Posted on 03/15/2013 6:12:50 AM PDT by thackney
Crescent Point Energy Corp., an intermediate producer with capacity to move half of its total oil production by rail, said Thursday it hopes to add a “rail option” later this year to transport newly acquired output in Utah.
Using railway cars to get around bottlenecks in pipelines is now considered a price protection strategy akin to forward selling oil, the company said on a conference call with analysts following release of its fourth quarter 2012 results.
“In 2012 we improved operational flexibility by adding 50,000 barrels per day of rail capacity,” said president and chief executive Scott Saxberg on the call.
“This gives us the flexibility to positively impact our corporate differentials.”
He said the company hopes to find rail options in Utah by the middle of the year to help offset a $15 US per barrel differential in area oil prices.
“We know it will be definite benefit to the area and benefit to us, long-term,” said Saxberg.
Oil produced in Western Canada and the northern United States has been receiving discounted prices because there’s not enough room on pipelines to get it all to refineries in the eastern and southern U.S.
Analysts estimate four to seven per cent of North American oil production is being shipped by rail, with the higher cost versus pipeline offset by better prices at tidewater.
During the fourth quarter, Crescent Point closed the $784 million US purchase of Ute Energy Upstream Holdings LLC, thus adding about 8,000 barrels of oil equivalent per day of northeastern Utah output to its Saskatchewan, Alberta and North Dakota core areas.
Vice-president of marketing Trent Stangl said so far there have been no limitations on crude deliveries to Salt Lake City refineries despite a tight market that has prompted refinery expansion proposals but added rail capacity will improve competitive forces.
The company said that it has used term rail contracts along with its derivatives deals to lock in prices of more than $90 US per barrel for more than 15,000 bpd of its production for the next 18 months.
During the fourth quarter, Crescent Point said it moved an average of 19,000 barrels per day of oil through its expanded Stoughton rail terminal and 2,000 bpd through its Dollard rail terminal, in southeast and southwest Saskatchewan, respectively.
In a note, analyst Brian Kristjansen of Dundee Securities said Crescent Point beat the Street’s expectations on production, cash flow and reserves growth in its fourth quarter report.
Revenue from oil and gas sales rose to $727 million from $630 million as the company achieved record output of 108,000 boe/d (90 per cent oil and liquids), up 33 per cent over 81,000 boe/d in the same period of 2011.
Cash flow was $430 million or $1.18 per share, up from $382 million or $1.32 per share despite lower average realized prices.
Its net loss was $95 million compared with $86 million in the same period last year.
Crescent Point completed more than $3 billion in acquisitions during 2012 and increased proved plus probable reserves by 43 per cent to 609 million boe.
In December, the company revealed a 2013 capital budget of $1.35 billion, up 23 per cent from its $1.1 billion 2012 budget, although it actually spent $1.5 billion in development capital last year.
It has promised to revisit the 2013 plan at mid-year.
It is guiding to average 112,000 boe/d this year, with an exit rate of 114,000 boe/d. Analysts pointed out on the call Thursday that the company is likely already ahead of guidance because of the Ute acquisition.
Paging Dagney Taggert, Call on line one!.........
Tank cars ?
Perfect !
For those that don’t understand the concern:
Shortage of tank cars as crude-by-rail picks up
http://www.smartbrief.com/news/aar/storyDetails.jsp?issueid=ECA30740-C76E-4DF2-B544-4B823B41ED51©id=8569468E-95CF-41CF-B014-A1E84D5C415D&brief=aar&sb_code=rss&&campaign=rss
02/22/2013
In 2009, Canadian Pacific moved 500 tank cars of petroleum products. In 2012, it moved 13,000 and could soon be moving as many as 70,000 tank cars. That’s one reason the tank car backlog has reached about 48,000. “There has been a shortage of cars ever since crude on rail picked up,” said Jean-Jacques Ruest, chief marketing officer at Canadian National. “There will be a shortage of cars in 2013; there will probably be a shortage of cars in 2014. After that we will see.”
Since you commented on Buffet on the other thread, I thought you would want to see this. He gets a second benefit beyond just moving the oil tanker cars, he sells them too.
Buffett Like Icahn Reaping Tank Car Boom From Shale Oil
http://www.bloomberg.com/news/2013-01-03/buffett-like-icahn-reaping-tank-car-boom-from-shale-oil.html
Warren Buffett and Carl Icahn are reaping the benefits of surging demand for railroad tank cars to haul shale oil from beyond the reach of existing pipelines.
Buffett’s Union Tank Car Co. is working at full capacity and Icahn’s American Railcar Industries Inc. (ARII) has a backlog through 2014. Trinity Industries Inc. (TRN), the biggest railcar producer, began converting wind-tower factories last year to help meet demand for train cars that can transport the petroleum product.
All three are getting a boost from a shale-oil boom that’s poised to make the U.S. the world’s largest crude producer by 2020. Rail carloads of crude tripled last year to more than 200,000, and demand for tanks designed for it soared, helping both Trinity and American Railcar outstrip the Standard & Poor’s 500 Index.
Just a few years ago, tank cars could be leased for $500 per month or about $1 per bbl of capacity. There were a half dozen brokerages that would take your unneeded cars and sublease them to others if your need evaporated for a short period.
Now, they’re as scare as hen’s teeth (or something like that.)
It won’t take long — perhaps after the first oil train derailment — before the Obama administration declares shipping oil in tank cars to be too hazardous for railroads to engage in without further governmental regulation.
And then the feds will enact regulations that all-but bans the shipment of oil by rail — making the rules and regs so onerous that the railroads will find it easier to refuse such shipments, rather than handle them...
Crescent Point should have painted on it’s tank cars:
“The John Galt Line” ….!
Depends on the size of the spill. Oil tanker car derailment as already happened.
Workers removing oil from cars after train derails near Penobscot River
http://bangordailynews.com/2013/03/07/news/penobscot/freight-train-pulling-oil-tankers-derails-in-mattawamkeag/
Oil Spill From Train Derailment
http://www.epa.gov/osweroe1/docs/oil/fss/fss04/nakad_04.pdf
Notification to National Response
Center of an oil spill from a train derailment on July 11, 1999.
So much oil, not enough pipeline, so much oil that it is selling at a discount - yet gas and diesel prices keep climbing.
Makes ya wonder...
Precisely because this oil is not coming to market via pipeline.
It is selling at a discount at the point of production because it costs so much to move it to the refinery. The cost to the refiner is still the same but the producer has to pay the extra transportation cost.
The refiner doesn’t pay a producer more because he spent more, he pays the going market rate at his location.
Consequently, the cost to make the gasoline is unchanged. Having a large expensive middle man will not lower prices in oil or any other market.
THanks!
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