Posted on 10/10/2014 5:29:11 AM PDT by thackney
This year's fall in energy prices is hastening the decline of big oil, as the seven Western majors sell-off assets, cut investment, return money to shareholders and shrink in size, leaving ever more output to small producers and state firms.
Companies that were already deep in the red when the price of Brent was at $109 a barrel last year are having to redraw business plans for prices as low as $90.
With promised shareholder dividends probably untouchable for now, they will have to divest, cut costs and borrow more against a smaller business just to make ends meet. And unlike in previous downturns, they are no longer big enough to ensure that their own cutbacks will drive prices and profits back up.
According to Morgan Stanley analysts, the seven majors - Royal Dutch Shell, BP, Exxon Mobil, Chevron, Total They generated $207 billion of operating cash flow but invested $209 billion in capital expenditure and returned $53 billion to shareholders in dividends.
All have promised investors to do better this year by cutting their capital investment and operating expenses - which mushroomed in recent years on the back of cost overruns and delays at projects such as Kashagan in Kazakhstan or Gordon in Australia - both estimated to cost over $50 billion.
But the latest drop in oil prices to a two-year low leaves few options other than to continue shrinking by selling projects, oil fields and refineries.
And given that the seven majors have already sold assets worth $150 billion in the past four years, they are gradually turning from super-majors into mini-majors: still among the biggest companies in the world but no longer with the size to bend prices to fit their investment cycle.
"Oil companies are in a period of circumspection, which will only be prolonged...
(Excerpt) Read more at rigzone.com ...
Hastens the decline of OPEC too. (And those funding terrorism)
Like everyone else, I was hoping that this was the boom that went on forever.
Translation: World monopoly is hurt by America become more independent thanks to fracking.
Pray America wakes up
Damn Peak Oil ruins everything.
The big boys have a lot of overhead 80-90$ range the little boys will still make a lot of money, not so much for the bigs...
Yup.
From the article, another piece of good news: “technology improves so fast on U.S. fields that what looked uneconomical two years ago looks economical today, even with lower prices.”
“And technology improves so fast on U.S. fields that what looked uneconomical two years ago looks economical today, even with lower prices.”
American ingenuity despite Barack Obama.
Spot oil may be approaching $80 or so but the price of NG is still above $3.60. Gas will be the future here unless someone figures out how to stiffle its use. Most majors have ample gas coverage IMO to withstand a further drop in crude. Besides, fracking, shale and ultra deep drilling for crude are not economical below about a $70 threshold so at some point marginal over leveraged mostly small to midsize players will be gone from the playing field if the move down persists. All non agricultural commodities are in a bad run now due to over supply verses demand. All IMO of course.
The concern I see is the previous reports about the little boys running large debt compared to the big boys in the these plays.
A Big Summer Story You Missed: Soaring Oil Debt
http://www.freerepublic.com/focus/f-news/3198564/posts
8/29/2014
Oil and gas company debt soars to danger levels to cover shortfall in cash
http://www.freerepublic.com/focus/f-news/3191680/posts
11 August 2012
Those were based upon a higher oil price.
You beat me to it.
American technology is BUILDING THAT!
Screw Obama.
OK, the decline of Big Oil isn’t necessarily good news. I was referring to the decline of oil prices.
I’m wondering how much of the downward trend is competition from ISIS oil reaching the market.
ISIS isn't drilling new wells. That production was already on the market before ISIS took them over. And since they took the area over, the production is down.
But isn’t ISIS selling the oil for less because there are outlets that won’t purchase oil from them? I read that somewhere about a month ago.
Sure. But stealing TVs and selling them at discount in the back alley doesn’t lower the price of TV’s at WalMart. If anything, it raises their cost of business and raises the price of TV’s.
The price pressure on the global, fungible oil commodity is driven by supply and demand at given price curves.
ISIS actions removed from the total amount of oil available to the market. For those willing to take the risk in the area, they got discounted oil. That has no impact on the global market other than trying to make up the supply that ISIS decreased, assuming no reduction in demand.
If the demand stayed the same, their actions would drive up the oil, but very slightly because this is a relatively small amount compared to the global market. Their actions have like reduced demand in the area with reduced commerce. I suspect it is a near break even to those outside their area of influence.
Witness the NIMBY folks refusing to let the gas pipeline in here in MA. I;m sure it’s not the only one in the country either.
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