06 March 2008

Your offshore mileage may vary

You have to read the ExxonMobil analyst statement to get it.

Read all of it.

Especially read the warning at the front about how the document contains certain forward-looking statements.  It's a hideous piece of English but the caution section is there for a reason.  It's right there at the beginning for a reason.

ExxonMobil's current forecast is subject to change and lots of things can happen to affect whatever it is the company is saying in there right now.  They want their investors, potential investors and others affected by ExxonMobil corporate decisions to be aware that things can change and the company may have to change with the times. The whole thing boils down to an old Internet acronym:  YMMV. 

Your mileage may vary.

With that in mind, it was a bit strange to see Deanne Fleet's orgasmic predictions on CBC's supper hour news based on the ExxonMobil analysis.

It was a bit strange because none of it is the least bit new.

ExxonMobil listed three projects that it expects to pursue offshore Newfoundland.

1.  Exploration:  The company expects to drill another hole in the Orphan Basin this year or next, along with its partners.  Okay, we pretty much knew that.  The Orphan basin exploration might be affected though by rig availability.  it might also be affected by the announcement yesterday that Shell is looking for someone to either farm in or buy out its 20% interest in the exploration license.

2.  Hebron:  The memorandum of understanding is there but the final deal is held up for some unknown reason. ExxonMobil lists Hebron as a project expected to start sometime after 2011.  Take that into careful consideration because that's exactly what Exxon has said since negotiations collapsed in 2006.  Hebron is not expected to start until after 2011, three years from now.  No work in the meantime.  Some preliminary stuff but nothing major until after 2011.

That pushes first oil out closer to 2020 than not and and that means it will sometime in the mid 20s and possibly beyond before the project pays off.  That - among other things - demonstrates the potentially great folly in the Williams cash giveaway in the current financial framework.

3.  Hibernia South:  It's listed for start-up in the 2009/2010 time period. Okay.  That's all well and good but in the meantime, there's no sign the Hibernia partners and the provincial government are any closer to any understanding on anything related to this project than they were when energy minister Kathy Dunderdale penned her name to the bottom of a bunch of letters that displayed nothing if not a fundamental ignorance of the entire project.

A cause for optimism?


But if experience is a harsh teacher, the sadistic bastard that is our experience of the Newfoundland offshore and provincial politicians has taught the value of those forward-looking cautions at the front of investor forecasts.

Our mileage has varied considerably from what the pols would have us believe.