spent the last half hour of the drive up here on the phone with the managers of investment houses around the world," he said. "There is almost a state of panic and shock."
One can only assume from the pregnant silence emanating from the oilpatch in the wake of the report's release that the same holds true for other industry members.
No surprise there. There are more than $140 billion worth of oilsands projects currently on the drawing boards in the Fort McMurray region and the province's economic future is now intrinsically tied to the ongoing development of that resource, which represents the second largest reserves of recoverable oil in the world.
But industry players and international companies contemplating entry into the high stakes game of oilsands development -- where single projects can run into the tens of billions of dollars -- have been on pins and needles since last spring. In February, Alberta Finance Minister Lyle Oberg announced the government had commissioned a panel headed by former forestry executive Bill Hunter to determine if Albertans were getting their fair share of energy royalties.
The panel's explosive report not only insisted that Albertans were getting shortchanged when it comes to royalty revenues, but also advocated significant and fundamental changes with respect to the calculation of natural gas, conventional oil and oilsands royalties.
And chairman Hunter threw further fuel on the fire days before the report's release by insisting that the government implement the panel's suggestions in their entirety -- leaving the premier, the finance minister and the rest of the government in a precarious political position.
"I'm shocked that the chair of the review panel would try to dictate government policy," Edwards observed.
Taking Hunter's suggestion would be a huge mistake, added Edwards, who questions some of the numbers behind the panel's conclusions. He also questions the philosophical positioning that would advocate against the grandfathering of oilsands projects now underway into a revised royalty structure.
Edwards pointed out, for example, that so far as Canadian Natural's multibillion dollar Horizon oilsands project -- one of the bellwethers of oilsands development -- is concerned, "we think we have an existing agreement."
No doubt other oilsands producers hold similar beliefs.
More important, perhaps, is what investors and multi-national decision-makers in other parts of the world think.
One of the key drawing cards that has attracted billions of dollars of badly needed investment funding to Alberta is our much vaunted stable political/investing environment. An environment unlike, say Venezuela or Nigeria or Chad or Kazakhstan, where the rules of the game are changed at will -- with predictable responses from investors.
It goes without saying that the bean counters in the oilpatch have been burning the midnight oil trying to develop best and worst-case scenarios based on current and future commodity prices and on what the government might or might not do.
And, I suspect, government officials have been similarly engaged, trying to discern at what point they might cause industry members to put their plans or hold -- or even cancel some projects.
Under ordinary circumstances that would be a healthy discussion.
But with billions of dollars at stake, not to mention the Stelmach government's political credibility, an electorate that is suddenly aware of the high stakes poker game being played with their monies, and an oil and gas industry that is caught on the cusp of an operational sea change, these are anything but ordinary times.
"I'm an eternal optimist," insisted Edwards, who suggested that despite the clouds on the horizon, a win-win scenario can still be authored with some open and honest talk between industry and government members.
With Stelmach promising action on the report in short order, those conversations will have to be quick and to the point.
Nothing less than our future economic well-being depends on it. And if you don't believe me, just ask Murray Edwards.
cfrank@theherald.canwest.com
My link was the the Globe and Mail and about the more exaggerated comments over the Royalty Report's recent and actually modest impact on stock prices.
ReplyDeleteWhat do you think about Rick Bell's column today in the Calgary Sun?
http://calsun.canoe.ca/News/Columnists/Bell_Rick/2007/09/21/4513980.php
Alberta hasn't seen this much hand-wringing coming out of Calgary since Dinning lost on December 2nd.
ReplyDeleteKen:
ReplyDeleteActually your comment was "business writers have been hyperventilating over the market impacts of the Hunter Royalty Review Report on oil sands share prices." Then you cited the Globe and Mail as an example.
As for Rick Bell, I usually read his column for the humour. Where does he come up with the figure of $6 billion lost to Albertans because of low natural gas royalties? By 2016, according to the Panel,the impact of staying with the status quo is $2.036 billion in lower royalties, of which only $375 million is natural gas.
Reading Rick Bell for humour - clever. I read most anonymous comments for the same reason.
ReplyDeleteKen:
ReplyDeleteYou said most anonymous comments, so I assume you are not talking about well-thought out and reasoned comments like mine. You didn't answer the question. I asked where Rick Bell came up with his figure of $6 billion lost to Albertans because of low natural gas royalties. By 2016, according to the Panel, the impact of staying with the status qup is $2.036 billion in lower royalties, of which only $375 million is natural gas.
Ken:
ReplyDeleteI suggest that you and Rick Bell read the following.
http://www.ziffenergy.com/download/pressrelease/PR20070914-01.pdf
Anon at 6:06 - why should I read the Ziff Energy piece?
ReplyDeleteAnon at 6:02 - YOU ask Rick Bell where he got his numbers...and yes I do include you - not because you are funny but your earnestness is mildly amusing.
Ken:
ReplyDeleteI suggest you and Rick Bell read the Ziff piece because it provides very useful information on the run-up of costs in the natural gas sector.
I am glad you are mildly amused that I am earnest. It is those who are earnest who become better informed.
Earnest and Informed - so why anonymous?
ReplyDeleteI will read the Ziff link this weekend - after I read the Hunter Report. Thxs for the link.
Thank you for the compliment. Anonymous because you permit me to be so as on your blog site.
ReplyDeleteSo Anon - You wish to stay Anon. thenm it is only just tht I get to imagine things about you and don't need to be burdend with facts or context.
ReplyDeleteMy guess is you are a frustrated Virgo who cross-dresses and sings Karaoke in a Calgary cowboy bar in and you specialize in Tony Bennet and Peggy Lee standards.
How close am I? Never mind - I wouldn't believe your reply anyway.
From what I gather from your "over the top" comments, facts and context are not your strong suit when it comes to the royalty regime in Alberta.
ReplyDeleteI was trying to help further your understanding of the oil and gas industry in Alberta and I am accussed of bring a cross dresser who sings Karoke in a Calgary cowboy bar. And you wonder why I wish to remain anonymous. I think you have your answer. Most unfortunate, Ken
ReplyDeleteanon @ 4:51 - I appreciate your help in understanding the energy sector...I don't appreciate anonymity - where is the courage of citizenship in a free and democratic society if we cower in closets.
ReplyDeleteOops! Did I just "accuse" you of something else? Not at all. You can stay Anon and then I get to have the freedom to use my imagination to "make you up." Because you are in fact a fiction so long as you are Anon.
I can pretend you are my "invisible friend" and I can do that with child-like innocence.
BTW earnestness may lead to being better informed by it apparently is not the road towards a sense of humour.
I am into the report and just about finished. I see the METR for the energy sector is so much more favourable than any other sector in Alberta - why is that?