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Message
re: Bloomberg: Big Oil Goes Looking for a Career Change
Posted on 9/16/20 at 6:48 pm to castorinho
Posted on 9/16/20 at 6:48 pm to castorinho
quote:
Oil, the commodity is not going anywhere anytime soon.
But investing your money O&G companies right is not bright.
This is the thing people don’t seem to understand when these oil & gas topics come up. Everyone with a shred of knowledge about the industry knows oil & gas will be around for a long time. But that’s not really the question to ask. The real question is how the O&G companies will fare.
When the Saudis flooded the market and the supply glut hit in ‘14, the price of oil dropped from $110/bbl to $30-40. At the time, I was all but certain we would see $100+ oil again in the next 5-10 years. That was the conventional wisdom in the industry - “boom and bust” - and many of us didn’t realize how crazy it was that oil got to $110 in the first place.
In hindsight it really might have been a sea change for the industry. Before 2014, it was just an exploration game. The steps were: find oil, drill production well, profit. For proof, look no further than McMoRan’s $1.2B Davy Jones debacle. They didn’t care how expensive it was to drill the wells - they knew if they could produce oil (they couldn’t), it would be profitable.
The explosion of shale production has changed that. And after 6+ years of lower oil prices, it seems pretty clear that shale will continue to be the swing producer. So now the name of the game is efficiency, and lower profit margins will stick around for the foreseeable future.
So while I don’t think it’s likely that EV’s will have a majority of the global market share any time soon (meaning 15-20+ years, IMO), I do think the O&G producers’ license to print money has expired permanently. XOM is no longer the blue chip stock it once was. Employment in the industry will continue to fall/stagnate. It doesn’t mean O&G is going away. Just means that big oil’s best years are likely behind them.
Posted on 9/16/20 at 7:17 pm to lostinbr
quote:
The real question is how the O&G companies will fare.
When the Saudis flooded the market and the supply glut hit in ‘14, the price of oil dropped from $110/bbl to $30-40. At the time, I was all but certain we would see $100+ oil again in the next 5-10 years. That was the conventional wisdom in the industry - “boom and bust” - and many of us didn’t realize how crazy it was that oil got to $110 in the first place.
In hindsight it really might have been a sea change for the industry. Before 2014, it was just an exploration game. The steps were: find oil, drill production well, profit. For proof, look no further than McMoRan’s $1.2B Davy Jones debacle. They didn’t care how expensive it was to drill the wells - they knew if they could produce oil (they couldn’t), it would be profitable.
The explosion of shale production has changed that. And after 6+ years of lower oil prices, it seems pretty clear that shale will continue to be the swing producer. So now the name of the game is efficiency, and lower profit margins will stick around for the foreseeable future.
So while I don’t think it’s likely that EV’s will have a majority of the global market share any time soon (meaning 15-20+ years, IMO), I do think the O&G producers’ license to print money has expired permanently. XOM is no longer the blue chip stock it once was. Employment in the industry will continue to fall/stagnate. It doesn’t mean O&G is going away. Just means that big oil’s best years are likely behind them.
Absolutely correct and perfectly nuanced take.
Posted on 9/16/20 at 8:48 pm to lostinbr
You are right in a sense but you picked the wrong example. All the McMoran big shelf wells were targeting shallow water ultra deep gas, which they found. Problem is they couldn't produce it with the technology available at the time and gas wasn't worth shite.
It was Jim Bob Moffits doing and pretty much solely his.
And XOM will definitely cut the dividend.
It was Jim Bob Moffits doing and pretty much solely his.
And XOM will definitely cut the dividend.
Posted on 9/16/20 at 11:06 pm to lostinbr
My thoughts as well. The US energy innovation (horizontal drilling/fracking) that made shale plays economical also created the supply issues that will change the industry forever.
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