Derivation of realized oil prices
In my ranking model I base my expectations for realized oil prices per company on the average delta of the realized oil prices price over the previous twelve months with the WTI oil over the same period.
With a common future WTI oil price scenario (I currently use a flat WTI=$ 70/bbl) using the historic discount I calculate the expected future realized oil prices per company.
Average discounts of Canadian oil companies in 2023 and 2024 per quarter are shown below.
- Canadian discount - 1.jpg (112.8 KiB) Viewed 3417 times
Trans Mountain Pipeline Expansion Project
With the start of the Trans Mountain Expansion Project in May 2024, an export route with access to the Pacific Ocean came available. The Trans Mountain Expansion Project forms an alternative to exporting oil to the refineries in the American NW. The original pipeline was built in 1953. The expansion project increased capacity from 300,000 to 890,000 bbl/d.
The start of the Trans Mountain Expansion Project resulted in Q3 in improved realized oil prices. The average discount of the realized oil prices in Q3 (discount US$ 7.85/bbl) improved with US$ 1/bbl versus Q2 (discount US$ 8.84/bbl).
For Q4 I had expected a further improvement in the discount versus Q3 of US$ 2/bbl, with a range of US$ 1-3/bbl. This assumption proved to be too pessimistic. The actual improvements ranged from US$ 0.05-5.88/bbl. The average reduction in the discount fell with US$ 3.48/bbl.
- Canadian discount - 2.jpg (153.34 KiB) Viewed 3417 times
The remaining discount in Q4 is still substantial – on average -US$ 2.66/bbl. The average discount is influenced downwards by some positive discounts due to the impact of diluent (Canadian National) or quality factors (Tourmaline, Vermilion, Yangarra). Taking these out the average discount in Q4 was US$ 6.44/bbl
- Canadian discount - 3.jpg (134.81 KiB) Viewed 3417 times
The Q4 discounts are typical for what I use for Q1 2025. From Q2 onwards I apply a common US$ 3.50/bbl extra discount to reflect the consequence of the start of the US import tariffs.