Posted on 11/11/2015 5:15:05 AM PST by thackney
Plummeting prices for crude oil have restricted the spending power of many oil and gas companies over the last few quarters, as recent massive cuts in capital expenditures and slashed headcounts in Houston have shown.
Illustrating how tight things have gotten for some companies, business research website FindTheCompany ranked firms in the U.S. by free-cash flow, which takes a company's operating cash flow and subtracts its capital expenditures.
Using this metric, FindTheCompany showed that across all U.S. businesses, oil and gas producers had among the shortest strings on their budgets following the second quarter of 2015.
Of the top 25 companies with negative cash flow, 12 were oil and gas producers. Two other companies on the list -- Freeport-McMoran and DuPont Co. -- had ties to oil and gas.
FindTheCompany analyst Ben Taylor noted that compared to many other major industries, energy companies are particularly capital intensive.
"Expenses for even the most obscure or supplemental components will often run in the hundreds of thousands," Taylor wrote. "Consider that commercial-grade dump truck tires can cost half a million alone, and must be replaced once every six months."
Great companies in the long term, many of them. ARP, EVEP and BBEP to name a few.
Without profit margins wide enough to sustain expansion, industry must inevitably contract to the point where the influx of earnings still equals or exceeds the costs of operation, or it turns into a death-spiral that ends in liquidation or bankruptcy.
Just as stark and simple as that.
Even greedy fatcats end up starving out if the pace is not sustained. But greedy fatcats are the ones that hire people and provide the amenities of life for everybody.
No poor person ever hired anybody for anything. If you consider yourself “poor” and still are hiring someone else, then you are not yet truly poor.
But you will be.
te. “Consider that commercial-grade dump truck tires can cost half a million alone, and must be replaced once
They need new drivers not new tires
This chart is very misleading in that it shows the companies position after the second quarter of 2015. The vast majority of these companies recognized that they had to cut cap ex to reflect reduced revenues and to bring cash flow and expenses in line. I own stock in 6 of the listed companies and they all have taken significant steps to retrench. If energy prices do not rebound until 2018, all bets are off, but short of that scenario these companies will be okay. They will sell off marginal properties and if necessary reduce their dividends, but they will survive. Saudi Arabia is pumping at max production. I doubt they can keep that up much longer and US production is already started to decline, which should start to stabilize prices and put a floor under energy prices.
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