Digging-in time
The short-term fundamentals look dire. But producers must not panic
John Hill owns a small company producing about 300 barrels a day of oil in eastern Alberta. Extraction involves fracking and is expensive. Hill needs $50 a barrel to keep his back-office staffed and his oil flowing. Costs are sticky and reducing them brings decisions about whether to spend $1,500 or so on regular lubing and maintenance or skip a month. Hill, not his real name, plans this year to increase production to 800 b/d. He needs to lay a short pipeline to do this and is searching for investors to fund the $1.4m outlay. Why, when his business loses money with each barrel it produces, does he want to double down? “I need to prove to the bank that I can manage this asset better than the
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