So Marathon Oil is clearly out of it. They are buying into the Alberta Oils Sands when the conventional “wisdom” is that the industry should run away from Alberta investment - at least according to some of the existing Alberta energy “players.”
They have been saying they can’t make a go of it with the second largest oil deposits in the world with oil at a record $86 per barrel and having to suffer with a province that imposes a stable democratic government with a strong currency, a skilled work force and located next to the largest market for fossil fuel energy use on the planet. That has to be a tough scenario in which to do business and make it work. Yes sir!
The “smart money” in the Alberta oil patch that is saying it is leaving Alberta and/or no longer investing because royalties will move from 25% of Net Profit to 33% of Net Profit. Yes that is a royalty based on Net Profits, meaning the dollars subject to royalties are not determined until after the projects have first paid all their operating costs including. They say that is 20% increase – which it is – but it really moves up 8 points and is based on net profits before taxes. Give me a break!
Marathon must be a fly-by-night operation run by a bunch of unsophisticated rubes to be going forward and investing in Alberta’s oil sands now of all times. Check out their website to see just how not true that is!
They have been saying they can’t make a go of it with the second largest oil deposits in the world with oil at a record $86 per barrel and having to suffer with a province that imposes a stable democratic government with a strong currency, a skilled work force and located next to the largest market for fossil fuel energy use on the planet. That has to be a tough scenario in which to do business and make it work. Yes sir!
The “smart money” in the Alberta oil patch that is saying it is leaving Alberta and/or no longer investing because royalties will move from 25% of Net Profit to 33% of Net Profit. Yes that is a royalty based on Net Profits, meaning the dollars subject to royalties are not determined until after the projects have first paid all their operating costs including. They say that is 20% increase – which it is – but it really moves up 8 points and is based on net profits before taxes. Give me a break!
Marathon must be a fly-by-night operation run by a bunch of unsophisticated rubes to be going forward and investing in Alberta’s oil sands now of all times. Check out their website to see just how not true that is!
They operate in 18 countries and are engaged in exploration and production, including integrated gas, marketing and transportation and happen to be the 5th largest refiner in the United States. What are they thinking - coming into Alberta?
They should just ask Encana for advice to see how much of a mistake they are making by coming into the Alberta energy sector. Oh yes Encana has the “Our Fair Share” royalty review recommendation’s figured out all right. They are leading the mythological parade out of Alberta due to the Royalty Review which they say is destined to wrought devastation on the energy sector investment market for all Alberta for all time.
Get this. They said they were pulling out a $1B of capital activity in Alberta because of “uncertainty” caused by the royalty review. Get this too. Two weeks later EnCana said they are going to be investing a cool $1B into an oil sands play. Coincidence…I doubt it. Hypocrisy is more like it.
Investment actions speak louder than political intimidations in my book.
Marathon you better think twice about coming into the Alberta energy sector because of enterprises like Encana is allegedly doing the opposite. And whatever you do – don’t talk to Warren Buffett about investing in Alberta’s oil sands…he just may talk you into it.
Get this. They said they were pulling out a $1B of capital activity in Alberta because of “uncertainty” caused by the royalty review. Get this too. Two weeks later EnCana said they are going to be investing a cool $1B into an oil sands play. Coincidence…I doubt it. Hypocrisy is more like it.
Investment actions speak louder than political intimidations in my book.
Marathon you better think twice about coming into the Alberta energy sector because of enterprises like Encana is allegedly doing the opposite. And whatever you do – don’t talk to Warren Buffett about investing in Alberta’s oil sands…he just may talk you into it.
You are seriously misrepresenting reality here as the said deal was announced on July 31, 2007. This was long before the industry was blindsided by the Hunter Royalty Review.
ReplyDeleteYou can verify it here:
http://www.westernoilsands.com/default.asp?V_ITEM_ID=347&article=1033974
Why is Marathon following through post royalty review? I can't say for sure, other than with corporate deals it's hard to stop once going; really hard. Break fees, lawsuits etc. can result from backing out. Plus as you point out Marathon is big enough that they may simply elect to wait for a sane government to come into power in Alberta.
Big multinational oil doesn't fool around; or didn't you see Syriana, LOL?
They'd eat a little province like Alberta for lunch. Trust me, you'll soon be wishing you had Encana and CNRL as the local bigshots after Exxon-Mobil, Shell, BP etc. take over. Just ask the people of Nigeria, for example.
I have a question. You stated:
ReplyDelete"They said they were pulling out a $1B of capital activity in Alberta because of “uncertainty” caused by the royalty review. Get this too. Two weeks later EnCana said they are going to be investing a cool $1B into an oil sands play. Coincidence…I doubt it. Hypocrisy is more like it."
Please provide the source for any major increase in Encana's oil sands spending post royalty review.
Encana's latest press release was September 28th, 2007. You can see the press releases here from the regulator:
http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00016914
As you wrote this on October 16th, I just don't see how your assertion can be correct.
Are you saying criticizing Encana because it is actually planning to spend $1 billion that was previously planned before royalty review? You are only happy if they spend nothing? Perhaps they have to bring their projects to a logical end point that would occur no matter how onerous the royalties were. The world isn't as simple as you paint. Truly, I don't understand your reasoning or the point you are making. Just looks like sloppy research that is not hyper linked for someone to check the veracity of.
Just like your Buffett post, that was vastly overdone. This was just announced yesterday right??
ReplyDeleteTry a long time ago, sometimes a train can be hard to derail.
The Marathon deal was announced months ago. This deal is nothing new.
ReplyDeleteYesterday's news was that some 99% of the Oil Sands Trust shareholders accepted the Marathon offer. This is the penultimate step to the fruition of this sale and purchase agreement.
As for being "overdone," Buffett and Marathon investment interest in Alberta oil sands plays is news that is a little hard to over do.
Especially in the face of the doom and gloom scaremongering and political posturing going on these days by some of Alberta's energy players.