Heavy Oil Investing News

By Duncan Sutherland – Exclusive to Heavy Oil Investing News

Welcome back to the Upgrader.

More Q 2 results were announced this week. The record heavy oil prices of the quarter have been kind to most, thought profits in refining operations have been hindered.

Calgary’s Baytex Energy Trust (NYSE:BTE) was boosted by $125 million (CDN) in income, with $34.4 million of that as profit, up from $31.1 million in last year’s Q 2. On the heels of this, Baystex is increasing distributions and accelerating its debt paydowns. Combined with new pilot results due in October, BTE is looking to be in good shape.

Freedom Financial Holdings Inc (PINK:FDMF) has signed on with WI Technology LLC in a Missouri joint venture in heavy oil production using WI’s conversion technology. Last week, we had reported that a letter of intent had been signed, so it appears the two are convinced that they can work together. Missouri’s heavy oil sector is experiencing a renaissance after production became unprofitable in the 1980s. Better technology and an amenable state government have made Enhanced Oil Recovery (EOR) operations and pilot tests in Missouri an interesting development that pops up on my radar screen now and then.

Berry Petroleum (NYSE:BRY) is revising its early estimate of oil in place in California’s San Joaquin Valley Basin upwards to 330 million barrels, with production anticipated at 12,000 bpd when it peaks. In neighbouring Newfoundland, Canada, it’s only refinery is looking to expand. Owned by Harvest Energy Trust (NYSE:HTE), the plant is trying to sell a stake of 20-49 per cent in the project. The sale would be used to finance one of three options; the addition of a coker, for more heavy oil processing, or a straight-forward expansion of capacity. Newfoundland is trying to stake its position as a North Atlantic production and value-adding hub for oil and gas operations. In my South Parse column yesterday on our sister site Gas Investing News I did briefly touch upon the new LNG terminal slated to be constructed in the province.

Surveying in southwest Colombia by Pan Andean Resources (LSE:PRE.L) has indicated that between 1 and 2 billion barrels could be in the block, with up to 300 million barrels recoverable. Pan Andean is currently searching for multinational partners, and I would guess that some of the most eager buyers will be those kicked out of Venezuela. (Total (NYSE:TOT) ExxonMobil (NYSE:XOM) Chevron (NYSE:CVX) ConocoPhillips (NYSE:COP) BP (NYSE:BP) and Statoil (NYSE:STO)). Anxious to replace the irrevocably lost production from Hugo Chavez’s self-styled Bolivarian Republic, the prospect of similar heavy oil so close to Gulf Refineries and the huge US market, expect negotiations to begin soon.

Sentinel Rock Oil Corporation (TSX.V:SEN) has filed a reserve report that will indicate a boost to all types of reserves - Proved, Proved + Probable, Proved +Probable + Possible. Also on the TSX, Pembina Pipeline Income Fund (TSX:PIF.UN) subsidiary Pembina Pipeline Corporation will build the planned Nipise and Mitsue lines. Nipise will bring heavy oil blend from Utikuma to Edmonton Alberta, using some new and some existing infrastructure. Mitsue will also use a similar combination of new and old lines to bring condensates from Whitecourt to Utikuma Alberta for diluent. Already Pembina has contracted for 80 per cent of Nipisi capacity and half of Mitsue capacity. All appears to be well here.

A black eye for Shell (NYSE:RDS-B) as the World Wildlife Fund got a ruling from the UK Advertising Standards Authority stating that Shell’s claim of Canada’s oil sands being sustainable was “misleading”. If you have been a regular reader of Heavy Oil Investing News, you would know by of my belief that oil sands producers must get out ahead of environmental regulations and implement long-term strategies to deal with emissions, rather than greenwash. This report shows the dangers of not doing so.

Since it is the end of the workweek in the lazy August period, here is a hilarious video on the BBC magazine. Virgin trader Simon Cox tries to corner the market in oil speculation in an instructive piece. Worth checking out for a laugh.

If you are looking for information about the “Fracas in the Caucasus” and how it might affect oil and gas markets globally, I have written here about it. For analysis of the military actions themselves, Information Dissemination has a great blog that has touched on it, and the inimitable Small Wars Journal has some superb analysis.