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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: Richard Saunders who wrote (6768)8/30/1999 12:16:00 AM
From: Kerm Yerman  Read Replies (4) of 24921
 
Richard / Natural Gas Conversion to barrel of equivalent

I suspect the reason for variance between U.S. and Canadian ratios (10:1 and 6:1) was very proper - that is, up to about a year ago.

It is my belief that the variance was based on prices received by producers in their respective countries. There was a huge variance between the price realized by a Canadian company versus its counterpart in the U.S.

Over the past year, the Canadian pricing scenario for Natural Gas in Canada has been in a process of change -- all being brought about by de-bottlenecking the gas supply from Canada via new pipelines. The variance between U.S. prices and Canadian prices have narrowed tremendously.

Beginning fiscal year 2000, I believe Canadian companies will begin to change their ratio - to 6:1 also. Using an average crude price of $19.00 in year 2000 and $2.80 mcf for natural gas, the resulting conversion ratio would be 6.78X. Over the next decade, I would guess that ratio to lessen somewhat, with added value given to natural gas. Thus, 6:1 seems reasonable to me.

What we need to see is a standard accepted by the industry in reporting the conversion ratios. Companies should not be allowed to report with other than a standard ratio.

Exactly what will happen is unknown at this time. One source which might shed light on the issue - is CAPP.

capp.ca

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