Incentive Plan Extension

Another tweak to the drilling and royalty incentives was announced by the Alberta Govt. today extending the two current incentives for yet another year.

You would think that with this he is hearing what we are saying, but there is no truth to this at all. Nothing else has changed from the week before outside of the extension. Gas prices are in the toilet and look to remain there for some time, therefore drilling based on a one year extension on royalty breaks means absolutely nothing, albeit it seems they may have come to the realization there is a problem. Maybe dropping our ranking to the eighth best province to invest in the oil and gas sector had something to do with this.

The only way to help bring in investment dollars is to outright cancel the NRF. By the time prices stabilize enough to where the juniors have enough money to drill the incentive program may not benefit them at all. All of the production before the incentives release in November 2008 are paying the royalties under the NRF. In the price low environment they can not afford to drill and complete the wells and in a higher price environment the royalties are punitive. This leaves no upside for producers and meddling with royalties time and time again does not help bring a stable framework, but eliminates it. With oil at $70US and our dollar at .87 oil is profitable at the moment so why aren't we drilling?

The answer is simple, there are better places to invest.