• 5 minutes Closing the circle around Saudi Arabia: Where did Khashoggi disappear?
  • 10 minutes Iranian Sanctions - What Are The Facts?
  • 15 minutes U.N. About Climate Change: World Must Take 'Unprecedented' Steps To Avert Worst Effects
  • 6 hours Can the World Survive without Saudi Oil?
  • 8 hours Sears files Chapter 11
  • 5 hours U.S. - Saudi Arabia: President Trump Says Saudi Arabia's King Wouldn't Survive "Two Weeks" Without U.S. Backing
  • 9 hours Natural disasters and US deficit
  • 5 hours China Is the Climate-Change Battleground
  • 1 day How High Can Oil Prices Rise? (Part 2 of my previous thread)
  • 2 hours Porsche Says That it ‘Enters the Electric Era With The New Taycan’
  • 1 hour $70 More Likely Than $100 - YeeeeeeHaaaaa
  • 2 days COLORADO FOCUS: Stocks to Watch Prior to Midterms
  • 2 days How Long Until We Have Working Nuclear Fusion Reactor?
  • 1 day Saudi A Threatens to Block UN Climate Report
  • 24 hours German Voters Set to Punish Merkel’s Conservative Bloc
  • 19 hours Threat: Iran warns U.S, Israel to expect a 'devastating' revenge
Alt Text

Why The Saudis Can’t Keep A Lid On Oil Prices

Oil prices continue to rise…

Alt Text

Fear Has Driven Oil Prices Too High

The calls for $100 oil…

Alt Text

Why The Oil Price Rally May Soon End

Not everyone seems to think…

Martin Tillier

Martin Tillier

More Info

Trending Discussions

Betting On A Survivor

Offshore

Around three years ago, in June of 2014, oil began a spectacular collapse. After rising to the point where WTI was fetching over $100 a barrel and holding that psychologically important level for a few months, the market turned. Six months after the rout began the price of a barrel of oil had halved, leaving a lot of companies in a lot of trouble. The hardest hit businesses in the industry were small exploration and production (E&P) companies. Even those that saw it as an anomaly rather than a new normal had worked on assumptions that seemed reasonable or even quite conservative at the time but proved disastrous very quickly. From that point, planning on a long-term average price of around $80 per barrel and borrowing and investing accordingly looked like a too conservative plan if anything.

As prices collapsed, however, even those companies faced a serious problem. Debt levels that looked manageable with oil at an average of $80 now became serious burdens. That situation was worsened by the fact that much of the borrowing had been done to finance land and mineral rights lease purchases that were now essentially worthless. There is no point having a right, and in many cases an obligation, to drill on land where the oil and gas cost more to get out of the ground than you can expect to get for it in the market.

I retell this history, as distressing as it is for most energy investors, to make a point about companies that have survived to this point. Many of them…

To read the full article

Please sign up and become a premium OilPrice.com member to gain access to read the full article.

RegisterLogin

Trending Discussions





Oilprice - The No. 1 Source for Oil & Energy News