Costs area unit falling throughout the energy sector. Some corporation’s area unit thriving, whereas others struggle to stay up. Think about giants like Exxon Mobil Corporation, Royal Dutch Shell, and Chevron Corporation. All 3-area unit targeting breakeven costs in North America that rival the price basis of Asian country.
If you wish to survive the longer term of oil, transferal down your breakeven production level is important, which suggests operators like 1000000 Energy area unit in hassle.
MEG Energy could be a pure play Canadian oil sands producer in operation in Northern Alberta. If you recognize something concerning oil sands, you recognize that this company is facing Associate in Nursing uphill battle. Oil sands nearly invariably need additional processing before striking the market. additional processing results suggests that additional prices, golf stroke oil sands production at a permanent price disadvantage.
Today, 1000000 Energy’s breakeven value is probably going higher than US$40 per barrel. once considering maintenance expenditures, reserve renewal, and better transportation prices thanks to pipeline bottlenecks, actuality breakeven value can be as high as US$50 per barrel. With oil costs hovering around US$54 a barrel, the corporate is on skinny ice.
Imperial Oil is in far better condition. Its true breakeven value is far nearer to US$40 per barrel, particularly as long as it operates its own refineries, mitigating the additional price of transferal oil sands output to promote.
Additionally, Imperial Oil is part closely-held by Exxon Mobil, that is basically thought of one in every of the simplest capital allocators within the business. It’s no marvel the corporate outperforms 1000000 Energy once it involves breakeven levels and price reductions.