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Fallout from Crude Price Crash Pt. 2

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Fri 16 Sep 2016, 09:32:34

"...meaning a climate activist could eventually become a director at the world's largest publicly traded oil company." LMFAO! Obviously this writer doesn't have a clue as to how boards of public companies function. There's a better chance of an atheist being elected pope.

As far as the validity of the accounting methods of all US pubcos that's strictly the realm of the federal govt via the SEC. So if NY doesn't like anytyhing about XOM's books that the SEC has signed off on then NY will need to sue the feds. Good luck with that. LOL.

Perhaps just some NY politicians looking for some free publicity prior to the election. LOL.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby rockdoc123 » Fri 16 Sep 2016, 10:32:19

Exxon has been adamant that they are conservative in posting proven reserves simply because they want to avoid writedowns which adversely affect their shareholders. Remember that Exxon is a company that produces largely from conventional fields that are relatively long life assets. As a consequence there are no associated PUDs and much of the probable category has been moved already to proven producing. My guess is proved producing category makes up the vast majority of Exxon's reserves. Even though they have acquired unconventional resources and reserves as of late they seem to resist the temptation to report large PUDs. Companies such as Exxon which are really all about dividend payment rather than growth are not driven by the need to book reserves quickly. This is not the case for smaller companies who end up being the ones who take writedowns. But again these writedowns are somewhat temporary as those reserves don't disappear they simply move from proven to probable and when prices rise again they become proven once more.

As Rockman says Exxon's reserve booking is subject to audit (as are all publicly listed companies). These audits are conducted by third party groups such as Ryder Scott, Gaffney Cline, McDaniels, Sproule etc and those auditors are legally liable for whatever numbers they sign off on. This all came into play as part of the Sarbanes Oxley act that was a result of the Enron debacle. Note also that the SEC requires booking only of proven reserves, there is no requirement to speak to what probable, possible or contingent resources a company has.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Fri 16 Sep 2016, 10:56:49

Also good to stop painting all companies with the same illogical brush. You want write downs? I got your write downs right here! LOL.

Understand the info below is from 2013. Unlike XOM the Shell management bought the shale hype hook, line and sinker. Or should I say stinker? They paid $1 BILLION for just one shale lease in S Texas. And then very quickly drilled 185+ wells before realizing it wasn't worth a crap. Then the head dog, an explorationist, was replaced by a refinery guy and he essentially shut down all US unconventional plays.

And again note: this is a 3 year old story written right after Shell tucked its tail under and ran like a scaled dog:

Royal Dutch Shell surprised the market on Thursday with a $2.1bn impairment, mostly on its liquids-rich shale properties in North America. The writedown showed that the results from Shell’s exploration drilling for oil in its US shale acreage have been much worse than it anticipated. “Shale oil bulls take note,” wrote Oswald Clint of Bernstein Research.

Shell’s news shows that some of the breathless rhetoric about shale’s potential may be unwarranted – a view Peter Voser, its chief executive, appears to endorse. The idea of a shale revolution spreading from the US across the world is “a little bit overhyped,” he told reporters on Thursday.

Shale impairments are nothing new. A clutch of companies, including BHP Billiton and BG Group, wrote down their US shale gas assets last year, as the low price of American natural gas reduced the value of their reserves.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Fri 16 Sep 2016, 11:40:35

XTO is heavily invested in shale. XTO is owned by XOM -- they only paid $31 billion for those shale "assets".

This funny -- from 2014.

Exxon’s answer to the SEC boils down to this: Yes, low gas prices hurt in 2012, but the pain was fleeting and the future looks a lot better.

To put a value on wells that pump oil and gas for decades, Exxon argued in its response to the SEC, it has to factor in things that haven’t happened yet. For instance, Exxon pointed out that the U.S. is poised to export a significant amount of natural gas overseas, which could boost prices for the fuel.

Exxon also told the SEC it didn’t test the value of its shale holdings in 2012, because low commodity prices in the short term don’t justify such an exercise. Last month, natural-gas prices rose to their highest level since June 2010.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby rockdoc123 » Fri 16 Sep 2016, 12:46:58

here is a press release from Exxon in early 2016 that speaks to another important point. When you have reserves all over the world that have different economics attached to them it is quite easy to offset any proven reserves losses you have in jurisdiction A by proven reserves increase in jurisdiction B. Small independants who operate in one jurisdiction do not have this luxury
IRVING, Texas--(BUSINESS WIRE)--Exxon Mobil Corporation (NYSE:XOM) said today it added 1 billion oil-equivalent barrels of proved oil and gas reserves in 2015, replacing 67 percent of production, including a 219 percent replacement ratio for crude oil and other liquids.

At year-end 2015, ExxonMobil's proved reserves totaled 24.8 billion oil-equivalent barrels. Liquids represented 59 percent of proved reserves, up from 54 percent in 2014. ExxonMobil’s reserves life at current production rates is 16 years.

In 2015, reserves were added in Abu Dhabi, Canada, Kazakhstan and Angola. Liquid additions during 2015 totaled 1.9 billion barrels. Natural gas proved reserves were reduced by 834 million oil-equivalent barrels primarily in the United States reflecting the change in natural gas prices. The company expects this gas to be developed and booked as proved reserves in the future.

Over the past 10 years, ExxonMobil has replaced 115 percent of the reserves it produced, including the impact of asset sales.

“ExxonMobil has a successful track record of proved reserves replacement over the long term, demonstrating the strength of our global strategy to identify, evaluate, capture and advance high-quality opportunities,” said Rex W. Tillerson, chairman and chief executive officer.

“Our proved reserves represent a diverse portfolio that positions us to create shareholder value as we supply long-term energy demand growth. We will continue to apply our disciplined, paced investing approach as we develop our industry-leading resource base.”

Reserves additions in 2015 reflect new developments as well as revisions and extensions of existing fields resulting from drilling, studies and analysis of reservoir performance. The annual reporting of proved reserves is the product of the corporation’s long-standing, rigorous process that ensures consistency and management accountability in all reserves bookings. Consistent with SEC requirements, ExxonMobil reports reserves based on the historic average market prices on the first day of each calendar month during the year.

Resource Base

During 2015, ExxonMobil added 1.4 billion oil-equivalent barrels to its resource base through by-the-bit exploration discoveries, undeveloped resource additions and strategic acquisitions.

ExxonMobil’s by-the-bit exploration success in 2015 included a significant oil discovery offshore Guyana and additional discoveries in Iraq, Australia, Romania and Nigeria. Strategic unconventional resource additions were made in the Permian Basin in West Texas, Canada and Argentina.

Overall, the corporation’s resource base totaled more than 91 billion oil-equivalent barrels at year-end 2015, taking into account field revisions, production and asset sales. The resource base includes proved reserves, plus other discovered resources that are expected to be ultimately recovered.

CAUTIONARY NOTE: Proved reserve figures in this release are based on current SEC definitions. Reserves also include oil sands and equity company reserves for all periods, which were excluded from SEC reserves prior to 2009.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Wed 21 Dec 2016, 12:34:07

Heard Haliburton was starting to hire again. Maybe some more haircuts for investors on the way, though:

Eyeing upswing, more U.S. oilfield service firms restructure

About half of some 32 oilfield service companies still trading actively in major stock exchanges are distressed, including five or six that are severely distressed and likely to restructure, said Kim Brady, a partner and restructuring adviser at financial consultancy Solic Capital.

Restructuring advisers said the stigma previously associated with Chapter 11, which tended to hit companies with serious problems, has vanished, opening the door to more bankruptcy filings.

"Now it's almost in vogue to be going through Chapter 11," said Jerrit Coward, former CEO of fracking services provider US Shale Solutions LLC who is now advising energy investors.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby shortonoil » Wed 21 Dec 2016, 16:21:43

"because low commodity prices in the short term don’t justify such an exercise."

Hilarious, 2 and half years is the short term? Besides being the largest decline in $ terms in history, and the longest it wasn't justified?? Maybe that is why EXXON didn't write down any reserves in 2015 when all the other majors did. It was just short term!

What's that saying; "piled higher, and deeper"? It must be getting about ear lobe level by now?
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby Subjectivist » Wed 21 Dec 2016, 18:10:32

Here is the thing I find interesting, total petroleum storage fell over 11MM/bbl this week but all CNBC talked about was the 2MM/bbl growth in crude. As if a large consumption of gasoline, diesel and aviation fuel were meaningless compared to a slight increase in the rawmaterial they are all made from.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Fri 13 Jan 2017, 11:37:11

'Significant' oil supply-demand gap possible in three to four years: IEA's Birol

"There were no discoveries because there is no money for exploration. You find something if you look for it," he said.

Global tightness in oil supply could be felt within two to three years, Birol predicted, echoing similar comments at the energy form Thursday by Saudi energy minister Khalid al-Falih.

"In 2017 we have to see major new investment to calm the market, otherwise, in two to three years, that supply-demand gap will be with us," he said.

Nonetheless, prospects for an imminent rebound in upstream oil investment are currently unclear. "Currently, 2017 investment numbers are not even showing a rebound after 2016. We may well see a third year of investment decline if no new projects are undertaken," Birol said.

He added that oil remains the world's most strategic commodity.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby Tanada » Fri 13 Jan 2017, 11:52:38

All of these scenarios are dependent on peace in all the OPEC countries. If someone attacks a major oil export terminal and does serious damage it will take less than a month for people to panic and prices to shoot up.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Tue 17 Jan 2017, 16:06:30

And more of one of the biggest fallouts of the oil price crash: the largest fossil fuel wealth transfer in history. While ExxonMobil and the rest of Big Oil have suffered revenue loss they are acquiring PROVED PRODUCING reserves cheaper then they've been able develop by drilling for decades. Difficult to judge the validity of the reserve numbers but on the optimic side XOM may be getting these reserves for as little as $2 per bbl equivalent (75% oil). So even if oil stays at $50/bbl XOM still turns a profit. And at $60/bbl? At $70/bbl? At $80/bbl?

Doc already pulled the $6.4 BILLION ACQUISITION apart so I'll copy him here:

"...today Exxon announced they had purchased Bass families holdings in the Permian basin for $5.4 billion upfront (share transaction) with an additional $1 billion to be paid based on successful development. The metrics of this deal are way out there with Exxon having paid ~$300,000 / flowing bbl of existing production. Exxon claims there is 3.4 billion bbls of recoverable reserves (I am assuming this is 3P) so the metrics on $/bbl is pretty decent (about $2/bbl), but then again nobody pays for 3P. It would be interesting to understand what 1P price was. Pretty obvious Exxon is paying for the large land position, the notion that the Permian has a high success rate and that oil prices will continue to rise."
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Mon 20 Mar 2017, 19:34:27

And one more brick in future energy wall: the industry isn't collapsing...just some companies are. Others companies/countries are very ready to take advantage of the huge fossil fuel wealth transfer that's underway. And notice this story deals with a developing economy trying to position itself for INCREASING domestic consumption.

From http://www.rigzone.com/news/article.asp ... _id=148901

Armed With $11 Billion, Thai Oil Giants Hunt for Investments. The Asian energy companies sitting on the largest hoard of cash outside China are ready to put it to use.

Thailand’s PTT Exploration & Production Pcl and its parent company have nearly $11 billion combined in cash and marketable securities, such as bonds and other short-term investments. The explorer is ready to spend from its portion on projects and exploration acreage to rescue declining oil and gas reserves, according to Chief Executive Officer Somporn Vongvuthipornchai.

PTT E&P is eyeing early-life producing assets or projects that are already sanctioned and ready for development, Somporn said in an interview in Bangkok. It’s also looking to work with its parent, PTT Pcl, to invest in liquefied natural gas plants, which would help feed the country’s growing demand.

There was no such hunger when Somporn took the reins of the upstream company in October 2015. Oil prices had already fallen from the $100 a barrel range into the $60s, and he watched as over his first six months they cratered below $30 to hit the lowest in more than a decade.

He kept the company focused on weathering the downturn by cutting costs and investments. Meanwhile, proved reserves have fallen from the equivalent of 1.1 billion barrels of oil in 2009 to 695 million last year. That will last just five years at its current production rate.

LNG is another avenue for growth. Parent-company PTT is looking to expand gas imports to meet growing domestic demand fueled by economic expansion, while domestic production is declining and pipeline imports from Myanmar may be redirected to China.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Mon 20 Mar 2017, 19:51:23

And the cannibals exist on the service industry side as well as in the producing world:

Borr Drilling has snapped up Transocean's fleet of drilling rigs for $1.35 billion.

The rig market deal is Borr's biggest since it was set up last year by Tor Olav Troeim and other executives who had left Seadrill, once the jewel in the crown of Norwegian-born shipping tycoon John Fredriksen but now battling with $14 billion in debt and liabilities.

After years at Fredriksen's side, Troeim split with him in 2014. Since then Troeim has re-established himself as an independent player in the global shipping market with a high profile and a reputation for successful capital raising. His private investment vehicle Seatankers bought the new West Mira rig from the Hyundai Samho Heavy Industries shipyard for an undisclosed sum just a week ago.

As the price of crude has fallen by more than 50 percent since 2014, oil firms have cut back on rig hires, leaving many vessels idle and prompting owners to restructure operations to preserve cash. Borr, founded with the aim of picking up cheap assets as rig firms sell during the industry downturn, said it would issue $800 million in new shares to help finance the purchase of the 15 rigs.

The deal comprises 10 high-specification jack-up rigs and five more that are under construction, Borr said in a statement. Swiss-based Transocean will retain a fleet of about 50 larger rigs used for exploration in deeper waters. Borr, which currently owns just two rigs, will pay $90 million on average for each of the 15 Transocean rigs. "That's half the construction cost, so it's a pretty attractive deal," said Carnegie brokerage analyst Frederik Lunde.

Borr, which is listed on Oslo's over-the-counter board, said a group of investors had agreed to the $800 million share issue to help fund the deal. The new shares will be sold at $3.50 each, a discount to Borr's current share price of $4.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby sparky » Mon 20 Mar 2017, 20:01:56

.
So unless I'm mistaken , Borr drilling is betting on a good future for the near-offshore while Transocean put its remaining money on the deep offshore ?
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Mon 20 Mar 2017, 22:45:32

Sparky - A reasonable guess IMHO. But not in the GOM...the shallow water plays dried up long ago.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Mon 29 May 2017, 13:31:33

A story on today's "Peak Oil News" got me wondering about how many are buying into "petroleum industry is dying" bullsh*t especially when they see such headlines as "Hundreds of oil companies filing bankruptcy". The Rockman figured some clarity was called for.

Folks need to pay attention to the details. Search US "bankrupt oil companies" and you'll find numerous articles posting less then 100 to many hundreds. The primary reason: there is no common definition of "oil company". Many articles included service companies who neither invest in oil/NG development nor produce any any oil/NG. And many articles that don't include service companies. For instance from a few months ago:

http://fuelfix.com/blog/2016/10/25/213- ... e-company/

"Woe in the oilfield: 213 companies have now declared bankruptcy

Fewer and fewer oil exploration and production companies are declaring bankruptcy. But more oilfield service companies are. So far this month, only one North American E&P firm filed for Chapter 11 protection. That’s down from two in September, three in August and four in July.

But it’s been an especially tough few months for service companies. As crude prices began crashing in 2014, drillers started idling rigs...Moreover, when producers did hire service companies, they often forced them to heavily discount their rates. Eight service companies filed this month. Seven filed last month, and eight again the month before. Almost 50 have filed in the last six months, half of the 108 over two years."

The other cause for the discrepancy: there is no such f*cking thing as "filing bankruptcy". LOL. But seriously, that is a completely misleading and thus useless term. There are 4 different types of bankruptcy filings...7, 11, 12 and 13. And 3 of those bankruptcy filings DO NOT mean a company is GOING OUT OF BUSINESS. Only a Chapter 7 bankruptcy filing involves the forced liquidation of a company's assets. Details here:

http://www.ms-bankruptcy.com/bankruptcy ... ifferences

The other 3 "chapters" allow companies in bad financial shape to "reorganize" their debts and continue functioning. Which, in some cases, they can void a portion or even much of that debt. That's commonly the case with "bond holders" whose debt is typically classified as "unsecured". Which is a nice way of saying that under certain conditions a company can completely f*ck over bond holders. LOL. Which is also why some bonds can earn interest rates many times what the banks can: high risk = high reward...or a 100% loss.

And guess what folk? Despite the foolish spin by the MSM et al the vast majority of E&P companies (IOW not the services companies) filed Chapter 11 Reorganization. IOW they ain't going out of business. At least not now. And how does a Chapter 11 filing help them? Remember what I said about UNSECURED debt owners taking it in the teeth: look at this chart from one of the leading law firms that handle oil patch bankruptcies.

https://www.slideshare.net/mobile/Marce ... cy-monitor

Almost half of the total debts owed by companies filing Chapter 11 Reorganization last year were UNSECURED DEBT. When you see the term "unsecured debt" just think of the sound of a toilet flushing. LOL.

So yes, a lot of E&P oil companies have filed bankruptcy. And no, the vast majority of E&P companies "filing bankruptcy" are not "going out of business". But many will still disappear as they are assimilated by financially healthy companies. As the Rockman has pointed out so many f*cking times: a company might have spent $1.5 BILLION to develop the $1 BILLION worth of oil (@ $45/bbl) it owns today. And that company may be as dead as road kill. But guess what, sports fans: the failed oil company still owns oil reserves worth $1 BILLION @ $45/bbl. Those oil reserves don't vanish, regardless of how much the company invested AND if the company ceases to exist. They are producing and are still worth $1 BILLION at today's prices. And as such they are still a valuable asset for the global economy.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Thu 01 Jun 2017, 11:48:04

Another example of a govt using tax payer monies to not so successfully pick winners and losers:

"It seemed like a good idea at the time.

When Canada’s government decided to fund the nation’s first new refinery in three decades in 2012, a diesel shortage had just caused some truckers to be turned away from filling stations, and demand was climbing. Oil-sands producers were ramping up output and crude prices topped $100 a barrel.

Fast forward to 2017, and North West Refining’s Sturgeon plant in Alberta is poised to add 40,000 barrels a day of diesel to an already-glutted market. Crude is hovering around $50 amid surging North American output, oil-sands producers have shelved expansions and Alberta has just emerged from a two-year recession. Diesel demand is lower than it was two years ago, and truck-fuel prices relative to crude oil are half their level from three years ago.

{Which may explain why private investors didn't build a new Canadian refinery}

The $6.32 BILLION Sturgeon plant, Canada’s first new refinery since 1984, will begin turning oil-sands bitumen into diesel by the end of the year.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Thu 01 Jun 2017, 12:06:50

And another example of decisions made during a crisis (high/low prices and gluts/shortages) can eventually bite you in the ass. In particular investing in LNG. The plants are so expensive the investments can be made without a GUARENTEED sales volume and price for the length of the contract. Typically a 20+ year contract. Even in periods of very high LNG prices those plants cannot be justified. From

http://www.rigzone.com/news/oil_gas/a/1 ... upply_Glut

Reuters) - A spat brewing between Qatar, the world's No.1 producer of LNG and its biggest customers in Japan underscores rising tensions between buyers and sellers of the super-chilled fuel as a supply glut unbalances the market. Importers of LNG having been pushing for greater benefits amid the surplus, signing new, cheaper contracts that give them more flexible terms, while exporters try to preserve long-term supply deals written in their favour during tighter markets.

Worried some buyers are becoming too bold in their push for an advantage, Qatar Petroleum warned customers in Japan - by far the biggest LNG importer - not to press too hard in long-term supply talks, because it could result in Japanese companies being squeezed out of Qatari gas projects. While suppliers have granted more flexible terms on some new contracts, many are worried buyers could seek arbitration to renegotiate contracts locking them into decades-long take-or-pay deals that don't factor in steep price falls, and which often bar importers from re-selling contracted cargoes.

Arbitration is a form of legal resolution outside formal courts in which both sides of a contractual dispute agree to be bound by the decision of a third party.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Wed 26 Jul 2017, 11:56:12

Less the optimistic article from the usually upbeat Bloomberg. Even more surprising being reprinted by one of the biggest cheerleaders of the oil patch...the RigZone:

(Bloomberg) -- Oil’s bear market may finally be taking its toll on the shale boom.

Hours after Halliburton Co. warned Monday that explorers are “ tapping the brakes" on drilling, Anadarko Petroleum Corp. said it’s trimming spending in the first earnings report this quarter from a major shale producer. That could make this week a turning point for the troubled global oil market -- the moment when shale companies showed signs of bowing to the low prices they helped inflict. The surge in U.S. production this year has stymied efforts by OPEC and other major oil exporters to unwind a supply glut that’s weighed on the crude market for three years.

“If Wall Street rewards them for being more reserved with their activity levels and capital expenditures, then maybe it catches on," Mike Kelly, a Houston-based analyst for Seaport Global Securities LLC, said in a telephone interview. If Anadarko shares suffer, on the other hand, “I think other people will be reticent about coming out and saying, ‘we’re cutting as well.’

The initial returns were mixed for Anadarko, one of the biggest oil and natural-gas explorers in the U.S. The Woodlands, Texas-based company slumped in after-hours trading on Monday, when it also announced a loss for the second quarter. The shares rose 1.7 percent to $44.98 at 9:55 a.m. in New York Tuesday amid a rally in global crude prices. West Texas Intermediate, the U.S. benchmark, rose 2 percent to $47.25 in New York.

Shale explorers started the year in a frenzy of renewed drilling, taking advantage of prices that climbed above $55 a barrel on OPEC’s promises to cut production. Anadarko, for one, said it would boost its capital budget by 70 percent. But crude’s momentum petered out, and prices have been stuck below $50 for two months. Now, Anadarko plans to pare $300 million from its 2017 capital budget, lowering it to a range of $4.2 billion to $4.4 billion, according to a company statement Monday.

Financial Discipline - “We sincerely believe that the volatility of the current operating environment requires financial discipline," Chief Executive Officer Al Walker told analysts on the conference call. “As I have said many times, pursuing growth without adequate returns is something we will avoid."

{IOW adding booked reserves y-o-y will not be the priority going forward}

Anadarko’s move followed a similar assessment from Halliburton, the top fracking-services provider. The U.S. oil surge is “showing signs of plateauing and customers are tapping on the brakes," Halliburton Executive Chairman Dave Lesar told analysts on a conference call Monday. Data last week from oilfield services company Baker Hughes showed explorers cutting the number of U.S. rigs for the second time in four weeks.

Oil’s downturn has also made it harder for companies to add new hedging contracts, which lock in payments for future volumes. That’s undercut a strategy that had provided a financial cushion for drillers in the first half of 2017. Going forward, Anadarko’s hedging positions “are fairly limited," Chief Financial Officer Robert Gwin said on a conference call Tuesday. The price outlook “doesn’t give us a lot of opportunity to lock down any more hedges that we would find materially attractive."

More at

http://www.rigzone.com/news/oil_gas/a/1 ... rice_Slump
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