National Petroleum Reserve

BigHornRam

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wllm

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You can't really tie gasoline prices to oil prices... but if you will allow...

The red line is US shale breakeven, the green line is Alaska breakeven. That's the breakeven, what does a companies stock do if it's just breaking even, is that a functioning business?

Let's just say for argument sake that, to make sense for investors you need prices $5 over breakeven.

That means US gas needs to cost ~ $2.60 to be make sense, for AK it's probably like $3.00?

I don't know what what people "want" to pay, but I'd guess it's like $2.25 or something that puts everyone out of business.



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BigHornRam

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You can't really tie gasoline prices to oil prices... but if you will allow...

The red line is US shale breakeven, the green line is Alaska breakeven. That's the breakeven, what does a companies stock do if it's just breaking even, is that a functioning business?

Let's just say for argument sake that, to make sense for investors you need prices $5 over breakeven.

That means US gas needs to cost ~ $2.60 to be make sense, for AK it's probably like $3.00?

I don't know what what people "want" to pay, but I'd guess it's like $2.25 or something that puts everyone out of business.



View attachment 210090
I predict that Hilcorps purchase of BP's Alaska assets will be considered a deal of a lifetime.
 

wllm

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Man... I'm not sure I'm optimistic about the DJ/Powder/Anadarko/Bakken/ US shale as a whole in 5 years.

What was the last well received OG IPO? Vine crumpled. Public market just wants nothing to do with Oil just is what it is.

My fingers are crossed that the Reuters article proves true and Colgate goes public. They are a very solid company, with a great team.

I would be flabbergasted if anything happens in AK for a decade, but hey there is a non-zero chance we go to war with Russia so 🤷‍♂️.
 

wllm

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I've never been impressed with BP. They could screw up a wet dream. 5 years you will know how bad a deal they made.🙂
I'm sure hillcorp will be able to cut costs and make money. I'm not sure that asset really has knock it out of the park potential.

I think for me the real bellwether will be the powder. There is good rock, but it has the same kind of fed/wildlife/take away issues as AK but to a lesser degree. If prices go to $100 and you don't see the rig count explode, and or powder companies doing well then I think you can write off AK.

Let's see if this bumps CLR's stock in the next year.
 

AlaskaHunter

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Has Dunleavy proposed a tax cut to incentivize drilling?
An oil tax increase was on the ballot in the 2020 statewide elections.
In a phone interview, Dunleavy said that Ballot Measure 1, the oil tax increase, “has the potential to hurt, not help.”

The measure could raise an estimated $200 million from oil companies next year, according to state projections, which amounts to about one-fifth of Alaska’s deficit. But companies say the tax increase would thwart investment in Alaska projects and hurt the state’s economy.

Dunleavy said he thinks the issue of taxation is better handled by state lawmakers than through the initiative process — echoing a complaint by resource development groups that initiatives are a major political threat to their projects.

“You get a better process if it’s done by the Legislature,” Dunleavy said.
(The oil tax initiative failed 58 to 42% votes)

Fast-forward to 2023, Alaska Legislature has started preparing the budget for the upcoming fiscal year with an influx of federal funds and high oil prices anticipated to bring in around $1 billion more in revenue compared to a year ago.

If approved by the Legislature, Alaskans would receive a permanent fund dividend (PFD) of roughly $2,500 per person in 2022. Dunleavy also wants legislators to approve a supplemental PFD payment of $1,250 to create a 50-50 dividend for last year.
 

Bambistew

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Fast-forward to 2023, Alaska Legislature has started preparing the budget for the upcoming fiscal year with an influx of federal funds and high oil prices anticipated to bring in around $1 billion more in revenue compared to a year ago.

If approved by the Legislature, Alaskans would receive a permanent fund dividend (PFD) of roughly $2,500 per person in 2022. Dunleavy also wants legislators to approve a supplemental PFD payment of $1,250 to create a 50-50 dividend for last year.
Heaven forbid we save something for the next budget crisis. I hope oil goes to $100 and AK keeps raking it in, and keep the budget as low as possible. At some point the Permanent Fund may actually sustain the budget.

Since its an election year for Dunlevy, he needs to promote that free gov't cheese. He still owes us $6000 from his last election promise.
 

BigHornRam

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I'm sure hillcorp will be able to cut costs and make money. I'm not sure that asset really has knock it out of the park potential.

I think for me the real bellwether will be the powder. There is good rock, but it has the same kind of fed/wildlife/take away issues as AK but to a lesser degree. If prices go to $100 and you don't see the rig count explode, and or powder companies doing well then I think you can write off AK.

Let's see if this bumps CLR's stock in the next year.


In 2013 the company purchased several small fields near Prudhoe Bay from BP and similarly invested in a rejuvenation. In one of the fields, Milne Point, Hilcorp has doubled production to just under 40,000 b/d.
 

AlaskaHunter

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Heaven forbid we save something for the next budget crisis. I hope oil goes to $100 and AK keeps raking it in, and keep the budget as low as possible. At some point the Permanent Fund may actually sustain the budget.

Since its an election year for Dunlevy, he needs to promote that free gov't cheese. He still owes us $6000 from his last election promise.
AK also received lots of new federal funding...Murkowski was a lead author and negotiator of the infrastructure package and Don Young was one of the few Republicans in the house that voted for it.

Alaska gets the most funding per capita among all states....$6,700 in funding per capita.

Alaska will get
$3.5 billion in federal Highway funding for Alaska over five years.
$1 billion in Army Corp projects,
$1 billion for a new program that establishes an essential ferry service
$225 million to address highway bridges
$80 million for airport capital improvements in the first year of the five-year infrastructure program
$75 million for the Denali Commission
and the list goes on...
 

wllm

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In 2013 the company purchased several small fields near Prudhoe Bay from BP and similarly invested in a rejuvenation. In one of the fields, Milne Point, Hilcorp has doubled production to just under 40,000 b/d.
“Hilcorp is a major Texas-based independent but the purchase, valued at $5.6 billion, has stretched the company’s resources. Earlier this year as oil prices crashed Hilcorp had to negotiate a restructured financial deal, essentially lowering the company’s early payments to BP.”

I don’t feel like I have a good sense of the PDP value (value of the predicted production of existing wells over time) of the BP asset and because their private, what Hilcorp paid to for that increase in production.

But when I read about Hilcorp and look at their website, I see a company that specializes in eking out the very last value in wells/fields and I see the asset described as mature. That doesn't read, lots of growth to me. That presentation is old but it's shows 325Mboe/d and 28,000 wells so average ~11.6 Boe/d per well.

Now for comparison if you look at some Permian or Anadarko companies that are getting after it, there are a number that were 0-3000 Boed in 2016/17 and now are over 50,000 Boe/d... and they have 75-150 wells. Typically these companies start by buying up acreage, maybe getting some what appears 'non-core' acreage from a big player or, or piecing several really small companies together.

Old wells are typically maintained only to hold acreage (HBP) essentially you get to keep the lease as long as there is a producing well, until the company can drill new wells on that acreage. The old wells might produce 1 barrel a day, the new wells come online and produce maybe 1,000 (will decline maybe 50% after a year, kinda depends) so you have to keep drilling to maintain production. A shale company at 50,000 BOE/d needs to run ~ 2 rigs to stay at that number (basin dependent) to grow you need three... etc.

Nuance here is conventional versus unconventional plays, a conventional play wont have as steep a decline as a unconventional play, and it's A LOT less steep. (AK is conventional, Texas is unconventional)

Now, once the new wells are drilled the company packages up all their old vertical wells, which are no longer needed to HBP acreage and sells them to a company like Hilcorp. Hilcorp is the largest company? that does this, often it's a bunch of small mom & pop operations.

Why do you do this? Well capital. It costs money to maintain wells, and it costs money to rejuvenate them. Let's say if you maintain a well you might make a 10% return, rejuvenating them a 20% return... but drilling a new well 200% return. (completely made up number, but I'm trying to be illustrative) So if a company has a 100MM drilling budget and lots of undrilled acreage it's a no brainer spend all your money towards getting that 200% return. Now drilling wells has way more risk, and requires more capital, so there is that trade off. That said for many operators, the rational is well we already made a huge profit on those wells, let's flip them, lower our staffing costs and invest the money in new production.

This is all preamble to explain why I don't think Hilcorp moving is a good omen for Alaskan oil. To me the facts point to a company whose MO is to come into fields at the end of their life. They aren't a company that is going to come in and aggressively increase production. To do that you would need to be spending a lot of capital and drilling a whole lot of wells.

Now if there was some headline "Kayne Anderson, Warburg Pincus, Quantum Energy, and Lime Rock partner to create first every pure play North Slope PE company with 4B investment" I would be like 🤯

or like if Conoco spend 5B there...
 
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wllm

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@BigHornRam honestly I think wall street correctly sees oil prices as extremely volatile... I mean we did have -$37 and have natural gas surge from $3 mBtu to $999 in a 2 year period, and sees the amount of bankruptcies that have occurred, and isn't willing to invest no matter what prices spike to in the near term.
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BigHornRam

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Liberal media was excited that the crash in oil prices was going to put a fork in BP's deal to sell to Hilcorp. Deal still went forward and oil prices have took off from there. Oil prices are definitely volatile. Weeds out the weak.🙂

 

wllm

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Liberal media was excited that the crash in oil prices was going to put a fork in BP's deal to sell to Hilcorp. Deal still went forward and oil prices have took off from there. Oil prices are definitely volatile. Weeds out the weak.🙂


Also and again... the project cycle times in AK are just brutal, if anything predictions are rosier than reality and even the energy department under Trump was like... "uh... maybe by 2030... or 2040, but only if we start today".

So assuming, prices stay high, then a Republican is elected and goes full send on AK drilling, and AK cuts OG taxes and incentivizes drilling... I guess when I'm in my 60s we could see a 500 BOE/d increase.

That's just brutal for AK, honestly it seems like an iceberg and the titanic with the permanent fund.

Maybe the Conoco projects on the other side will pan out.🤞 for AK residents, and I mean that sincerely a lot of people rely on that production.


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SAJ-99

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Liberal media was excited that the crash in oil prices was going to put a fork in BP's deal to sell to Hilcorp.
Interesting theory. Please continue.
The problem with the deal was Hilcorp wouldn't tell anyone how they were going to pay for it and the rating services were going to downgrade them. They ended up setting up an independent sub so when all those assets have problems, the sub can declare bankruptcy. Their partners in those assets are deep-pocketed majors who weren't (and still aren't) thrilled about the structure.
 

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