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Page added on November 29, 2008

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Oil shortage remains a reality

Big Canadian oil companies are flush with cash thanks to the recent past year of record oil prices.


Suncor Energy, Canadian Natural Resources, EnCana Corp., Talisman Energy and Nexen Inc. are debt-free and have generated more than $50 billion US of free cash flow over the past year.


That makes smaller Canadian companies, like TriStar and Birchcliff, acquisition targets as share prices are low with oil at $50 US per barrel.


However, the world’s top five oil companies generated $230 billion US in cash flow, which makes Suncor, EnCana, Nexen, Canadian Natural Resources and Talisman international acquisition targets as well.


Likely international acquirers would include companies such as Exxon Mobil, Royal Dutch Shell, Total, Chevron, BP, ConocoPhillips and Eni.


Many international companies are looking for assets such as the oilsands that have a 40-year-plus reserve life. They understand that there will be many bull market cycles for energy over that period, and that the best time to buy is now, while assets are cheap.


…As the global economy recovers over the next 12 months, oil at $50 US will not be sustainable. The credit markets will be cured, the U.S. dollar will weaken and oil prices will settle back in the $80-$100 US range.


The supply ship of Earth’s oil will once again say, like Scottie of Star Trek fame: “She can’t take anymore, Captain, I’m givin’ ‘er all she’s got!”


Financial Post



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