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Three Things to Watch as Oil Companies Count Costs of the Bust

More than a year into the worst oil bust in a generation, companies keep tallying the carnage. Most of the industry’s third-quarter results will be reported over the next two weeks. Here are three numbers to watch: 1. Writedowns Southwestern Energy Co. set the tone on Oct. 22 with a $2.8 billion charge, twice as much as forecast by Barclays Plc. There’s more to come. Barclays predicted $20 billion in writedowns from six companies in an Oct. 21 report. That’s because some producers use an accounting method that requires them to take charges when estimates of future cash flow fall below the cost to acquire land and drill wells. Of the 61 companies in the Bloomberg Intelligence North American Independent Explorers & Producers index, 25 use that approach, including Devon Energy Corp., Apache Corp. and Chesapeake Energy Corp. 2. Cash Flow During the boom years, shale drillers spent far […]

Posted On : Published By : Tom Whipple
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Oil industry slipping into the red as outlook dims

The Shell Oil Company’s drilling rig Polar Pioneer is shown in Port Angeles, Washington May 12, 2015. The oil sector is slipping into the red after years of fat profits as the steep slump in oil prices shows little sign of ending, with this quarter shaping up to be the worst since the downturn started. The world’s top oil companies have struggled to cope with the halving of oil prices since June 2014. They have cut spending repeatedly, made thousands of job cuts and scrapped projects. The lower-for-longer outlook for oil prices took its heaviest toll yet in the third quarter as oil companies again reported a dramatic drop in income. Some saw results swing into the loss column, and the industry had billions of dollars in impairment charges. "This downcycle poses significant challenges," Jeff Sheets, ConocoPhillips’ ( COP.N ) chief financial officer, told investors on a conference call […]

Posted On : Published By : Tom Whipple
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Oil Producers Curb Megaproject Ambitions to Focus on U.S. Shale

Big U.S. oil companies are starting to think small. A stubborn 16-month crude rout with no end in sight is driving the largest U.S. oil producers away from costly, high-risk megaprojects long touted as the industry’s future and toward safer shale operations that generate the cash needed to satisfy anxious investors. Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., ConocoPhillips and Hess Corp. have all either delayed or abandoned projects that range from the deep seas of the Gulf of Mexico to Canada’s oil sands and the U.S. Arctic. At the same time, Exxon and Chevron both announced plans to substantially increase U.S. crude production, largely as a result of their shale operations. “What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in west Texas where you already know there’s oil […]

Posted On : Published By : Tom Whipple
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Canada’s Suncor producing more oil

Canadian oil sands producer Suncor reports production increase from third quarter, though profits down during depressed market. Photo courtesy of Suncor CALGARY, Alberta, Oct. 29 (UPI) — Canadian oil company Suncor said production for the third quarter was up 9 percent year-on-year at a time when surplus is driving industry profits down. "Our focus on operational discipline continues to pay off," President and Chief Executive Officer Steve Williams said in a statement. Suncor, the largest energy company in Canada, reported total production for the third quarter of 566,100 barrels of oil equivalent per day, up 9 percent year-on-year, because of strong results from British output and Canadian oil sands operations. Oil sands, which accounted for the vast majority of the company’s output, increased in production by 4.5 percent from third quarter 2014. Crude oil prices are depressed in part because markets are favoring the supply side at a time […]

Posted On : Published By : Tom Whipple
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Canadian Oil Sands Ltd. Posts Net Loss, Sharply Lower Operating Profit

CALGARY, Alberta— Canadian Oil Sands Ltd. COSWF 1.48 % , the largest stakeholder in the Syncrude oil-sands consortium, on Thursday swung to a net loss and posted a sharply lower operating profit in its latest quarter due to falling production volumes and a slump in crude oil prices. The Calgary-based company reported a net loss of 174 million Canadian dollars ($132 million), or 36 Canadian cents a share, for the three months ended Sept. 30, compared with a net profit of C$87 million, or C$0.18 a share, in the year-earlier period. It said that came partly from a C$184 million foreign exchange loss linked to U.S. dollar-denominated debt due to a weaker Canadian currency. Cash flow from operations, which is adjusted to exclude one-time items, slid 73% to C$82 million, or C$0.17 a share, down from C$302 million, or C$0.62 per share, a year ago. Canadian Oil Sands blamed […]

Posted On : Published By : Tom Whipple
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Oil Companies Curtail Spending on Everything – Except Dividends

Oil executives are standing by promises to protect dividend payouts from the collapse in crude prices even as they fire workers, cancel drilling projects and sell everything. (Bloomberg) — Oil executives are standing by promises to protect dividend payouts from the collapse in crude prices even as they fire workers, cancel drilling projects and sell everything from oil fields to aircraft to conserve cash. Exxon Mobil Corp., the world’s biggest oil explorer, declared a quarterly dividend on Wednesday that will raise the 2015 payout for the 33rd straight year. Within hours of Exxon’s announcement, Chevron Corp. disclosed a payout that will boost its annual remittance for a 28th straight year. Oil producers as diverse as Britain’s BP Plc, Norway’s Statoil ASA, and ConocoPhillips and Occidental Petroleum Corp. of the U.S. are following the same track, maintaining or lifting dividends while curtailing other sorts of investments to cope with crude […]

Posted On : Published By : Tom Whipple
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Anadarko drilling for less in U.S. shale

U.S. oil and gas company Anadarko Petroleum posts loss, but improves economics of drilling operations in U.S. shale basins. Photo courtesy of Anadarko Petroleum HOUSTON, Oct. 28 (UPI) — While taking a hefty loss for the quarter, U.S. oil and gas company Anadarko Petroleum said it was able to improve costs at operations in domestic shale basins. Anadarko reported a third quarter loss of $2.24 billion, compared with a profit of around $1.1 billion one year ago. Like its peers in the industry, the Houston-based company is struggling to generate cash at a time when crude oil is selling for about 45 percent less than it did at this time last year. "We remain committed to building and preserving value in this challenging environment," Anadarko Chairman, President and Chief Executive Officer Al Walker said in a statement. Despite the losses, the company said it was improving efficiency and productivity […]

Posted On : Published By : Tom Whipple
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Oil company Hess posts fourth straight loss

Hess Corp. posts loss for the third quarter, but maintains ability to keep producing oil in a depressed market. Photo by photostock77/Shutterstock NEW YORK, Oct. 28 (UPI) — U.S.-focused oil producer Hess Corp. said it was taking a disciplined approach to its business operations after posting its fourth consecutive quarterly loss. Hess reported a net loss of $279 million for the third quarter of the year as crude oil prices, down by about 45 percent from last year, take their toll on producers. Exploration and production operations, known as the upstream sector, accounted for the bulk of the losses in the third quarter. Chief Executive Officer John Hess said spending cuts were expected from the company moving forward, but the company’s operational performance was robust in the weakened market. "We are well positioned in the current low price environment and are taking a disciplined approach to preserve our financial […]

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Canadian market forces Shell’s hand

Weak oil economy and the lack of pipeline infrastructure caused Royal Dutch Shell to shelve Canadian oil sands project. File photo by Brian Kersey/UPI CALGARY, Alberta, Oct. 28 (UPI) — An uncertain market and the lack of infrastructure needed to move Canadian oil to the global market means it’s time to scrap an Alberta oil project, Shell said. Royal Dutch Shell said it would no longer continue with the construction of its Carmon Creek project in Alberta, Canada, and take a $2 billion write down for the loss. Sanctioned in 2013, the company said it had moved in early 2015 to retool construction operations at the oil sands project, which was expected to yield 80,000 barrels of oil per day. Costs at a time of lingering market weakness and the lack of pipelines needed to move Canadian oil to the global market forced the company to reconsider its priorities. […]

Posted On : Published By : Tom Whipple
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Is it the Beginning of the End for the Alberta Oilsands?

A new report from Oil Change International challenges industry’s common assumption that the continued production of oilsands crude is inevitable. The report, Lockdown: The End of Growth in the Tar Sands , argues industry projections — to expand oilsands production from a current 2.1 million barrels per day to as much as 5.8 million barrels per day by 2035 — rely on high prices, public licence and a growing pipeline infrastructure — all of which are currently endangered in a carbon-constrained world. As the report’s authors find, growing opposition to oil production — especially in the oilsands, which is among the most carbon intensive oil in the world — has significantly altered public perception of pipelines, a change amplified by the cross-continental battles against the Enbridge Northern Gateway , Kinder Morgan Trans Mountain , TransCanada Energy East and TransCanada Keystone XL pipelines. According to the report’s authors, production growth […]

Posted On : Published By : Tom Whipple