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THE Exxon Mobil Thread pt 3

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

THE Exxon Mobil Thread pt 3

Unread postby rockdoc123 » Fri 24 Feb 2017, 12:03:46

I guess it would help if folks actually looked at what Exxon is saying in their press release rather than going to a third party news release that obviously doesn't understand the issues. From the latest XOM press release:

As a result of very low prices during 2016, certain quantities of liquids and natural gas no longer qualified as proved reserves under SEC guidelines.

These amounts included the entire 3.5 billion barrels of bitumen at Kearl in Alberta, Canada. Another 800 million oil-equivalent barrels in North America did not qualify as proved reserves, mainly due to the acceleration of the projected economic end-of-field life. These revisions are not expected to affect the operation of the underlying projects or to alter the company’s outlook for future production volumes.


Consistent with SEC requirements, ExxonMobil reports reserves based on the average of the applicable market price prevailing on the first day of each calendar month during the year. Prices to date in 2017 have been higher than the average first-of-month prices in 2016. Among the factors that would result in these amounts being recognized again as proved reserves at some point in the future are a recovery in average price levels, a further decline in costs, and / or operating efficiencies


which is precisely what I (and others) have been pointing out.

1. the proven reserves are simply downgraded to another category. They remain on the books just are handled differently in terms of accounting and valuation
2. reserve audits and assessments are done each and every year for submission to SEC or similar regulatory bodies (instrument 51-101 in Canada). The average price of crude over the year must be used for economic analysis and the forecast for price increase generally cannot exceed an inflationary bump unless there is proof of a change to pricing in the future.
3. Each year is essentially a clean slate given what may not qualify as booked proven reserve this year might next year as a consequence of price or costs
4. What is reported often has little bearing on the companies ongoing activities. Companies develop resources that are currently uneconomic with a view to either being able to lower costs in the future or enjoy higher prices. Companies are all the time working on all the categories of reserves and resources
5. the impact is not that these reserves will be lost but that in the short term the company must report an impairment charge in their balance sheet which in turn could result in a large non-cash loss as has been the case for Exxon. For many smaller companies that require equity in the market or debt financing this can be problematic as it affects their ability to raise cash in the market through equity (lower valuation in any prospectus) and for those with reserve based credit facilities they will be in continuing discussions with lenders as to the overall negative impact on their ability to meet ceiling tests. Since Exxon is largely self financing the impact is not as severe.
6. the overall impact of such a write down is not readily noted until you dig through the entirety of their financials. As Rockman points out the potential impact on net revenue after tax is likely positive.

It is easy to make a mountain out of a molehill with regards to reserve write downs. If prices stay low for a number of years there will definitely be a problem but if they recover (which they have already to some extent) it isn't as big an issue.
What seems to be missed here is that even with such a large reserve write down XOM still managed a 70% reserve replacement ratio. They added 2.5 billion barrels.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Fri 24 Feb 2017, 16:43:56

Plant - You still haven't answered the question: as per your chart what is the oil price at which we reach "equilibrium"? You must have a number since you claim there is a current "glut" as such must not have reached that price. So again I assume some day you will declare the "glut" is over when we hit that price. But if you don't know that number then for all you know the "glut" ended when oil hit $52/bbl...right?
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Fri 24 Feb 2017, 16:54:26

Plant - "'l bet EXXON would have preferred profits over losses on these operations." The are divisions in XOM that would have preferred higher oil prices. And other divisions that are very happy with the lower prices. So no, "ExxonMobil" doesn't have a preference.

I think you keep forgetting about the basic concept behind a vertically integrated oil company. Personally the Rockman has become somewhat enthusiastic about the oil price collapse. Just had a lunchtime discussion today with a cohort today about the Rockman jumping ship to an A&D (Acquisition & Divestiture) company for a nice salary bump with big bonus potential. The Rockman has always been more qualified for that segment then E&P.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby Plantagenet » Fri 24 Feb 2017, 17:07:14

ROCKMAN wrote: Personally the Rockman has become somewhat enthusiastic about the oil price collapse. Just had a lunchtime discussion today with a cohort today about the Rockman jumping ship to an A&D (Acquisition & Divestiture) company for a nice salary bump with big bonus potential. The Rockman has always been more qualified for that segment then E&P.


Good luck with your new company.

I hope you'll continue to share your insider view of the oil biz with us here.

Cheers!
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Sat 25 Feb 2017, 14:34:59

P - Mostly I just try to remind folks that "success" in the oil patch IS NOT dependent upon a high price of oil. Actually it can hinge on prices being low. If you get bored search the oil company "Hilcorp". Bought millions of bbls of very old (and thus VERY SLOWLY declining) proven oil reserves sometime ago on the cheap. Just did basic maintenance for years. And then...BOOM!...oil prices started shooting up 10 years ago. Originally less the 10 employees and now I think around 1,500. And now tens of thousands of geologists/engineers once employed chasing the shales thanks to high oil prices can't even get a job interview let alone a job.

BTW it's Hilcorp that's using that CO2 from the largest sequestration project in the world for enhanced oil recovery in one of those old fields it bought cheap a couple of decades ago. A field that's been producing for more the 70 years.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby sparky » Fri 03 Mar 2017, 07:51:45

.
On those Exxon reserves , they are mostly Canadian tar sands ,
From Exxon press release
http://news.exxonmobil.com/press-releas ... 6-reserves
"These amounts included the entire 3.5 billion barrels of bitumen at Kearl in Alberta, Canada. Another 800 million oil-equivalent barrels in North America did not qualify as proved reserves, mainly due to the acceleration of the projected economic end-of-field life"

while US fracking seems to be above water at 45$ ~50$ ,
it would appear that the oil sands number is higher
when we get there , again ,those reserves will be put back on the books
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby Revi » Fri 03 Mar 2017, 09:46:35

Writing off the tar sands.... Interesting!
Deep in the mud and slime of things, even there, something sings.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby Tanada » Fri 03 Mar 2017, 12:52:52

sparky wrote:.
On those Exxon reserves , they are mostly Canadian tar sands ,
From Exxon press release
http://news.exxonmobil.com/press-releas ... 6-reserves
"These amounts included the entire 3.5 billion barrels of bitumen at Kearl in Alberta, Canada. Another 800 million oil-equivalent barrels in North America did not qualify as proved reserves, mainly due to the acceleration of the projected economic end-of-field life"

while US fracking seems to be above water at 45$ ~50$ ,
it would appear that the oil sands number is higher
when we get there , again ,those reserves will be put back on the books


As was pointed out up thread, or at least on a recent thread, the SEC price that the reserves must be calculated by for 2016 was around $43/bbl. Exxon did not scrap all their operations in Alberta, all they did was follow the law and take them off the books as reserve assets. They did not physically divest themselves of the land/lease/equipment. Actual production will be based on current prices and the cost/benefit analysis, the reserve level is just an accounting requirement. In another 12 months when the SEC uses the price for 2017 to set reserve requirements all those accounting dropped reserves will be back on the books, and quite likely a bunch more will be added because 2017 has been consistently over the 2015 price of about $48/bbl.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby sparky » Sat 04 Mar 2017, 02:06:34

.
Well My fault , I didn't make myself clear ,
this episode will reveal the commercial price of the tar sands , my guess between 60 ~ 70$

( why call it oil ? might as well call the floor of a garage oil concrete and with better reasons)

plantagenet , your supply/demand crossing of the curve is cute enough but the supply or even the demand don't follows continuous curves ,

it's more like
the liquid thermodynamic of super-cooling .
nothing much happen way below the theoretical point then the whole thing freeze in a "catastrophic" fashion

a cubic function with rise and dip

a positive feedback control , when the change create more change , driving the system to its physical limits
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby AdamB » Sat 04 Mar 2017, 11:28:25

ROCKMAN wrote: And now tens of thousands of geologists/engineers once employed chasing the shales thanks to high oil prices can't even get a job interview let alone a job.


Really? I've hired a few, maybe not as drilling engineers and whatnot, but solid engineering positions using their skills. I've even got interns on the books now, kids who have only recently completed their junior year of petroleum engineering working on doing reserve evaluations for banks in Houston. Hadn't realized there were thousands out there competing nowadays, you described getting a job during the current glut, and you aren''t the only one still working right through it all. Just like the glut last time. And the time before that. And that.

But your comment reminds me I need to call a few schools to see how the pool of students is doing nowadays. I had heard that the routine of going into a graduate program because of lack of available jobs was happening, but don't have a feel for the numbers.

Rockman wrote:BTW it's Hilcorp that's using that CO2 from the largest sequestration project in the world for enhanced oil recovery in one of those old fields it bought cheap a couple of decades ago. A field that's been producing for more the 70 years.


70 years!! Wow! I remember the days when I was learning on century old oil fields...in the late 1970's. 70 years is maybe a long time, wherever Hilcorp is working? Sounds like they need some more experience!
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby pstarr » Sat 04 Mar 2017, 12:12:50

Plantagenet wrote:Hey---I used to work at a famous oil company, but now I"m just an academic geophysicist so a theoretical model is good enough for me these days.


AdamB wrote:Really? I've hired a few, maybe not as drilling engineers and whatnot, but solid engineering positions using their skills. I've even got interns on the books now

Fast tracking. You two have barely finished your own internships. Look at you! Folks must be proud lol
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Sat 04 Mar 2017, 12:15:20

Adam - Jeff doesn't need any help: he was making a very nice profit at $30/bbl before the boom from those old fields others had given up on. Bought West Ranch and a number of other Greta Sand fields in the trend on the cheap back in the 90's. A bit of his history:

https://en.wikipedia.org/wiki/Jeffery_Hildebrand

Smart, lucky, successful, stinking rich and generous. From Dec 2015:

It's the continuation of a tradition at Hilcorp, owned by billionaire Jeffery Hildebrand. Five years ago, when Hilcorp achieved its goal of doubling its oil and gas production, Hildebrand gave every employee the choice of $35,000 cash or $50,000 towards a new car. This year, despite the downturn, Hilcorp doubled its output again, to more than 150,000 barrels per day. So Hildebrand doubled the bonus — to $100,000. With about 1,400 employees, Hildebrand’s largesse will total more than $100 million (amounts are said to be prorated depending on how much of the past five years a worker was with the company).

Yes Hildebrand, 56, has been generous with his workers, but they have helped him make an incredible amount of money — $5.9 billion by FORBES’ latest count. (But we probably ought to knock that down to $5.8 billion after these bonuses.) His fortune has about trebled since the last big bonus in 2010.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby Tanada » Sat 04 Mar 2017, 13:06:52

sparky wrote:.
Well My fault , I didn't make myself clear ,
this episode will reveal the commercial price of the tar sands , my guess between 60 ~ 70$

( why call it oil ? might as well call the floor of a garage oil concrete and with better reasons)

plantagenet , your supply/demand crossing of the curve is cute enough but the supply or even the demand don't follows continuous curves ,

a positive feedback control , when the change create more change , driving the system to its physical limits


I think there is a good chance your prediction will prove itself accurate. Two things to remember Tar Sands were already being mined and produced at a moderate rate when oil was $20/bbl at the dawn of this century. Secondly Alberta and/or Canadian government subsidized early development to try out half a dozen techniques for extracting the bitumen from the sand and either refining or diluting it enough to pump it through conventional pipeline networks. All of those early subsidies are long sunk costs that make figuring out hw to profit on current oil sands extraction a much easier path to follow. Despite dollar cost inflation efficiency improvements have also played a big part in determining what bitumen is worth extraction at $50/bbl and what is only profitable at $60+/bbl.
I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby AdamB » Sat 04 Mar 2017, 20:45:50

ROCKMAN wrote:Yes Hildebrand, 56, has been generous with his workers, but they have helped him make an incredible amount of money — $5.9 billion by FORBES’ latest count. (But we probably ought to knock that down to $5.8 billion after these bonuses.) His fortune has about trebled since the last big bonus in 2010.



Sounds like a generous guy. Has he ever considered cutting the price he sells his oil at to help out the consumers who were screwed into the ground during the high price years between 2010 and 2013, or does screwing over the consumers who spent all those extra untold billions that he happily took (as you have often pointed out) just make him and his employees happy at night, driving their nice new cars or spending their bonus money on just more stuff?
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Sun 05 Mar 2017, 01:08:09

Adam - "Has he ever considered cutting the price he sells his oil at to help out the consumers...". Hell no! And for the same reason consumers didn't offer to pay him more for his oil when it dropped to $12/bbl in the late 90's: it ain't personal...just business. LOL.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby AdamB » Sun 05 Mar 2017, 09:37:30

ROCKMAN wrote:Adam - "Has he ever considered cutting the price he sells his oil at to help out the consumers...". Hell no!


Yeah, I didn't think so, but it seemed reasonable to ask before joining in with your appreciation of how well oil industry folks just screw the consumer over as hard as they can, pass around the spoils amongst themselves and LOL it up afterwards.

Rockman wrote:: it ain't personal...just business. LOL.


See what I mean? The industry can't be allowing ethics or morals in there anywhere if there are sheep around, they need to be shorn.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby Cog » Sun 05 Mar 2017, 10:09:35

I don't invest in XOM and BP for them to give away their product. I want them to charge whatever the market will bear. My dividends yo.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby pstarr » Sun 05 Mar 2017, 11:29:08

Cog wrote:I don't invest in XOM and BP for them to give away their product. I want them to charge whatever the market will bear. My dividends yo.

you certainly are a brilliant hardnosed investor guy. Perhaps you should start your own investor blog?
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby ROCKMAN » Sun 05 Mar 2017, 14:54:09

Adam - "The industry can't be allowing ethics or morals in there anywhere..." Exactly: same ethics and morals that allow consumers to pay companies less for oil/NG then it cost those companies to develop that production. Or did I misunderstand: have you sent a check to ExxonMobil to help make up for its revenue short fall this year? LOL.
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Re: Exxon cuts its oil reserves by 3.3 billion barrels

Unread postby AdamB » Sun 05 Mar 2017, 16:27:15

Cog wrote:I don't invest in XOM and BP for them to give away their product. I want them to charge whatever the market will bear. My dividends yo.


Of course. There is no morality, fair play or elements of human kindness in the founding principles of economics, and this is why economics works when informing us about human behavior. And are a core reason why those who didn't include these first order principles when pretending that bell shaped curves have anything to do with oil production, got it all so badly wrong.
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