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Alberta does not have 168 billion barrels of oil reserves. The real number is likely only 1/7th. Yes, 85% of Alberta& #39;s reserves are vapourware. A 
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="Thread" aria-label="Emoji: Thread">for non-energy experts.
First of all, what& #39;s a reserve? It& #39;s an amount of oil that can be economically recovered at some price. So a reserve has (1) an amount, (2) a cost, and (3) a price expectation. Non-energy people get very confused by this, because a reserve is not "oil in the ground." /2
A reserve is instead analogous to an oil-making machine sitting in a factory. You don& #39;t think of a bottling line in terms of "oh my God we& #39;re running out of bottling lines," or "there& #39;s too dang many bottling lines!" A reserve is simply an economic asset. /3
And economic assets create cash flow. If assets don& #39;t create cash flow, then they are not assets. Full stop. Now, reserve categories exist to communicate the relative probabilities of turning the asset into cash flow - proved, PUD, etc. That& #39;s not what this thread is about. /4
Instead, this thread is about the 168 billion barrels that Alberta allegedly has. The number hasn& #39;t been updated since 2015. Remember what I said about reserves? Amount, cost, price. Anything change in price expectations since 2015? Anyone? /5
It& #39;s simply unreasonable that the cash flow production potential of Alberta oil resource hasn& #39;t changed since 2015. I haven& #39;t covered oil sands in years, but in 2015 a $40 WTI price meant zero margin. About the same now, I think. $MEG is a lean, single asset operator. /6
Note the pre-hedge netback of -$7.78 in 2Q20. WTI was US$27/bbl. So that& #39;s a cash margin breakeven of ~US$32/bbl. At WTI oil prices < US$32/bbl, the best SAGD oil sands is cash flow negative. But! That doesn& #39;t include initial, upfront capital development cost!!! /7
Which is relevant because only 24 billion bbl of Alberta& #39;s oil sands resources were under active development in 2015 (the last year of data, remember). The upfront capital is risky, pays out over decades. Add a bit more for normal heavy/light oil diffs (don& #39;t ask)... /8
... and prob you need US$55 WTI to make a new SAGD investment. Mining? Ha ha ha ha. Forget it. Kearl broke even at $104/bbl (2013 calc). And, the resource quality we know now is worse than we thought it was (the nature of learning... the more you learn, the dumber you get). /9
To a first order approximation, the amount of oil sands resource truly left to be developed is zero. Zero. Zero. Even if climate change is a hoax. (It& #39;s not). Even if Keystone XL is built. (It won& #39;t be). /10
The culprit is fracking. In 2016, I was on the team that calculate 3x more resource in the Midland basin than in the oil sands at ANY price deck below US$95. Midland has its own capital efficiency problems, so number today would be less than 3x. But the point remains! /11
168 billion barrels at $40 WTI is a fantasy. Need to let go of this. Investment is not coming back. Those good jobs are not coming back. Sinking $26 billion into bitumen refineries will not bring them back. https://www.cbc.ca/news/canada/calgary/alberta-bitumen-sturgeon-refinery-nwrp-1.5718044">https://www.cbc.ca/news/cana...
