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Started By
Message
re: There’s more oil and gas than ever — and the industry is tanking
Posted on 2/10/20 at 4:21 pm to Decisions
Posted on 2/10/20 at 4:21 pm to Decisions
So what do you think? Glory days lie ahead for O&G?
I concede that my analogy is imperfect - but I was not trying to argue the relative worth of each commodity - just that the negative investor sentiment is very real.
I agree it will sort itself out in the sense that those who are overlevered will die off and those who are not will be left standing, with the majors "winning" (as another poster pointed out) because they will be able to acquire assets on the cheap and will continue to have access to capital markets due to their investment grade bond ratings.
Fund managers care about profits but also about keeping their jobs. They are not incentivized to step out into E&P when their competition isn't. I think there will continue to be downward pressure on stocks because there aren't many buyers.
I concede that my analogy is imperfect - but I was not trying to argue the relative worth of each commodity - just that the negative investor sentiment is very real.
I agree it will sort itself out in the sense that those who are overlevered will die off and those who are not will be left standing, with the majors "winning" (as another poster pointed out) because they will be able to acquire assets on the cheap and will continue to have access to capital markets due to their investment grade bond ratings.
Fund managers care about profits but also about keeping their jobs. They are not incentivized to step out into E&P when their competition isn't. I think there will continue to be downward pressure on stocks because there aren't many buyers.
2
Posted on 2/10/20 at 4:33 pm to Negatiger1986
So buy up a bunch of Exxon or not? I'd like to have the dividends instead of bonds just to satisfy some lower risk portion of my retirement savings. I mean, there are a ton os shite hole countries driving inefficient beaters using up some oil and gas right?
I suspect if electric cars become the norm, we will need the Exxons of the world to supplement power and/or provide charging stations on every corner of the city.
I suspect if electric cars become the norm, we will need the Exxons of the world to supplement power and/or provide charging stations on every corner of the city.
Posted on 2/10/20 at 4:44 pm to Bamajedi
I've held on to Chevron and Slumberger on the way down. I'm not selling at these levels though 
Posted on 2/10/20 at 4:59 pm to Bamajedi
quote:
I mean, there are a ton os shite hole countries driving inefficient beaters using up some oil and gas right?
This is the question IMO. America has become very efficient in O&G, and I don't see any short term or near term major demand for gas changing. The move is away from it.
So the question then becomes, what's the plan for developing world? The reality is electric is probably easier to maintain and it would likely be less pollutants for big cities in places like China, India, etc. that have major pollution issues.
This has nothing to do with stocks, as I think the bigs especially will be involved in energy for years to come and it only takes one homerun on energy to change a company. I just don't see any major change to the entire sector coming.
Posted on 2/10/20 at 5:06 pm to Ramblin Wreck
quote:and yet there is still too much supply in the market
People don’t realize how much of what they use is derived from oil
Posted on 2/10/20 at 5:21 pm to Negatiger1986
quote:
So what do you think? Glory days lie ahead for O&G?
Not glory, just stabilization (at least in the U.S.).
quote:
Fund managers care about profits but also about keeping their jobs.
I believe this is the crux of your misunderstanding. Fund managers’ jobs are joined at the hip with profits. Not perception. Let the PR department worry about perception.
quote:
They are not incentivized to step out into E&P when their competition isn't. I think there will continue to be downward pressure on stocks because there aren't many buyers.
I feel like this is exactly what they are incentivized to step into. Oversold market bottoms with no competition? Yes please.
Posted on 2/10/20 at 5:31 pm to Decisions
quote:
I feel like this is exactly what they are incentivized to step into. Oversold market bottoms with no competition? Yes please.
I think you're underestimating the ESG/Divestment movement just a bit...the funds that the "fund managers" get their money from have been getting hammered for hydrocarbon investments - even on the very secretive PE side and a commodity price slide alone doesn't explain the huge drop in energy investment.
This post was edited on 2/10/20 at 5:32 pm
Posted on 2/10/20 at 5:35 pm to cwill
I worry that when shale oil production falls off a cliff at some near point (and it will with the steep decline rates) that we won’t have enough conventional oil to avert the price spike. The economy will then go through a commodity driven recession and the cycle could repeat again. Maybe Guyana/Suriname can hold on for a while but with oil sands and deepwater drying up what else is left other than Middle East national oil companies? I haven’t been impressed with the supposed 5% terminal decline in shale oil. Some of the wells are quite frankly god awful
This post was edited on 2/10/20 at 5:39 pm
Posted on 2/10/20 at 6:14 pm to TigerDog83
quote:
I worry that when shale oil production falls off a cliff at some near point (and it will with the steep decline rates)
And rapidly disappearing greenfield locs.
quote:
Maybe Guyana/Suriname can hold on for a while but with oil sands and deepwater drying up what else is left other than Middle East national oil companies?
Guyana/Suriname may turn out to be a great find but it won’t be enough to offset the shales tailing off. But I think there’s a lot of oil sand left and higher prices could lead to some tech advances in E&P and on the consumption side.
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 2/10/20 at 9:58 pm to KillTheGophers
quote:
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
Those investors will grow up and care about the returns they missed.
Posted on 2/10/20 at 10:02 pm to cwill
quote:
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.
Posted on 2/10/20 at 10:12 pm to KillTheGophers
quote:
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.
Good. Let these young rich people avoid these stocks. Not everyone will be rich enough to afford battery powered vehicles. Also, the distance these vehicles can travel in cold weather is much less than during warmer weather. Typically the batteries last about 5 years which means one must pay a high dollar figure to replace the batteries every 5 years.
The cost per barrel for oil will stabilize. No one knows that the price vs supply vs demand will become in the future.
Is now a good time to jump in? Relative to history, yes, relative to the future, who knows?
I do not foresee battery powered jet airliners in the near future (less than 10 years). Jet fuel is still needed.
At what point does the population of the earth increase the demand to the point where the demand is greater than O&G production?
Investments today would payoff at that time.
Posted on 2/11/20 at 12:32 am to Ramblin Wreck
quote:Is that really different than before? Although I guess this more relevant to the “ban fossil fuels” argument than the stock/commodity prices last of this discussion.
People don’t realize how much of what they use is derived from oil.
Posted on 2/11/20 at 12:42 am to KillTheGophers
quote:I’m confused by this statement. In a discussion about the relatively poor returns of those stocks, aren’t they NOT missing out on returns by not being invested in a sector of poor returns? And if they’re becoming an increasing larger portion of the investing public (especially as they reach their prime earning years) aren’t they actually becoming a major driver behind the lack of returns in this sector and presumably a driver behind greater returns in others?
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.
I mean I couldn’t care less about what I invest in so long as I maximize my returns, and I would happily buy these stocks if I thought they would achieve that. But since they aren’t, I don’t invest in them.
Posted on 2/11/20 at 1:01 am to djmicrobe
quote:My guess is that people that can’t afford these vehicles are less likely to be actively investing in the first place.
Let these young rich people avoid these stocks. Not everyone will be rich enough to afford battery powered vehicles.
quote:A quick search reveals that Tesla’s warranty covers 8 years or 120,000 miles, with a bunch of articles about how they typically last much longer than that 90% efficiency at 160,000 miles back in 2018 and their longevity and efficiency are increasing, which is expected as they become more popular and the technology develops.
Typically the batteries last about 5 years which means one must pay a high dollar figure to replace the batteries every 5 years.
So I’m not sure where you’re getting this 5 year lifespan, unless someone is driving like 40,000 miles per year.
quote:Since population growth is nothing new, and technology advancements has made it easier to find, extract, and produce O&G, has made gas powered vehicle more efficient, and has made more (and increasing) viable alternatives to gas more widely available and more affordable, this just doesn’t seem like something to bet on anytime soon unless they (as OPEC often does) artificially reduce the supply.
At what point does the population of the earth increase the demand to the point where the demand is greater than O&G production?
quote:And there seems like there are many other, safer and more promising sectors for the future that will payoff too, especially if there is an increasing population of investors who aren’t going to participate in these investments which limits the demand for them to grow.
Investments today would payoff at that time.
It just seems like there a lot of potential headwinds in this sector to “bet” on it especially with other sectors lacking those headwinds if not having tailwinds.
This post was edited on 2/11/20 at 1:04 am
Posted on 2/11/20 at 7:34 am to buckeye_vol
quote:
A quick search reveals that Tesla’s warranty covers 8 years or 120,000 miles, with a bunch of articles about how they typically last much longer than that 90% efficiency at 160,000 miles back in 2018
What? Tesla wasn’t exactly producing anything much I. 2010 - how can such a claim be made. We are just now starting to see a few thousand cars hit 8 years.
Not saying it is wrong - just impossible to measure at 2018
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 8:59 am to KillTheGophers
quote:
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.
Yeah I don't believe that at all. Plenty of Harvard students are old money, old business, or otherwise pro career. Sure they may act like they care for 5 minutes in from of some of their peers, but the reality is those guys go to Harvard Law to work for the best of the best. If that's Exxon or O&G, they are going there.
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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