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Should Oil Sands Producers Be More Valuable Than Frackers?

By Joel South and Taylor Muckerman – Mar 5, 2014 at 3:33PM

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Scotiabank released break-even costs for oil producers and determined oil sands are more cost competitive than originally thought.

Source: Wikipedia

A new report from Canada's third-largest bank, Scotiabank, released a report showing the cost competitiveness of bitumen from the oil sands compared to "tight oil" shale plays in both Canada and the United States. The numbers shocked many, showing In Situ oil sands break-even costs below that of the Eagle Ford in Texas and North Dakota's Bakken shale plays.

With break-even prices below those of unconventional plays in the United States, why are producers levered to the oil sands currently trading at cheaper valuations? Investors only need to look at the margin differentiation, and the distance the oil has to travel to market. 

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This segment is from Tuesday's edition of "Digging for Value," in which sector analysts Joel South and Taylor Muckerman discuss energy and materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays and Thursdays. It can also be found on Twitter, along with our extended coverage of the energy and materials sectors @TMFEnergy.

Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of EOG Resources. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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