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BBC claim about oil discoveries

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Re: BBC claim about oil discoveries

Unread postby Darian S » Tue 01 Oct 2019, 23:12:36

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'h')ow about bankruptcies, haven't there been many for the past few years?


was discussed at great length by Rockman on this forum. Bankruptcy doesn't mean what you think it does. The vast majority of these companies entered into Chapter 11 which gives them time and cash to restructure, refinance or sell their company. In a few cases companies do go under but it is very few in the scale of things. Most exit in a few months time stronger than they were before. This is due to what I pointed out previously they were leveraged and the oil price dropped quickly and unexpectedly catching where suddenly their revenues could not cover debt carrying costs.


So like 90% are not cash flow positive according to rystad, iirc, many are going bankrupt, but you say there are no real financial issues? And this is in an era of artificially low interest debt, allowing for far easier to pay debt than at any other normal time.
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Re: BBC claim about oil discoveries

Unread postby rockdoc123 » Tue 01 Oct 2019, 23:37:23

$this->bbcode_second_pass_quote('', 'S')o like 90% are not cash flow positive according to rystad, iirc, many are going bankrupt, but you say there are no real financial issues


OK, as I said before "cash flow positive" is measured after all non-cash accounting adjustments as well as re-investments. So if a company, as an example posts revenues of $2 billion, has DD&A adjustments of ($1 billion), reinvests $1 billion into properties and wells it would appear on the balance sheet as zero cashflow. In reality the DD&A is a non-cash adjustment, it has no affect on what money the company has on hand. In this case they actually would have $1 billion in working capital available. You need to understand what it is you are reading. Rystad reports the information correctly (what is irrc, never heard of them), but they expect people understand what the balance sheets mean. As to many are going bankrupt...do you understand what "bankrupt" means in the context of a public company? As Rockman went to great lengths to point out Chapter 11 mostly results in stronger companies. As well you need to look at the E&Y oil and gas reserves analysis that is published annually. It points to how well companies are doing in terms of replacing reserves, growing revenues and reinvesting pre-tax cash. There are a few companies that are struggling but the vast majority are not. The oil and gas business is cyclical. Years ago there were numerous intermediate sized companies and then followed a period of consolidation where Chevron and Exxon and a couple of others went on a buying spree eliminating many of the names. A decade later a whole new bunch of small companies emerged on the market as prices rose, they grew and became quite large entities and now that prices have fallen to low levels for some time and the markets have temporarily lost their love affair with the oil patch there is going to be another period of consolidation (mergers, acquisitions etc) after which we will see far fewer names but all much stronger. It's the nature of the business.

But you appear to have an opinion, so the question you originally asked was really trying to seek some confirmation. Unfortunately, the data doesn't support giving you that.
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Re: BBC claim about oil discoveries

Unread postby Pops » Wed 02 Oct 2019, 10:43:05

Here is the picture from that report

Image


It would be interesting to see the picture from other sectors

Rystad also said a couple of days ago:
US Shale Won’t Go Bankrupt

.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
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Re: BBC claim about oil discoveries

Unread postby StarvingLion » Wed 02 Oct 2019, 12:12:32

$this->bbcode_second_pass_quote('', 't')he industry being a victim of it's own success


Matt Mushalik says rockdoc is nutzo.

http://crudeoilpeak.info/the-attacks-on ... -in-ghawar

"The world cannot live without Saudi oil"

" It is weak because the money printing in response to high oil prices in mid 2008 and 2011-2014 (shale oil boom!) has created a debt problem weighing down on the financial system and the balance sheets of many companies. "

"... the next attack is almost certain. The Houthis have already threatened to attack the UAE"

"Ghawar’s Light Arab has an API of 34 with a sulphur content of 1.9- 2.2 % by weight (which the Abqaiq plant must remove). Therefore, much of the very light and extra light shale oil cannot really replace Ghawar oil directly."

"All this means that Ghawar has peaked and future production is set to decline. The money now spent (hundreds of millions of dollars) on Abqaiq’s repairs will not be available to control decline rates in the field."
Last edited by StarvingLion on Wed 02 Oct 2019, 13:15:30, edited 1 time in total.
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Re: BBC claim about oil discoveries

Unread postby rockdoc123 » Wed 02 Oct 2019, 13:12:28

Rystad like many others use Cash Flow as reported in quarterly and annual reports simply because that is a number that is apples to apples. That doesn’t mean a comparison of that number tells you what is going on. As I said cash flow includes all cash costs plus accounting non-cash items.
E&Y show the reinvestment of cash into operations in a different manner. Their ploughback equation looks at revenues net of costs and then how much of that is expended back into the operations through OPEX and new E&P CAPEX. Basically they are putting back all of their revenues into the business as would be expected of publicly traded companies who the share holder expects to grow.

Image

Just as a good example of what is going on the E&Y study summarizes the top 50 US oil and gas company results. Looking at the first entry Andarako.

Their results of operations were $1,962 MM for 2018. That would appear on their balance sheet as free cashflow. But when you start to look at the entries you see revenues were $9,071 MM, production costs were 2,415 MM, exploration expense was 417 MM, DD&A was 3,198 MM, impairments were 373 MM, other income expense was 121 MM and income taxes were 585 MM. If you remove the non-cash accounting items (in this case DD&A and impairment) you get a better picture of what the company is doing (I’ve previously pointed out that when you are doing your own home budget you do not include the depreciation of your house or car in that calculation as it is meaningless to the bottom line of what you can afford to do). Hence on a cash basis before tax Andarako saw $9,071MM - $2,425MM - $417MM - $121 MM or $6,045MM a number much larger than what would appear as cashflow in the balance sheet, the difference being non cash accounting items. It is pretty obvious that they can afford their own E&P programs.
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Re: BBC claim about oil discoveries

Unread postby sparky » Mon 07 Oct 2019, 01:28:09

.
One of the issue with "Peak Oil " is one of definition
for a long time crude oil was understood as a liquid extracted from on shore and near Offshore

then fracking and sand tars came around , the natural gas got very popular
the result is a glut for the producers
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Re: BBC claim about oil discoveries

Unread postby ralfy » Mon 07 Oct 2019, 03:51:37

Actually, other sources of fossil fuels were discussed in Hubbert's report, and they will experience similar problems.

Given that, the problem isn't definition but the effects of peak oil. That is, increasing costs to increase production leading to lower energy returns, and increasing debts needed to cover costs.
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Re: BBC claim about oil discoveries

Unread postby shortonoil » Mon 07 Oct 2019, 08:53:21

$this->bbcode_second_pass_quote('', 'I')n fact, oil is being discovered far more quickly than it is being consumed.


Next up; the BBC is claiming the moon is made out of green cheese. With the global economy in debt $331 trillion dollars, the economy in contraction, and oil heading down as a result, the only thing the oil industry will be discovering will be the inside of a bankruptcy court!

The oil age is nearing its completion, and publishing absurdities is not going to help the situation! The world is burning 36 billion barrels a year, and discovering less than 4. To prevent a hell on earth from appearing it is going to take more than imaginary barrels from imaginary reserves. We either learn to face the music, or learn to dance at our own funeral.

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Re: BBC claim about oil discoveries

Unread postby Outcast_Searcher » Mon 07 Oct 2019, 11:53:16

$this->bbcode_second_pass_quote('shortonoil', '')$this->bbcode_second_pass_quote('', 'I')n fact, oil is being discovered far more quickly than it is being consumed.


Next up; the BBC is claiming the moon is made out of green cheese. With the global economy in debt $331 trillion dollars, the economy in contraction, and oil heading down as a result, the only thing the oil industry will be discovering will be the inside of a bankruptcy court!

The oil age is nearing its completion, and publishing absurdities is not going to help the situation! The world is burning 36 billion barrels a year, and discovering less than 4. To prevent a hell on earth from appearing it is going to take more than imaginary barrels from imaginary reserves. We either learn to face the music, or learn to dance at our own funeral.

If the facts and logic don't suit your narrative, just make stuff up, use nonstandard definitions to try to justify that, ignore all rational counter-arguments, including all the provided data, accounting information, etc. -- and THEN expect to be credible, despite being 100% wrong re your projections, year after year after year after year.

That will work with the folks who want to hear fast crash doom constantly.

For the real world for folks who value rationality and data and trends, not so much.

But no doubt, hyperbole or name calling will carry the day over time, when you have nothing meaningful to say. :roll:

Hint: As pointed out many times, re your nonsense on this site, reserves are doing just fine over time. Technological change matters.

https://www.investopedia.com/terms/o/oil-reserves.asp

https://www.thebalance.com/oil-reserves ... st-3305873

https://www.indexmundi.com/energy/?prod ... h=reserves

https://www.bp.com/en/global/corporate/ ... l-reserves


So what's next? More green cheese? Name calling, perhaps? A futile war cry?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: BBC claim about oil discoveries

Unread postby Darian S » Wed 09 Oct 2019, 10:48:55

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'S')o like 90% are not cash flow positive according to rystad, iirc, many are going bankrupt, but you say there are no real financial issues


...

But you appear to have an opinion, so the question you originally asked was really trying to seek some confirmation. Unfortunately, the data doesn't support giving you that.

how about the 100s of billions in debt?

I mean I hear most are losing money many are going bankrupt and shale companies are 100s of billions in debt, and I tend to think that perhaps their finances aren't that good.
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Re: BBC claim about oil discoveries

Unread postby rockdoc123 » Wed 09 Oct 2019, 11:06:00

$this->bbcode_second_pass_quote('', 'h')ow about the 100s of billions in debt?


You can't look at debt across the industry as a whole and then suggest individual companies are in trouble because of it....that's just dumb. Even companies with very hefty debt such as CHK have been easily able to pay their annual carrying costs as well as pay down the principal on schedule. CHK reduced its debt from $24 billion to $10 billion over a period of two years. As I have said a number of times debt becomes a problem when you can't pay the interest and related costs or you have a debt retirement schedule that you can't meet. There have only been a few of the smaller shale companies who over-leveraged when prices were high in 2010 - 2014 and got caught when the price fell in late 2014.

$this->bbcode_second_pass_quote('', 'I') mean I hear most are losing money many are going bankrupt and shale companies are 100s of billions in debt, and I tend to think that perhaps their finances aren't that good.


OK, you didn't read what I wrote, bankruptcy does not mean what you think it does. Perhaps do that and ask specific questions. Or better yet go to the SEC filings of whichever company you think is in trouble and then have a look. I summarized Anadarko here recently which is doing well despite what a sole look at cash flow from operations might suggest (the problem of non-cash items added into cash items in the accounting analysis for GAAP).
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Re: BBC claim about oil discoveries

Unread postby Darian S » Wed 09 Oct 2019, 11:14:51

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'h')ow about the 100s of billions in debt?


You can't look at debt across the industry as a whole and then suggest individual companies are in trouble because of it....that's just dumb. Even companies with very hefty debt such as CHK have been easily able to pay their annual carrying costs as well as pay down the principal on schedule. CHK reduced its debt from $24 billion to $10 billion over a period of two years. As I have said a number of times debt becomes a problem when you can't pay the interest and related costs or you have a debt retirement schedule that you can't meet. There have only been a few of the smaller shale companies who over-leveraged when prices were high in 2010 - 2014 and got caught when the price fell in late 2014.

$this->bbcode_second_pass_quote('', 'I') mean I hear most are losing money many are going bankrupt and shale companies are 100s of billions in debt, and I tend to think that perhaps their finances aren't that good.


OK, you didn't read what I wrote, bankruptcy does not mean what you think it does. Perhaps do that and ask specific questions. Or better yet go to the SEC filings of whichever company you think is in trouble and then have a look. I summarized Anadarko here recently which is doing well despite what a sole look at cash flow from operations might suggest (the problem of non-cash items added into cash items in the accounting analysis for GAAP).


Supposedly a former shale executive claims things have gone quite south
$this->bbcode_second_pass_quote('', '[')b]Fracking has been an “unmitigated disaster” for shale companies themselves, according to a prominent former shale executive.
“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Steve Schlotterbeck, former chief executive of EQT, a shale gas giant, said at a petrochemicals conference in Pittsburgh. “In fact, I'm not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”

He did not pull any punches. “While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said. “The industry is self-destructive.”
https://www.rt.com/business/462622-shal ... -disaster/
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Re: BBC claim about oil discoveries

Unread postby Pops » Wed 09 Oct 2019, 11:37:40

Just a WAG, but the smaller outfits did the experimenting and perhaps overextended, especially with the bust. Now the big cos like EXXON and Chevron, with higher capitalization that can bridge the humps in the market, are buying up the small guys.

Also, the transit problems are loosening so that cost is easing.

https://www.houstonchronicle.com/busine ... 277447.php
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Re: BBC claim about oil discoveries

Unread postby rockdoc123 » Wed 09 Oct 2019, 12:27:55

$this->bbcode_second_pass_quote('', 'S')upposedly a former shale executive claims things have gone quite southYou need to read the detail in what Schlotterbeck was saying:


You need to read the detail in what Schlotterbeck was saying:

$this->bbcode_second_pass_quote('', '')The biggest problem facing the upstream industry, frankly, is the industry itself,” said Schlotterbeck, who created the nation’s largest natural gas producer by volume with the merger of EQT and neighbor Rice Energy in November 2017. “The shale gas revolution has been an unmitigated disaster for any buy and hold investor.”

Speaking at Petroleum Update’s 2019 Northeast Petrochemical Conference in Pittsburgh, Schlotterbeck said upstream producers must change their orientation away from production growth that has swamped the market to delivering yield for their investors. Slashing drilling efforts to the bare bones while paying a healthy dividend with free cash is the path forward, he said.


So he isn't claiming that the companies have not been doing well, on the contrary they have had too much drilling success. What that has done is to maintain large supply versus a very slowly increasing demand which, in turn, results in sustained low prices. The previous mantra for all publicly traded oil and gas companies was growth, the reason being that it was the associated metrics that attracted shareholder investment. Shareholders encouraged the management of public companies to reinvest all of their revenues (along with an acquisition of appropriate debt) in order to finance land acquisitions and drill/complete new wells. As production went up in a rising price environment which had the attention of wall street investors did well in successful companies. As an example, if you bought CHK back when they really started to invest in the unconventionals (2004-2005) by the top of the oil price market in 2014 you would have quadrupled your investment. But after the price fall in 2014 wall street lost interest almost entirely with the oil and gas industry which has resulted in languishing oil stock prices that seem no longer to be tied to oil price. As an example, one that I follow out of interest is VET which has a mix of conventional and unconventional around the world. At the height of prices in 2014 they were at $74/share and now are at slightly less than $20/share even though production has increased, debt has decreased and cashflow per share has increased. Up until 2014 the price of light sweet crude pretty much tracked VET but the two diverged quickly after that and continue to do so, a product of the market losing interest in oil and gas companies. What Schlotterbeck is pointing out is if companies took more of the Capex spent on new wells and land (increasing production) and spent that instead on dividends paid out to shareholders on record they would attract investors who are no longer growth interested. This would have the added benefit of decreasing supply which would help with prices.
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