Sesame Street is better at math than the oil companies are right now. Virtually every midsized oil exploration and production company has recently claimed not only to maintain production levels for 2015, but to increase production in the next year, all while slashing capital expenditure budgets to the bone. That math doesn’t compute at all: Where is the Sesame Street “Count” when you need him?
It really is as simple as 1, 2, 3….
This week after capex slashes were reported from several US oil companies, including a stunning 75% drop in the budget of Abraxas energy (AXAS), Canadian oil companies started to report with their own version of austerity for 2015. Husky energy (HSE), the number four oil major in Canada, has dropped its capex a third for the year coming, to $2.9B dollars. Penn West Petroleum (PWT) has guided its capex down $215m Canadian Dollars or 25% to $625m. MEG Energy (MEG), Cenovus (CVE), Tormaline (TOU) and Canadian Oil Sands Energy (COS) have reported similar spending reductions. The only constant in today’s cratering oil market are the dwindling drilling budgets of US and Canadian oil companies.
But production? Oh no, that’s another story. So far, I’ve yet to see one oil company, US or Canadian, admit to static production numbers from 2014 repeating in 2015, much less a production drop. It sounds much like the old jokes of discount sellers of knives or salad bowls – (“we sell UNDER our…