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There’s more oil and gas than ever — and the industry is tanking
Posted on 2/10/20 at 10:11 am
Posted on 2/10/20 at 10:11 am
quote:
The world’s oil and natural gas companies are drilling their way into financial and social hell.
Driving the news: The industry’s stocks are in the toilet, and climate change is fast becoming a mainstream investor worry. These problems overlap and neither is going away any time soon — if ever.
Why it matters: People use products from oil and natural gas, which are heating up the Earth, and many own (perhaps unwittingly) stock in these companies. Whether they love or hate them, the financial and social standing of these companies will likely affect all.
The intrigue: CNBC’s Jim Cramer raised eyebrows by saying recently that he was “done” with fossil fuels and likened them to tobacco. “This has to do with new kinds of money managers, who frankly just want to appease younger people who believe you can’t ever make fossil fuels sustainable,” he said.
“That’s absolutely representative of what a lot of people are thinking in terms of investing,” said Paul Sankey, a well-known oil analyst in the sector for 30 years, now at the Japanese bank Mizuho Financial Group.
By the numbers:
- Energy stocks have dropped from 15% of the S&P 500 in 1990 to just 5% last year.
- ExxonMobil, once considered one of the most reliably well-performing stocks of any kind, and the exchange-traded fund XOP, comprised of oil and gas stocks, have performed far worse than the overall S&P since 2014, when oil prices crashed due to oversupply.
- The stocks haven’t recovered (and neither have oil prices). Check out the accompanying chart.
Energy jobs, led by oil and gas, were the only sectors to lose jobs last year.
LINK
I remember a time when a stock like Schlumberger was considered a bellwether. How times have changed...
10
Posted on 2/10/20 at 10:26 am to rickgrimes
People don’t realize how much of what they use is derived from oil. Guess we could start making everything from wood and metal. However, it might be hard to generate enough heat / electricity for the manufacture of metal products without oil or natural gas to burn. Guess we can just cut all the trees down.
Posted on 2/10/20 at 10:38 am to rickgrimes
good, let them drive the prices down so I can make a killing
Posted on 2/10/20 at 10:44 am to rickgrimes
quote:I can remember when the Chicken Littles of the world were predicting that we would run completely out of available crude oil by 1990.
There’s more oil and gas than ever
Instead of running out of crude, we have more proven reserves of crude oil today than ever before.
Posted on 2/10/20 at 11:38 am to rickgrimes
quote:
I remember a time when a stock like Schlumberger
It pays a good dividend but it's been a dog.
Posted on 2/10/20 at 11:42 am to rickgrimes
It's all supply and demand.
Oil and gas supply has increased while demand has grown much more slowly, if at all.
Climate change affects it two ways.
1) People are demanding new ways of energy
2) Even for products and processes that use oil and gas, people are demanding that they become more efficient, see higher gas mileage in vehicles.
Oil and gas supply has increased while demand has grown much more slowly, if at all.
Climate change affects it two ways.
1) People are demanding new ways of energy
2) Even for products and processes that use oil and gas, people are demanding that they become more efficient, see higher gas mileage in vehicles.
Posted on 2/10/20 at 1:29 pm to rickgrimes
My theory is it's because of the more efficient vehicles and the electric vehicles.
Posted on 2/10/20 at 2:36 pm to rickgrimes
quote:
CNBC’s Jim Cramer raised eyebrows by saying recently that he was “done” with fossil fuels and likened them to tobacco.
Cramer should go frick himself...he's a front-runner that was pumping O&G stocks up to 2014 when prices collapsed and people finally saw how poorly most of the companies were run...too much debt and production declines that put producers in a vice of needing to borrow more to drill more to replace revenue that was declining. Unconventional exploration can be profitable but you have to carefully manage the treadmill and watch your debt or you're fricked.
I would not buy any small cap E&P stocks, maybe one or two large caps and would buys couple of the majors in this dip. For the small and large caps the outcome is going to be BK or consolidation...don't want to bet that and the few that have occurred ended up offering very little premium for the target and tanked the acquirer.
This post was edited on 2/10/20 at 2:44 pm
Posted on 2/10/20 at 7:34 pm to rickgrimes
Perfect example - Harvard Law School - Exxon hosts a fancy recruiting party for top young legal scholars.
The student body protests the affair and shamed fellow Harvard students for attending.
Exxon’s stance is that they will pay enough to get the best legal minds....but it will be a challenge.
And you have younger and younger investors that want nothing to do with XOM, COP, CBC, etc. those investors do not want fossil fuels in their portfolios....regardless of returns they may miss.
The student body protests the affair and shamed fellow Harvard students for attending.
Exxon’s stance is that they will pay enough to get the best legal minds....but it will be a challenge.
And you have younger and younger investors that want nothing to do with XOM, COP, CBC, etc. those investors do not want fossil fuels in their portfolios....regardless of returns they may miss.
Posted on 2/11/20 at 8:28 am to rickgrimes
The healthy companies will recover and do better in a few years.
Of course it's mostly a supply and demand issue. Companies like Exxon and Shell are heavily invested in natural gas and it's killing them right now as well as the other obvious issues. Combine an oversupply of nat gas with the mild winter we are having and it's easy to see why things look like crap in the near term.
Of course it's mostly a supply and demand issue. Companies like Exxon and Shell are heavily invested in natural gas and it's killing them right now as well as the other obvious issues. Combine an oversupply of nat gas with the mild winter we are having and it's easy to see why things look like crap in the near term.
Posted on 2/11/20 at 9:16 am to rickgrimes
The industry is not tanking 
You don’t understand it
You don’t understand it
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