"When Peter Tertzakian stands on a soapbox at the Calgary Petroleum Club -- as he did last week -- and warns senior Canadian oil executives to stop being in denial about natural-gas prices ever recovering to the levels they think they need to get back to work in Alberta, they tend to listen."
"Today's natural gas price, which at US$3.50 per million British thermal units is about half what's needed to economically drill in Alberta, is a reflection of the new reality.
"We have to be honest with ourselves, look in the mirror, and say that 2006 to 2008 was an anomalous period of incredible excess [industry] returns that are not likely to come back and that the clock has to wind back, especially it has to wind back if we are going to be competitive with the rest of the continent," he said in an interview."
"Even if there is a price recovery, Mr. Tertzakian doesn't see natural gas going beyond the US$5-to-US$6 range in North America, far away from the double digits reached in the past, even if oil prices return to triple digit levels. The good news is that the Alberta sector doesn't have to give up -- as long as it changes its model from one relying on high prices to one based on low costs, he said."
No real news here, at least not to those have a moderate grasp of the supply picture of natural gas. There might still be some overpriced natural gas producers out there waiting to be shorted. Some leveraged gas weighted energy trusts and master limited partnerships are likely to be in serious trouble as distributions will have to be cut even further which in turn will make raising new equity more difficult. Lower long term natural gas prices will force companies write down even more assets which will reduce available credit.
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