• 5 minutes Rage Without Proof: Maduro Accuses U.S. Official Of Plotting Venezuela Invasion
  • 11 minutes IEA Sees Global Oil Supply Tightening More Quickly In 2019
  • 14 minutes Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 5 hours Waste-to-Energy Chugging Along
  • 4 hours U.S. Senate Advances Resolution To End Military Support For Saudis In Yemen
  • 12 hours Contradictory: Euro Zone Takes Step To Deeper Integration, Key Issues Unresolved
  • 7 hours Let's Just Block the Sun, Shall We?
  • 8 hours Venezuela continues to sink in misery
  • 1 hour Alberta govt to construct another WCS processing refinery
  • 4 hours Regular Gas dropped to $2.21 per gallon today
  • 22 hours Zohr Giant Gas Field Increases Production Six-Fold
  • 9 hours What will the future hold for nations dependent on high oil prices.
  • 21 hours No, The U.S. Is Not A Net Exporter Of Crude Oil
  • 17 hours UK Power and loss of power stations
  • 1 day USGS Announces Largest Continuous Oil Assessment in Texas and New Mexico
  • 23 hours Global Economy-Bad Days Are coming
  • 18 hours EPA To Roll Back Carbon Rule On New Coal Plants

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