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Still too early to consider the oils in my opinion. While OPEC link below expects a balanced market in 2016, I think that is over optimistic, i.e. overly aggressive demand growth, and I don't think they have fully considered the Iran factor.

http://www.reuters.com/article/2015/07/13/us-opec-oil-idUSKCN0PN12420150713

If you believe current oil futures, we could be looking at sub-$60 oil for years to come (assuming no wild cards).
 

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I bought about 10k of this recently. A small part of our holdings. I wanted to increase my energy exposure in something that spat out a reasonable dividend payout ratio. (confession - I also hold CPG and the payout ratio there is getting ridiculous.)

I am not expecting any sudden move in oil prices, or any other part of the economy - I just stick bits of funds in all sectors in this 'mad money' account, and rebalance as I put more finds in over time.
The TFSA and RRSP holdings are ala couch potato - this non registered account is on spot where a bit of fun on individual stocks is done.
 

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WCP tends to have the most visibility in their estimates, which I like. Mostly to see where and how the pain will begin; WCP is supposed to be one of the best with some of the lowest declines in their wells.

They posted their 2016 outlook along with their 3rd quarter results about 3-4 weeks ago: http://boereport.com/2015/11/10/whi...s-third-quarter-2015-results-and-2016-budget/

Bottom line: their worst case estimate for 2016 is WTI at $50 and nat gas at $2.75. WTI is barely hanging onto $40 and nat gas is $2.20. Their dividend is not sustainable at current prices and my guess if WTI stays below $50, the dividend will be cut in the next 3-6 months.

Look at Q3 results: average oil price was $51, but their hedging produced almost $10 on top of that, so they realized in excess of $60/barrel in USD.

There is a lot of pain ahead in 2016 as the vast majority of the really good hedges disappear, if oil doesn't rise above $50.
 

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It's an interesting name that I look at on and off for the past year. I haven't pulled the trigger because I have been very happy with staying away E&P oil and gas companies since I sold CPG last year.

I don't see this as a takeover target though. If it does get an offer, the company trying to acquire would need to offer a significant premium to WCP, considering how financially healthy the company is.
 

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In their 2016 guidance yesterday. they are electing to reduce capex spend 27% rather than reduce dividend to maintain a 100% payout ratio (at $US40 oil and a 75 cent loonie). Should have been the other way around in my opinion.

They are also banking on an oil price increase to US$45 for 2Q, US$50 for 2H2016. Time will tell.
 

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At their estimates, which include $40US WTI for 1H2016, they are goign to lose 4% production. What does that tell you is happening now at $35-36 oil? And WCP is one of the best. Very telling at how dire it is for oil production companies at these levels.

To be honest, I thought that companies would have started pulling back earlier. It appears no one is willing to invest less than cash flow, so they continually reinvest all cash flow, but even doing so they are going to be losing production. I think that is when you know the game is starting to be up, in terms of hoping for making up for lower prices with higher production.
 

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I don't get why they wouldn't dial back production sooner, either. This goes for all the players in the industry. They obviously know something I don't, but I've always read that oil needs to be in the $50-60 range for oil sand companies to make a profit.
 

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I don't get why they wouldn't dial back production sooner, either. This goes for all the players in the industry. They obviously know something I don't, but I've always read that oil needs to be in the $50-60 range for oil sand companies to make a profit.
It depends on whether you are talking about cash operating costs, variable and fixed operating costs (fixed costs being things like security, lighting), or 'all in' full cycle costs. Until the oil price drops to the point where oil revenue does not cover variable costs (including royalties), it is cheaper to keep producing generating positive cash flow than to shut in. Everyone is in that situation and thus why no one 'can' decrease production until they hit that wall.
 

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Bottom line: their worst case estimate for 2016 is WTI at $50 and nat gas at $2.75. WTI is barely hanging onto $40 and nat gas is $2.20. Their dividend is not sustainable at current prices and my guess if WTI stays below $50, the dividend will be cut in the next 3-6 months.
Dividend reduced by 40%, only took 1 month.

http://www.theglobeandmail.com/repo...ing-and-production-forecasts/article28271531/

With a 53% reduction in capital spending in addition to dividend reduction, they now have an effective payout ratio of 100% (less with some dispositions). Production will fall by 8% this year over previous guidance which was for a small increase. Now you can see the pain - this is one of the best oil producers, and they still need an average price of $37.50 WTI in 2016 in order to maintain debt to cash flow of 3 times and will still lose 8% of their production.

Good management I suppose to stay ahead of this, but really they could have just cut the dividend entirely.
 

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Averaged down a bit by picking up a few shares at $6.30 this morning. I would have preferred to see the dividend suspended temporarily, but this certainly gives them a bit more breathing room than no cut at all.
 

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All of these companies should immediately cut their dividends to zero if they are to survive. This stiff upper lip nonsense is going to kill them. Dividends are a distribution of excess earnings not required to maintain or grow a company. Paying a dividend while reducing production makes no sense.
 
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