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How did XOM and CVX weather the low oil price?

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How did XOM and CVX weather the low oil price?

Unread postby misterno » Tue 16 Feb 2016, 12:19:05

When I look at the income statements and balance sheets of these 2 companies I do not see a huge drop. It seems like they are using low oil price as an excuse to lay off people

What is surprising is that their diversification of investments are all in energy field but energy prices are dropping accross the board whether it is oil or LNG or NG or solar, they are all dropping.

So I wonder how did they manage all these dropping prices not to effect their bottom line? Is it their hedging strategy where they sold off oil already at higher prices is it because they laid off so many people, or something I do not see?

Any comments will be appreciated.
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Re: How did XOM and CVX weather the low oil price?

Unread postby AdamB » Tue 16 Feb 2016, 12:39:53

When deciding to go ahead with a project, make sure it can withstand your IRR targets even if oil hits $10/bbl. While idiot companies that attempt to borrow themselves into growth occasionally succeed, those betting on sure things always do. Older companies know this. Boomer companies, not so much.
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Re: How did XOM and CVX weather the low oil price?

Unread postby misterno » Tue 16 Feb 2016, 12:53:46

AdamB wrote:When deciding to go ahead with a project, make sure it can withstand your IRR targets even if oil hits $10/bbl. While idiot companies that attempt to borrow themselves into growth occasionally succeed, those betting on sure things always do. Older companies know this. Boomer companies, not so much.



So you are telling me that these big companies never invested in oil wells with a cost over $30.

Uum, google does not agree with you.

Chevron says the project will be profitable as long as oil prices stay above $60 or $70 per barrel, well below Monday’s level of $97.70.


http://peakoil.com/production/facing-up ... l%E2%80%99
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Re: How did XOM and CVX weather the low oil price?

Unread postby ROCKMAN » Tue 16 Feb 2016, 13:41:33

"It seems like they are using low oil price as an excuse to lay off people". They never need an excuse to lay folks off...never have...never will. LOL. The only folks XOM management has to justify its position is to the board of directors who, in turn, justify their actions to the major shareholders. And it's the board/shareholders that would be DAMANDING layoffs.

As has been said many times: it ain't personal...just business.
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Re: How did XOM and CVX weather the low oil price?

Unread postby misterno » Tue 16 Feb 2016, 13:55:12

ROCKMAN wrote:"It seems like they are using low oil price as an excuse to lay off people". They never need an excuse to lay folks off...never have...never will. LOL. The only folks XOM management has to justify its position is to the board of directors who, in turn, justify their actions to the major shareholders. And it's the board/shareholders that would be DAMANDING layoffs.

As has been said many times: it ain't personal...just business.


well so what were their excuse for laying off people?

Also, it is not a coincidence that they laid off so many people at the exact time of oil going down.

Also, what is your comment on the subject of this thread?
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Re: How did XOM and CVX weather the low oil price?

Unread postby tita » Tue 16 Feb 2016, 14:33:35

misterno wrote:well so what were their excuse for laying off people?

Benefice plunging, shareholders not happy, board has to do something to redress the situation, massive layoff. That's all. Oh, the benefice plunge is certainly related to the oil price fall, but it's not an excuse. Shareholders don't care about that, they care about the value of they share.
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Re: How did XOM and CVX weather the low oil price?

Unread postby ROCKMAN » Tue 16 Feb 2016, 14:52:52

misterno - Again no excuses...just a reason: lower capex spending requires fewer employees. IOW why pay anyone a salary when there's no work for them to do. After all those aren't govt jobs. LOL. Companies pay very good salaries when there is a high demand. And then lay you off when the need disappears. If you can't handle that dynamic then you have obviously chosen the wrong career path.

And how do they survive: because they are huge corporations with $billions in steady income regardless of the price of oil/NG. It really isn't that complicated. But that stability due to mass also hurts them: they are so large and produce so much it's essentially impossible for them to develop enough new reserves with the drill bit as they produce every year. Big Oil's primary growth mechanism is the acquisition of smaller companies. And in the last year a very target rich environment has developed. Which is another reason (and not an excuse) for reducing staff: as they acquire smaller companies they will need to absorb some of those employees for the sake of the continuity of operations...they need to keep the folks that know how to run those new operations.

Back some years ago ExxonMobil acquired XTO. That one acquisition represented more then 80% of XOM's reserve additions that year. And guess what: they retained a fair number of XTO employees.
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Re: How did XOM and CVX weather the low oil price?

Unread postby kublikhan » Tue 16 Feb 2016, 17:57:29

misterno wrote:When I look at the income statements and balance sheets of these 2 companies I do not see a huge drop.
Sounds like you are not looking in the right place. CVX swung from $3.5 billion profit to a half a billion dollar loss. BP had a $3.3 billion loss. XOMs profits fell by more than half from $6.6 billion to $2.8 billion.

Asset sales, job cuts and less spending are in the cards for Chevron Corp. (NYSE: CVX) in 2016 after tanking commodity prices led to a $588 million net loss for fourth-quarter 2015. That is a 117% swing from reported 2014 earnings of $3.5 billion.
Chevron Sees Red: Profits Fall, Production Grows

The newest measure of the oil industry’s falling fortunes came on Tuesday in the form of a $3.3 billion fourth-quarter loss reported by BP. Exxon Mobil, the American industry’s largest player, reported a 58 percent decline in its quarterly profit. The entire industry is reeling from the effects of a global glut, and slackening international economic growth. This is the worst industry decline since similar commodity price collapses in the 1980s and 1990s forced oil companies to slash payrolls and dividends.
Exxon Mobil’s Profits Fall and BP Cites Low Oil Prices in $3.3 Billion Loss
The oil barrel is half-full.
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Re: How did XOM and CVX weather the low oil price?

Unread postby ROCKMAN » Tue 16 Feb 2016, 18:06:57

K - True but I don't think most understand what a "loss" means on a company's SEC report. I won't explain: easily learned on the web...look up "paper loss". It's not the same as one losing their wallet with $500 in it...they lost $500. XOM et al did not lose wallets with $billions in them. LOL.
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Re: How did XOM and CVX weather the low oil price?

Unread postby AdamB » Tue 16 Feb 2016, 18:16:41

misterno wrote:
AdamB wrote:When deciding to go ahead with a project, make sure it can withstand your IRR targets even if oil hits $10/bbl. While idiot companies that attempt to borrow themselves into growth occasionally succeed, those betting on sure things always do. Older companies know this. Boomer companies, not so much.



So you are telling me that these big companies never invested in oil wells with a cost over $30.


I didn't say anything about cost.

misterno wrote:

Uum, google does not agree with you.

Chevron says the project will be profitable as long as oil prices stay above $60 or $70 per barrel, well below Monday’s level of $97.70.

http://peakoil.com/production/facing-up ... l%E2%80%99


There is a difference between an IRR target, and survival. So Chevron must forgo the IRR target? Fine. Lose profitability while cost cutting their way to survival? They, like all the others who survived the 1986 crash, certainly know how. It is unlikely they have forgotten.
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Re: How did XOM and CVX weather the low oil price?

Unread postby Outcast_Searcher » Tue 16 Feb 2016, 18:21:41

misterno wrote:"It seems like they are using low oil price as an excuse to lay off people".
ROCKMAN wrote: They never need an excuse to lay folks off...never have...never will. LOL. The only folks XOM management has to justify its position is to the board of directors who, in turn, justify their actions to the major shareholders. And it's the board/shareholders that would be DAMANDING layoffs.

As has been said many times: it ain't personal...just business.


well so what were their excuse for laying off people?

I know this is hard for liberals to grasp, but they don't have to justify layoffs to you or anyone else except the owners of the company, as Rock said.
misterno wrote:Also, it is not a coincidence that they laid off so many people at the exact time of oil going down.

Again, I know such things are hard to grasp, but companies do what is in their OWN best interest, as far as financial decisions like how many people to employ. We're hearing about high priced oil being shut in. Why would layoffs as a result be surprising?

It's always amusing to see the far left complain about business decisions which enhance business profits, even as that same political group tries to extract every penny possible from profitable businesses in taxes, for whatever political agenda(s) they see fit -- even as they feign outrage at "evil" profits of companies -- as though that had no relation to jobs. :P
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: How did XOM and CVX weather the low oil price?

Unread postby Subjectivist » Tue 16 Feb 2016, 19:16:22

AdamB wrote:
misterno wrote:
AdamB wrote:When deciding to go ahead with a project, make sure it can withstand your IRR targets even if oil hits $10/bbl. While idiot companies that attempt to borrow themselves into growth occasionally succeed, those betting on sure things always do. Older companies know this. Boomer companies, not so much.



So you are telling me that these big companies never invested in oil wells with a cost over $30.


I didn't say anything about cost.

misterno wrote:

Uum, google does not agree with you.

Chevron says the project will be profitable as long as oil prices stay above $60 or $70 per barrel, well below Monday’s level of $97.70.

http://peakoil.com/production/facing-up ... l%E2%80%99


There is a difference between an IRR target, and survival. So Chevron must forgo the IRR target? Fine. Lose profitability while cost cutting their way to survival? They, like all the others who survived the 1986 crash, certainly know how. It is unlikely they have forgotten.


Actually the people who survived the 1986 crash have all retired by now, that was nearly 30 years ago. Many of the managerial level working there today were not yet born when the events of 1986 were taking place, and most of the others were children way back then.
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Re: How did XOM and CVX weather the low oil price?

Unread postby AdamB » Wed 17 Feb 2016, 00:53:34

Subjectivist wrote:[
Actually the people who survived the 1986 crash have all retired by now, that was nearly 30 years ago.


No. They haven't. Ask Rockman when he was doing his first oil field work. All you need is an old oil field fart, say, someone who was working towards the end of the late 1970's boom, say, as an intern in industry during the summers. Graduated earlier 80's, figure that person would be 22 right around then, would be about 56 right now. Certainly not a retirement age unless someone got some nice golden parachute.

So no, they haven't all retired.

Subjectivist wrote: Many of the managerial level working there today were not yet born when the events of 1986 were taking place, and most of the others were children way back then.


And some were gaining valuable field experience during the 1986 downturn, as youngsters, forever trained on what the world of WORKING in the oil field looked like, as compared to boomer nonsense the industry has enjoyed over the past few years.
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Re: How did XOM and CVX weather the low oil price?

Unread postby tita » Wed 17 Feb 2016, 04:37:37

Subjectivist wrote:Many of the managerial level working there today were not yet born when the events of 1986 were taking place, and most of the others were children way back then.


You're saying managers in oil industry are between 30 and 40 yo? It's not google or facebook, or any IT tech industry which makes money with new ideas in a couple of years. It's oil, where new ideas takes decades to carry out. Only old farts are at the head. And they learned what happened in the 80's, and know what's happening now. Much money for them just before they retire.
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Re: How did XOM and CVX weather the low oil price?

Unread postby Heineken » Wed 17 Feb 2016, 09:30:59

XOM has a huge chemicals business, which benefits from lower oil prices. That's one factor in the company's buoyancy.
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Re: How did XOM and CVX weather the low oil price?

Unread postby ROCKMAN » Thu 18 Feb 2016, 01:15:01

Sub - Not that some don't exist but I don't personally know a single upper management that's under 55. And a lot over 60. And the next big group of geologists aren't 45 to 60 years old. I saw the stat for the Houston Geologic Society (that had more members then all the global societies COMBINED) that showed a huge age gap below the peak of my contemporaries. It represented the lack of geology majors during the 80's bust. In fact by mid 1980 Texas A&M was considering shutting down its graduate program in petroleum engineering.

We really are a dying breed. LOL. But maybe folks can now understand why so many very experienced managers that survived the 80's bust borrowed so much money to drill up the shales as fast as possible even though they knew it would eventually bust.

Simp!y because they knew this was their last chance to cash in before they retired. And once the monetized their gains and retired IT WASN'T GOING TO BE THEIR F*CKING PROBLEM. LOL.

I know it pisses so folks off when I say but the truth is the truth: we ain't you momma. It's not personal...just business. IOW we're pretty much like almost everyone else. LOL. You don't want to get f*cked over by high fossil fuel prices then don't choose a lifestyle so dependent upon ff.
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Re: How did XOM and CVX weather the low oil price?

Unread postby AdamB » Thu 18 Feb 2016, 20:47:37

ROCKMAN wrote:I know it pisses so folks off when I say but the truth is the truth: we ain't you momma. It's not personal...just business. IOW we're pretty much like almost everyone else. LOL. You don't want to get f*cked over by high fossil fuel prices then don't choose a lifestyle so dependent upon ff.


God Bless the Rockman for putting the raw truth to the matter. And God Bless the auto companies for putting out personal peak oil transport solutions so that the American commuter can follow Rockman's advice to the letter.

Embrace the future, and do it now, while the supply of solutions are high, and the demand low! Stick it to Big Oil, and do it today!

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