Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on September 25, 2015
EIA: Oil firms’ deficit between spending and cash balloons to $50 billion
The plunge in crude prices cost oil companies some $35 billion in operating cash flow in the second quarter, compared to the same period last year, the U.S. Energy Information Administration said Thursday.
And though the collective of 97 western oil producers the EIA studied has cut billions in spending this year, they still invested slightly more than they made from the oil patch in the three months ended June 30.
The industry has long outspent its cash flow and funded investments by raising debt and equity from banks and capital market. But that became far more costly after oil prices tanked.
The EIA said that on an annualized basis, the oil industry’s deficit between the capital it spent on drilling prospects and other projects and the cash that it got back ballooned to $50 billion in the second quarter. That’s compared to a $15 billion deficit late last year, when producers began cutting back because of low oil prices, but cash flows hadn’t plummeted yet.
And profits have bit the dust. Together, the oil companies’ annualized return on equity has fallen from about 11 percent last year to nearly zero in the second quarter. It was about 17 percent in 2012.
Producers have keep the deficit funded by selling assets and raising debt and equity, but that is straining their balance sheets. The oil companies’ debt-to-equity rations have climbed from about 35 percent last year to 44 percent this year, the EIA said.
The EIA’s analysis mostly focused on U.S. oil companies, but also included firms headquartered in Canada, Europe and emerging markets.
42 Comments on "EIA: Oil firms’ deficit between spending and cash balloons to $50 billion"
makati1 on Fri, 25th Sep 2015 7:12 am
Debt Up!
Equity Down!
Sounds like a receipt for bankruptcy.
shortonoil on Fri, 25th Sep 2015 7:53 am
We have stated here, and other places, that our calculations show that it will require $39 trillion in additional debt formation over the next decade to keep the world’s oil supply operating. We have not changed that estimate.
http://www.thehillsgroup.org/
apneaman on Fri, 25th Sep 2015 8:30 am
What other places? Are you seeing someone else on the side? I’m crushed:(
ghung on Fri, 25th Sep 2015 8:43 am
No worries. Crank up the Chapter 11 machine and keep pumping.
Kenz300 on Fri, 25th Sep 2015 8:51 am
Divestment in fossil fuels has begun……
The banks are pulling back their investments in fossil fuels and are moving on to alternative energy sources. They are safer, cleaner and cheaper. Makes for a better investment.
The Year Humans Got Serious About Climate Change — NYMag
http://nymag.com/daily/intelligencer/2015/09/sunniest-climate-change-story-ever-read.html
penury on Fri, 25th Sep 2015 9:43 am
Don’t worry,be happy. As long as the FED is there to protect the banks, the taxpayers will pick up the tab. Banks will not be allowed to suffer losses and of course the economy of the nation is at stake; Besides 2016 is an election year and every thing must be presented as awesome to assure the proper results.
BobInget on Fri, 25th Sep 2015 9:50 am
OK then. If oil companies all go broke, how will I,
BobInget get to a grocery store?
(it’s all about me, ya know)
Wait a second. No sense going to ‘the store’. There was no way to transport food that couldn’t be grown in the first place.
No fertilizer. No trucking.
No water.
No tractors, combines, mills.
On the plus side. Plenty of parking and no traffic.
No UBER. No internet. No place to fear monger.
No need to go to airports, trains, bus depots,
hospitals, university, prison. All closed.
Those wealthy enough to buy gasoline were such a tiny portion of the population it was not worth spending 13 hours a day pulling a plow with a horse to feed the bastards.
How did we get here?
For all the answers;
http://www.thehillsgroup.org/
BobInget on Fri, 25th Sep 2015 10:11 am
The aircraft, auto, truck and agriculture industries ain’t goin away.
As fuel prices rise because of scarcity, (disinvestment) hyperinflation excludes all but the wealthy. Resentment against this class grows.
At first, we blamed Muslims.
I’m no Muslim. Folks all say our President is one.
I keep silent.
Then, when Israel and Saudi Arabia bomb Iran
People blamed Jews for gasoline shortages. I’m a Jew but thought it best to keep that to myself.
To keep public order, Web sites like this one were kept on a 24 hour delay so as to filter out
messages that might bring further unhappiness.
Black folks in America were finally getting equal treatment ‘under the law’. Tens of thousands of so called ‘dissidents’ are being rounded up and deported.
There’s a loud knock at my do
rockman on Fri, 25th Sep 2015 10:41 am
Bob – Easy answer: you get in your car and drive to the grocery. Assuming you can afford the gas. And if you get a check from your employer or from the govt so you can buy food. The grocery will have food but it might cost more since ag and transport costs may have risen. The day to day dynamics didn’t breakdown when prices hit $147/bbl. And producing oil wells will keep producing whether oil is selling for $90/bbl or $30/bbl. In fact the lower oil prices have seen many operators, such as the KSA, increase production in an effort to max cash flow.
But those are all short term dynamics. The KSA, US shale players et all may be producing existing well flat out but that obviously doesn’t mean they’ll spend a lot of capex on new projects. This is one of the reasons we’re seeing such diverse predictions about future oil production. Yes: we might actually have seen a recent uptick in global oil production despite the price drop. But not because companies are drilling more/better wells. Just the opposite. It’s because they are increasing production from existing wells to make up for the lower oil prices.
How the system adjusts over the next 10+ years is another question. Folks really do need to split the conversation between short and long range projections. And as much as some don’t like it we cannot not resolve a coherent picture without taking into full account of the POD. The POD explains both the current lower oil prices as well as the decrease in the development of new production. Yes: the cure for low oil prices are low oil prices. But only to a degree: the state of the global economy will also have its impact.
Again folks can piss and moan about the POD but breaking the discussion down to just the individual components will never capture the full nature of the energy predicament we find ourselves in. Nor will it allow anything close to an accurate projection of the future.
tita on Fri, 25th Sep 2015 10:55 am
The FED can’t do miracles. Yes, they can go for another round of QE to keep the machine running. But this would raise some big question, as the rest of the US economy is doing better (thanks to the low oil prices). They are actually thinking of raising the interest rate, not buying again junk bonds.
The US oil patch will have to go through the same procedure than 30 years ago, as nobody will help them.
Boat on Fri, 25th Sep 2015 11:21 am
rock,
Yes: we might actually have seen a recent uptick in global oil production despite the price drop. But not because companies are drilling more/better wells. Just the opposite. It’s because they are increasing production from existing wells to make up for the lower oil prices
This is an argument we should explore more. Are you saying the expanding production from Iran, Iraq etc are not from better and cheaper wells than fracked wells? Most of these wells were not drilled or quit drilling for geopolitical reasons/war. If Nigeria, Libya, Syria were to return to political stability would they also not be able to deliver oil cheaper than tar sands, frackers etc/high cost producers.
What about the future of oil if it reached $80. Would not Argentina, and Mexico start fracking their little hearts out along with other shale players in certain areas.
One last note. Finance is global in nature. Investors will chase a buck if they think there is money to be made. Unlike tita I think there will be no lack of money if the price of oil is high enough to make a buck.
BobInget on Fri, 25th Sep 2015 11:25 am
Deep water, O sands, Shale, Kerogen, are all out of the question with North American 50$ crude.
So, for that matter, NG @ $2.53. Fell because of hot weather. In fact, if it weren’t for tight oil would we even have plentiful NG? No one is thinking future, Rockman is right. Natural gas was supposed to pull our chili off the fire or at least stir the pot. Now, with longer summers so called ‘injections’ are higher then ‘normal’.
IOW’s like with oil, an embarrassment of wealth.
As for the ‘global economy’ how much longer can ‘Big Oil’ keep paying dividends from reserves (keep investments) and keep up deliveries losing $30 to $40 bucks a barrel? I know, I know, they’ll make it up with volume.
As it is it will take at least a year just to put all the lego pieces in order WHEN oil resumes its normal rinse and repeat cycle.
penury on Fri, 25th Sep 2015 11:54 am
Reading the comments from some who know the industry has led me to the conclusion that the money is interesting but, at this point largely irrelevant, “As it is it will take at least a year just to put all the lego pieces in order WHEN oil resumes its normal rinse and repeat cycle.” This statement to me says it all. Looking at the devastation in coming because of the diesel stench in Europe, and the loss of mining,and other sections of the economy combined with the continued refugee or whatever crisis in the world IMHO there will continue the downward trend for a very long time.
Boat on Fri, 25th Sep 2015 11:58 am
Bob,
Deep water, O sands, Shale, Kerogen, are all out of the question with North American 50$ crude.
So, for that matter, NG @ $2.53. Fell because of hot weather. In fact, if it weren’t for tight oil would we even have plentiful NG?
200 drilling rigs for nat gas are supplying huge growth that is knocking the dust out of coal and taking over their market share that used to take 1600 wells to produce less. That is just the US.
That is just wild to think about. Nat gas is not in trouble. There is gas out the ass.
Boat on Fri, 25th Sep 2015 12:12 pm
penury,
There is a lot of investment dollars coming back to the US because of cheap nat gas. No one thought that could happen.
Adding humans to already stressed countries is a mistake. Someday people will figure it out.
Kenz300 on Fri, 25th Sep 2015 12:27 pm
The OIL industry has their collective heads stuck in the sand.
It is time for the OIL companies to reinvent themselves and turn into ENERGY companies by embracing alternative energy sources like wind, solar and second generation biofuels.
Fossil fuels are the past and they are killing the planet. It is time to move to a safer, cleaner and more sustainable future.
GregT on Fri, 25th Sep 2015 12:28 pm
“Adding humans to already stressed countries is a mistake. Someday people will figure it out.”
The Earth is in human population overshoot, caused mainly by our exploitation of fossil fuels. No country is exempt from the consequences of human exceptionalism. Adding more greenhouse gasses into the environment will only make all of our most serious problems worse. Everywhere.
You Boat, are not smart enough to figure this out.
ghung on Fri, 25th Sep 2015 12:29 pm
There is a lot of investment dollars coming back to the US because there is nowhere else for them to go.
idontknowmyself on Fri, 25th Sep 2015 12:56 pm
IEA is looking at the situation so they know how much money it will cost to bailout the oil industries and what companies need help right away. 50 billion is nothing. The FED used to print 85 billing a mouth during QE.
SO far not that many companies went bankrupt. If in a year from now we don’t see more oil companies going bankrupt, it means that the oil industries is being bail out.
Bob Owens on Fri, 25th Sep 2015 1:38 pm
The sooner the fracking companies are dead and buried the better. Next up: the Canadian tar sands companies. Hopefully, they will all die a quick death.
shortonoil on Fri, 25th Sep 2015 2:05 pm
“SO far not that many companies went bankrupt.”
http://www.zerohedge.com/news/2015-09-14/theres-just-no-cash-oil-price-increase-will-not-come-fast-enough-save-alberta
Not that many have gone bankrupt, but it sure looks like a lot of them are going broke!
Hello on Fri, 25th Sep 2015 2:22 pm
Important is productive assets.
Debt, credit, money and all that is not very important.
BC on Fri, 25th Sep 2015 2:49 pm
When the shale sector finally crashes, most will be quite surprised, even shocked, when US oil production falls 3-4Mbd over the next 2-3 years but consumption falls 2-3Mbd to converge with trend US demand outside the energy and energy-related transport sectors.
I have already purchased lots of popcorn, Goobers, and Maker’s to enjoy while watching the entertaining spectacle. 😀
BC on Fri, 25th Sep 2015 3:01 pm
Since we no longer have a capitalist economy (replaced by financialized rentier-socialism), bankruptcy is probably optional at this point. The only entities that can afford bankruptcy are the ones the gov’t bails out and the Fed prints to cover. But we don’t call that bankruptcy.
That makes The Donald the perfect choice for CEO of the militarist-imperialist, rentier-socialist corporate-state.
Also, because the top 0.001-1% and the corporate-state acting on the precedents of the uniform commercial code (commercial law) are the real “owners” of virtually all “property”, corporate bankruptcies are the only ones that really matter vs. personal bankruptcies, the latter being often just a legal transfer of ownership from a landless/propertyless person to a corporate entity.
That’s another reason why every “person” and/or household should become a corporation in whichever form is appropriate, including sole proprietor, S corp, LLC, etc.
Corporate persons of the world unite!!! 😀
Just another day in fascist, corporate-statist paradise.
Craig Ruchman on Fri, 25th Sep 2015 7:09 pm
Does anybody have an opinion on why solar stocks are doing so poorly. Oil is getting more expensive and there is less of it. Meanwhile solar gets better all the time and is on an exponential growth trajectory.
antaris on Fri, 25th Sep 2015 10:49 pm
Hi Craig.
It sounds like you are waking up from a long sleep. Stick around here for 6 months and read lots and you will have a better understanding of where we are at. Just to let you know, this site is like a tennis court. On one side are intelligent, experienced people trying to pass on good information and then the other side, trolls, shills and shit disturbers. You decide which side you are with.
ghung on Fri, 25th Sep 2015 11:14 pm
Craig – Besides the perception of an energy glut, solar is acting like other commodities. Seems counter-intuitive, but economies are struggling to boost any sector. Add in new tariffs cranking up in the US, along with the early adopter factor getting saturated and various state tax credits expiring,, well there you go.
makati1 on Fri, 25th Sep 2015 11:30 pm
BC, I don’t think you will need too many snacks for this show. I suspect it is in it’s last act and will be over sooner than many here believe. 10 years? Nope! 5? Maybe if they can keep pulling faux fixes out of the hat. Less than 3 is my bet. Maybe even next year. But it should be exciting!
BC on Sat, 26th Sep 2015 10:01 am
https://app.box.com/s/jemdqkdd23257oummtpjwl6348wigdlx
https://app.box.com/s/jemdqkdd23257oummtpjwl6348wigdlx
https://app.box.com/s/npygb8t139jm69yjcz5nhzm8ygibd5pd
https://app.box.com/s/0hroqkg7zym2us8em4k55a36affs4xmc
Craig, it’s a function of Peak Oil and its effect on “Limits to Growth” (LTG) and the end of growth (EOG).
US electricity consumption per capita is at the level of the late 1990s to early 2000s.
The growth of wind and solar in the US has peaked with the price and change rate of oil. The oil cycle is turning down as in the early 1960s and 1986.
The end of growth of world real GDP per capita and trade will mean less demand for oil, particularly in the energy and energy-related transport sectors.
https://app.box.com/s/ztgvh9e0u9skbdctnnrm29h2xpuq3854
https://app.box.com/s/cik3teki4u11tj7erkxqh1t1lw0eayvj
Financial risk is increasing and another equity bear market is setting up as in 2000 and 2007.
When the shale sector finally crashes, most will be quite surprised, even shocked, when US oil production falls 3-4Mbd in the years ahead while consumption falls 2-3Mbd to converge with trend US demand outside the energy and energy-related transport sectors.
Under these conditions, it matters little that the cost of PVs is plunging, as the lack of growth of demand per capita does not economically justify further build-out of altE to larger scale.
Ghung is quite right about the commoditization of PVs (but that’s one of the positives of capitalism).
https://app.box.com/s/y3pdkblwlcvgev3rncpm4q93twut996e
https://app.box.com/s/0fasm21t3ic7m0i16s8jq9g71do98qhb
https://app.box.com/s/mmw9jxpm5m3qrvs7jehrg3lehukq02vb
SCTY is breaking down from a mega-bearish descending triangle, which implies that the stock will “catch down” to its peers.
http://www.businessinsider.com/jim-chanos-shorting-solarcity-2015-8
Clearly, Chanos also sees the potential for the big bearish outcome for SCTY.
If one “actually” understands Peak Oil, then one will understand the connection to population overshoot, LTG, EOG, climate change, and the implications for altE.
We cannot grow real GDP per capita AND build out altE to necessary scale AND maintain indefinitely the fossil fuel infrastructure. Something has to give and it will be real GDP growth per capita and further altE build-out.
In net energy terms per capita, we can no longer afford to grow population, resource consumption, profits, and capital formation/accumulation on a full planet. No one in authority will tell us this because it violates the Establishment metanarrative (and the instinctive biological imperative, one might also say), it risks loss of credibility and legitimacy of the elites’ authority to rule, and there is no alternative growth-oriented paradigm to which we can quickly and seamlessly transition.
I hope this makes sense.
The good news is that now you know and can personally act to adapt successfully.
Craig Ruchman on Sat, 26th Sep 2015 8:22 pm
Thanks to all.
I have been an observer of PO since reading Kunsler in 2005; I do come to this site every day though I do not post except when I awaken from my sleep about once every 6 months :). Like PO, I predicted a housing bubble was coming in 2004, but I was alone with my words at that time because prices were going up and not down (like today’s production). But I saw the interest only loans (subsites to the real thing) and other gimmicks that held the house of cards together. Many now come to me and say if only they had listened.
At any rate, at this point in time in the oil story, I do believe it’s quite possible that we will have reached PO this year, and if not, then perhaps next year. But even if I am wrong, I would still be right by noting that production is larded with ‘substitutes of the real thing’: lower quality, lower ERoEI fuels. This is hardly seems like a recipe for a brighter future.
But in the spirit of the yin and yang, this future could be split between a good and bad outcome.
PO might be just a doorway we must pass through to an even more incredible future then the industry hydrocarbons created. Take Elon Musk. His Tesla electric, rather than being an under powered city car, outperforms just about everything on the road. So is he totally blind to the temporal nature of the hydrocarbon reality; is he just kicking the can; an opportunist out to make a quick buck before it all comes crashing down. Or is he on to something.
But in contrast to this all electric utopia are the negative effects PO has had in retail world. Stores are closing, and no new ones take their place. Kohl’s has cut full-time workers and part-timers can never go above 26 hours a week so the company does not have to pay health benefits. At a local mall, Sears has gone from a two floor anchor to just one floor. Meanwhile the minimum wage rises faster than raises given to veteran employees. From this perspective, it looks like it’s the end of the American dream of upward mobility.
I believe in PO, I’m just not sure of what road we heading down. I will keep abreast of the story and hope I do not fall asleep at the wheel.
Craig Ruchman on Sat, 26th Sep 2015 9:02 pm
Just as I side note, I would say yes, things are getting worse.
Boat on Sat, 26th Sep 2015 10:07 pm
Craig,
Efficiency is what is destroying the labor market. Machines require less energy and cost. Even in the oil patch they are working on technology to replace 50% of human input on the drilling rigs. Just the way it is and always will be. Reducing the amount of humans on earth is the only answer. Someday drone trucks will deliver online products from warehouses. No need for all those buildings.
GregT on Sat, 26th Sep 2015 10:31 pm
Boat,
Capitalism is what is destroying the labor market. Profit and greed are capitalism’s greatest motivators. Drone trucks will not be delivering online products from warehouses, if there isn’t enough cheap energy, or enough humans to keep the debt based ponzi schemed monetary system going.
You are in la-la land Boat. Have another shot of whatever it is that you are drinking.
Boat on Sat, 26th Sep 2015 10:40 pm
GregT,
You just live in a fantasy world. Drone trucks from warehouses would require less energy and be much more efficient than keeping all those dinosaur buildings with their expensive upkeep going. You can’t see the world changing before your vary eyes while your staring at it.
apneaman on Sat, 26th Sep 2015 10:48 pm
Boat isn’t it great that the “market” is getting so efficient it will soon no longer need humans at all. No sacrifice is too small for our god.
Boat on Sat, 26th Sep 2015 10:57 pm
More of the apeman mentality. Just like a flat tax would eliminate an entire industry and save billions you socialists just want the tax payer to subsidize more workers doing wasteful jobs. How about fewer people and smart jobs.
GregT on Sat, 26th Sep 2015 11:16 pm
Boat,
Hate to break it to you buddy, but drone trucks from warehouses are a fantasy. IE: they are not reality.
It is you that is living in a fantasy world Boat, not I.
GregT on Sat, 26th Sep 2015 11:25 pm
Boat said:
“How about fewer people and smart jobs.”
How about you explain why you deserve to be one of the people that isn’t in your fewer category, and how it is that you consider your “job” to be smart.
Boat on Sun, 27th Sep 2015 12:44 am
GregT,
Just experience. First of all you have to be able to make the right call. If you can’t you won’t last long. Many things only go wrong every year or so. So you have to be a long timer to know what the right decision is. It helps if a couple of your projects have saved/made the company millions.
GregT on Sun, 27th Sep 2015 1:27 am
Boat,
Then you’d better be sure that you make the “right call”, because when you don’t, you won’t last long. In the end it isn’t about millions, or billions, or trillions, it’s all about being a useful idiot, and sucking ass to those above you. I’ve spent 32 years in the corporate world Boat, and I can assure you that you are irrelevant in the big scheme of things. You are a nobody Boat, nothing, nada, and a complete zero in the big scheme of things.
MrNoItAll on Sun, 27th Sep 2015 1:54 am
“How about fewer people and smart jobs.”
Exactly where we are headed. Much fewer people. Much smarter jobs. Those smarter jobs all related to food production and/or critical trades. It may take a while to get there, or we may end up there much sooner than we expected. At which time, those unable or unwilling to do the “smarter” jobs will join the ranks of the “fewer” people.
Kenz300 on Mon, 28th Sep 2015 9:29 am
Divestiture in fossil fuels has begun…….
The transition to safer, cleaner and cheaper alternative energy sources is growing around the world.
Solar Surges in the Middle East and North Africa – Renewable Energy World
http://www.renewableenergyworld.com/articles/2015/09/solar-surges-in-the-middle-east-and-north-africa.html
Wind, Natural Gas, Solar Provide More U.S. Power, Replacing Coal
http://www.greencarreports.com/news/1098033_wind-natural-gas-solar-provide-more-u-s-power-replacing-coal
Top 10 Clean Energy Trends Driving the Global Clean Energy Revolution – Renewable Energy World
http://www.renewableenergyworld.com/articles/slideshow/2015/08/top-10-clean-energy-trends-driving-the-global-clean-energy-revolution.html