• 3 hours Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 7 hours Russia, Saudis Team Up To Boost Fracking Tech
  • 13 hours Conflicting News Spurs Doubt On Aramco IPO
  • 14 hours Exxon Starts Production At New Refinery In Texas
  • 15 hours Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 1 day Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 1 day Oil Gains Spur Growth In Canada’s Oil Cities
  • 1 day China To Take 5% Of Rosneft’s Output In New Deal
  • 1 day UAE Oil Giant Seeks Partnership For Possible IPO
  • 1 day Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 2 days VW Fails To Secure Critical Commodity For EVs
  • 2 days Enbridge Pipeline Expansion Finally Approved
  • 2 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 2 days OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 3 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 3 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 3 days Aramco Says No Plans To Shelve IPO
  • 5 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 6 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 6 days Chevron Quits Australian Deepwater Oil Exploration
  • 6 days Europe Braces For End Of Iran Nuclear Deal
  • 6 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 7 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 7 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 7 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 7 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 8 days Chinese Teapots Create $5B JV To Compete With State Firms
James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

More Info

In Gloomy Oil Market, $28 Production Costs Win the Day

With crude oil prices hovering around $46/$53 per barrel and the market separating the weak from the strong, Toronto-based MCW Energy Group (MCWEF: OTCQB; TSV: MCW.V) announces that its Utah production costs per barrel have been slashed to $28, making this oil sands project one of the most profitable plays in North America.

While shale producers are taking a nose-dive in this market, experts estimate that MCW’s per barrel oil production in Utah is more profitable than 95% of shale oil currently being produced, and more profitable than any other oil sands project in North America.

Right now, Canadian oil sands heavy crude production costs are around $40-$60 per barrel—vastly more expensive than MCW’s $28/barrel oil sands production projections at its newly built processing plant in northeastern Utah—a state that is home to some 32 million barrels of heavy crude buried in sand and silt.

Utah is the heart of a massive oil sands venue known as the Green River Formation, which also runs into Wyoming and Colorado and may hold some 3 trillion barrels of recoverable oil. MCW’s new oil sands extraction pilot plant—which opened on 1 October 2014--is in the sweet spot of this area, Asphalt Ridge, which is thought to contain nearly a billion barrels of oil on its own.

The company will have 5,000 barrels per day of production coming online here in 2016/2017, and even with cash flow forecasts based on today’s dire oil prices, this is a win-win situation for investors. The slash in production cost projections is a result of lower costs of petroleum products used for extraction. But adding to the attractiveness here is an aspect that could reduce production costs by a further $4-$5 per barrel.

MCW is also planning to purchase the Temple Mountain oil sands lease and this would reduce feedstock costs by up to $5 per barrel, bringing total costs down to $23-$24 per barrel—prices that are nearly impossible to find right now.

"Unlike the high production costs and lower energy efficiency levels associated with the mega oil sands projects in Alberta, MCW is in a unique position to take advantage of this unexpected 'silver lining' of lower petroleum product prices," MCW’s CTO, Dr. Vladimir Podlipskiy, said in a statement. "Not only have we reduced the costs of these components by 18%, we've also enhanced the automation of our proprietary extraction process, which effectively reduces our labor costs by 20%."

The economics of this play are brilliant in this market, and more expensive Utah projects run by larger players in the Uinta Basin will be registering much weaker signals on investor radar. Houston-based Marathon Oil (NYSE:MRO), EP Energy Corporation (NSE:EPE) and Newfield Exploration Co. (NYSE:NFX)—have invested a great deal in Utah’s Basin shale, but the focus could now shift to oil sands. Crescent Point (NYSE:CPG) has also invested heavily in Utah, and plans to spend $154 million of its 2015 budget in Uinta.

Earlier this week, Newfield--Utah's largest oil producer—laid off 80 of its 540 employees in the state, citing the economic challenges brought on by the continued drop in oil prices.

According to Platts, the Uinta shale is one of the five weakest plays in this oil price environment, while virtually all major US shale plays are now earning average internal rates of return of less than 20%--compared to over 50% in July 2014.

So while Utah’s shale plays may suffer, MCW’s oil sands math adds up to a clear profit for investors.

More poignant still is a technological breakthrough that promises to deliver the first environmentally friendly oil sands in North America, according to Bloomberg. The news agency also noted that while MCW has pioneered the process, low oil prices and new oil sands extraction technology make this an attractive notion that has prompted another player—Calgary-based US Oil Sands (USO:CN)—to follow in MCW’s footsteps with its own plans for a 2,000 bpd plant.

MCW says it can extract Utah’s oil sands “without creating the toxic wastelands that have resulted from oil sands projects in Western Canada.”

The technological trick is contained in a paint thinner-like solvent the company uses to separate the oil from crushed rock and sand. Significantly, Bloomberg noted, the process does not use any water, which is good news for Utah, where water is extremely scarce.

At the time, Bloomberg noted that MCW could process oil at $38 per barrel, compared with roughly $75 for oil from Alberta. But those costs have continued to come down since then, making it a clear winner in today’s oil price environment. And when $28 production costs are further slashed to $23, investors will already have missed the boat.

By James Burgess of Oilprice.com

Legal Disclaimer/Disclosure: MCW Energy is an Oilprice.com client. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News