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Best article about oil energy's collapse

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Best article about oil energy's collapse

Unread postby misterno » Tue 21 Feb 2017, 13:02:39

This is by far the best research I have ever seen

https://srsroccoreport.com/the-blood-ba ... -industry/

Comments are welcome
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Re: Best article about oil energy's collapse

Unread postby KaiserJeep » Tue 21 Feb 2017, 13:57:53

Comment: This web page is selling precious metals, and dissing energy stocks. This HAS been done before, many times. There is nothing like precious metals for losing money, nothing at all.
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Re: Best article about oil energy's collapse

Unread postby ROCKMAN » Tue 21 Feb 2017, 14:58:42

m - "Comments are welcome". Not much to add: the industry has been cyclic since Col. Drake poked that first well. If someone thinks the situation looks bad today go back to June '08 to Feb '09 when oil dropped from $139/bbl to $35/bbl. Or Dec '98 when it hit $13/bbl. Or '90 to '94 when it dropped from $62/bbl to $20/bbl. Or during '86 when it dropped from $60/bbl to $25/bbl. Or the mid 80's when it dropped from $119/bbl to $60/bbl. Same sh*t...different day. LOL.

And obviously the financial stats of Big Oil paralleled the price of oil. And often with worse outcomes then we've seen in this latest bust. Go back to each of those busts and you'll find the same articles as the one you posted.
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Re: Best article about oil energy's collapse

Unread postby rockdoc123 » Tue 21 Feb 2017, 15:53:10

I went through the article quickly and I think they have screwed up somewhat in their analysis. All of these companies report information including dipersal of dividends and looking at what these guys come up with the numbers are a lot different than reported in at least Chevron's financial reporting. Not that it matters given the fact this is a couple of years out of many. Chevron's market cap grew from around 110 billion to 209 billion since 2000. Their debt is 24 billion or so. What that means is that if the company were sold it would still bring in ~180 billion in revenue to the seller (the shareholders) even without a bump in sale price (almost always the case). So I don't think any of these guys are about to collapse.
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Re: Best article about oil energy's collapse

Unread postby AdamB » Tue 21 Feb 2017, 16:42:58

misterno wrote:This is by far the best research I have ever seen

https://srsroccoreport.com/the-blood-ba ... -industry/

Comments are welcome


The article avoids some quite obvious facts. This ain't nothing new to the big boys, who survived not only small busts like that in 2008, but the REAL decimation of 1986, and they made it through the boom before that in the late 1970's, as well as the downturns before that as well. Are numbers bigger now? Perhaps, but that is because this article doesn't discuss anything beyond nominal information, displaying some pretty basic ignorance of how to calculate things through time.

And thermodynamic oil collapse has nothing to do with the information utilized by the author of the article.

So no, this isn't even research, let alone the best of even standard bobble head speak on the topic.
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Re: Best article about oil energy's collapse

Unread postby misterno » Tue 21 Feb 2017, 17:19:19

This is the part that caught me

Some oil producing companies like CVX is borrowing in record values just to pay dividends?

Because most of the shareholders are dividend investors?

God Bless Wall Street
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Re: Best article about oil energy's collapse

Unread postby Zarquon » Tue 21 Feb 2017, 21:35:32

1) The majors have been described as "widows and orphan funds" for a long time. They can't grow much bigger than they already are, so the value of their stock comes mostly from exorbitant dividends, and stock buybacks.

2) The web is full of "news sites" like srsroccoreport. It's a large network of snake oil peddlers who set up these sites from the comfort of their living room, google end-of-the-world stories, cherry-pick their facts, embellish them a little and then post them in the guise of sensational new market analysis. They typically quote each other for additional credibility.

If you look closer at srsroccoreport, there's a Georgia gold & silver coin dealer behind it. Lowest prices anywhere! Also active in historical autographs and Christian television. You're free to draw your own conclusions.

3) Take ExxonMobil. Since 2000, they've bought back ~40% of their own stock. But IIRC these shares don't simply disappear, they end up in the piggy bank. And when prices are low and smaller firms are hurting, Exxon takes that piggy bank and goes shopping for new reserves. Why it makes financial sense to buy a company with Exxon shares instead of cash escapes me. But they're done that for a long time.
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Re: Best article about oil energy's collapse

Unread postby rockdoc123 » Tue 21 Feb 2017, 21:59:20

3) Take ExxonMobil. Since 2000, they've bought back ~40% of their own stock. But IIRC these shares don't simply disappear, they end up in the piggy bank. And when prices are low and smaller firms are hurting, Exxon takes that piggy bank and goes shopping for new reserves. Why it makes financial sense to buy a company with Exxon shares instead of cash escapes me. But they're done that for a long time.


share buybacks serve several purposes. The first is if you have spare capital and there is no good place to invest it because commodity prices are low and buying opportunities arent' yet attractive your own shares might be worth more. It lowers the number of shares on the market and hence has a tendency to raise the price when there is buying going on. Those shares can be used (as you suggest) in terms of an acquisition where it is down with shares rather than cash but having removed shares from the market float gives the company the opportunity to seek an equity capital raise at some point through issuing of new shares. If done at the appropriate time it doesn't dilute the long term shareholders and it makes capital available for program spending or acquisitions. Companies that are being acquired might prefer Exxon shares if they see additional upside to the share price versus the fixed price they will receive if the transaction is done in cash. Remember that Exxon prior to the price crash has done very well in the market and they have a healthy dividend.
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Re: Best article about oil energy's collapse

Unread postby ROCKMAN » Tue 21 Feb 2017, 23:11:26

m - "Some oil producing companies like CVX is borrowing in record values just to pay dividends?" Someone seems to have a very different view of the dividend potential at Chevron the the professional stock analysts at Market Watch. From 3 days ago:

"Chevron's strong balance sheet and the stock’s cheaper-than-peers valuation make the energy company “one of the best positioned” in face of flat oil futures prices, one that could reward shareholders with a dividend increase or even a share buyback, analysts at Citi said in a note Tuesday.

At flat oil prices, defined at between $55 a barrel and $65 a barrel, Chevron CVX, +1.26% “offers one of the strongest 2016-19 (cash flow) growth trajectories in the Big Oil group, a flow-through of a period of intense capital investment (from 2009 through 2014),” the Citi analysts wrote."

Do you know how much dividends Chevron pays ever quarter? About $1.08/share. You might want to look up how many outstanding shares there are and calculate how much that amounts to for a year and compare to its cash flow and revolving debt.
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Re: Best article about oil energy's collapse

Unread postby onlooker » Thu 02 Mar 2017, 17:30:04

http://www.independent.co.uk/voices/oil ... -303429069

Well this confirms what is becoming evident. Humanity is not and cannot walk away from FF voluntarily. A few excerpts
Financial markets are now betting against the future of the planet. This won't end well


Against this background, the markets are betting against substantive government action, whether in America or anywhere else in the world, to curb climate change. And they are also betting, indirectly, against the habitable future of the planet.

In line with what Rock has been saying
"We are mortal beings doomed to die
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Re: Best article about oil energy's collapse

Unread postby peripato » Thu 02 Mar 2017, 18:34:43

onlooker wrote:http://www.independent.co.uk/voices/oil-tycoons-financial-markets-climate-change-environment-betting-against-future-planet-a7604021.html?utm_source=Daily+Carbon+Briefing&utm_campaign=b4254f380e-cb_daily&utm_medium=email&utm_term=0_876aab4fd7-b4254f380e-303429069

Well this confirms what is becoming evident. Humanity is not and cannot walk away from FF voluntarily. A few excerpts
Financial markets are now betting against the future of the planet. This won't end well


Against this background, the markets are betting against substantive government action, whether in America or anywhere else in the world, to curb climate change. And they are also betting, indirectly, against the habitable future of the planet.

In line with what Rock has been saying

A.k.a. The Monkey Trap

The trap “consists of a hollowed-out coconut, chained to a stake. The coconut has some rice inside which can be grabbed through a small hole”. The monkey's hand fits through the hole, but his clenched fist can't fit back out. “The monkey is suddenly trapped.”

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Re: Best article about oil energy's collapse

Unread postby ROCKMAN » Thu 02 Mar 2017, 18:47:09

p - Exactly. What I learned as a "Malaysian monkey trap" decades ago. An examples I don't think I've used on this site. Thanks for reminding me.
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Re: Best article about oil energy's collapse

Unread postby CL » Wed 29 Mar 2017, 09:42:04

Hi there! I'm new to this board and i have a question that im hoping someone can answer.

I've been reading the SRS Rocco report and recently heard an interview in which the Steve St. Angelo predicts that increasing EROI = falling production (which makes sense to me) and also a falling nominal oil price (which does not make sense to me).

He says that commodity prices are not determined by supply and demand but by cost of production. For that reason, he expects gold and silver prices to rise (because new production simply won't be possible due to lack of energy.)

Here's my question: why would the same not be true for oil production. If the cost of production is going to rise dramatically, wouldn't that mean that the price of oil would also rise?

I'm open to the idea that falling output = falling prices. I just don't understand how that makes sense.

Thanks in advance !!
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Re: Best article about oil energy's collapse

Unread postby Subjectivist » Tue 04 Apr 2017, 10:46:11

CL wrote:Hi there! I'm new to this board and i have a question that im hoping someone can answer.

Here's my question: why would the same not be true for oil production. If the cost of production is going to rise dramatically, wouldn't that mean that the price of oil would also rise?

I'm open to the idea that falling output = falling prices. I just don't understand how that makes sense.

Thanks in advance !!


It doesn't nake sense to anyone who has a real world view of supply and denand. EROEI may some day restrict the volume of fossil fuels entering world supplies, but that will make prices go up because of basic economics. If the producers can not invest the energy needed to increase supplies then supplies will fall, prices will rise and a new ballance will develop.
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Re: Best article about oil energy's collapse

Unread postby ROCKMAN » Tue 04 Apr 2017, 12:12:30

CL - "I'm open to the idea that falling output = falling prices. I just don't understand how that makes sense."

As sub explained. But here's the short version: falling prices = falling output = increasing prices...eventually = increasing output...eventually. That is the price/supply dynamic that has always ruled the industry. And the length of each phase is dependent to a degree on the global economic condition.

In that sense the fossil fuel industry has never "collapsed". It has just repeatedly gone thru the boom/bust cycle. And will continue to do so in the future. At least until the world has enough economic alternative energy sources to replace fossil fuels 100%. Yes: 100% because even in the far future in a world that consumes only 5% of its current appetite someone will be making money satisfying that demand. And even then that little bit of the remaing industry will still be subject to boom/bust cycles.
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Re: Best article about oil energy's collapse

Unread postby asg70 » Tue 04 Apr 2017, 17:03:44

pstarr wrote:the mortgage crisis . . . all started in 2005 when conventional oil (<45api, deep, dirty) production peaked.


And a coincidence of timing is supposed to mean...what?

pstarr wrote:Demand collapses not because of price or production levels. But because not enough oil wealth reached the consumer market to pay the oil companies to drill. It's a depression, covered up by debt.


I've seen charts posted in response to this sentiment multiple times showing consumption going up over the last few years, lots of holiday road tripping, etc... CO2 emissions definitely are going up, but that is also due to coal and natural-gas. As to any long-term downward trends, this article presents a narrative of us leaving oil well before oil leaves us. The few times I see the term peak oil used these days it's either as a source of mockery or rebranded as this utopian concept of peak oil demand.

As to your conclusion, that this is a depression, covered up by debt, it reminds me of the old adage, if a tree falls in the forest and nobody is there, does it make a sound? My point being, if it doesn't feel like a depression, why should we care? During the last election cycle I remember Ron Paul paying for ads talking about imminent currency collapse. Before that, Peter Schiff was the one sounding the alarm. You also had Glenn Beck and his ilk selling precious metals and rations. Why should we be any more concerned about the debt bomb now vs. 5-6 years ago? After all, the Fed is finally easing interest rates and the center is continuing to hold.

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-Short welched on a bet and should be shunned.
-Frequent-flyers should not cry crocodile-tears over climate-change.
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Re: Best article about oil energy's collapse

Unread postby ROCKMAN » Tue 04 Apr 2017, 17:31:43

pstarr - "Those types (see RM, vt) believe that somehow every consumer can afford any prices". Moi??? LOL. I have no idea what you think you read. Did you not see my post a few months ago when I pointed out that there were still hundreds of millions of folks in the world who couldn't afford much if any oil at $26/bbl?

And no: EROEI will never be used to make development decisions. For instance an oil sands project might burn 20% more Btu's of NG then the Btu's contained in the oil produced. But if that oil sells for 30% more then what that NG cost the oil will be produced.

And even if diesel is used to drill a well the EROEI can still be low: folks continue to greatly overestimate how much fuel is used to drill a well. Typically less then 10% of the total well cost...sometimes as little as 5%. Thus the economics of a prospect will kill a project before EROEI gets below 5 or 6. Maybe that's the statement you're misinterpreting.

BTW the minimum EROEI that can be justified economically greatly increased when oil prices crashed. Today it's probably around 10...or more. Think about it: the Btu's used the drill a well today are the same needed to drill the SAME WELL 3+ years ago. And the Btu's of oil produced by the two identical wells is the same. And while the cost to drill the current well has declined it hasn't dropped as much as the revenue from the new well.

IOW for the new well to generate the same rate of return it has to produce MORE OIL then the older well. And more oil produced by consuming the same amount of Btu's = a higher EROEI.

Despite what folks think the EROEI of projects undertaken today are HIGHER then those started several years ago. If oil were to fall to $10/bbl and stayed there for a couple of years new oil reserves would still be produced profitably. And that production would have a very high EROEI...maybe 50 or greater. But, of course, there would be very few projects undertaken and very little new reserves produced.
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