THE BLOOD BATH CONTINUES IN THE U.S. MAJOR OIL INDUSTRY

The carnage continues in the U.S. major oil industry as they sink further and further in the RED.  The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures.  The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year.

Unfortunately, the majority of financial analysts at CNBC, Bloomberg or Fox Business have no clue just how bad the situation will become for the United States as its energy sector continues to disintegrate.  While the Federal Government could step in and bail out BIG OIL with printed money, they cannot print barrels of oil.

Watch closely as the Thermodynamic Oil Collapse will start to pick up speed over the next five years.

According to the most recently released financial reports, the top three U.S. oil companies combined net income was the worst ever.  The results can be seen in the chart below:

In 2011, ExxonMobil, Chevron and Conocophillips enjoyed a combined $80.4 billion in net income profits.  ExxonMobil recorded the highest net income of the group by posting a $41.1 billion gain, followed by Chevron at $26.9 billion, while ConocoPhillips came in third at $12.4 billion.

However, the rapidly falling oil price, since the latter part of 2014, totally gutted the profits at these top oil producers.  In just five short years, ExxonMobil’s net income declined to $7.8 billion, Chevron reported its first $460 million loss while ConocoPhillips shaved another $3.6 billion off its bottom line in 2016.  Thus, the combined net income of these three oil companies in 2016 totaled $3.7 billion versus $80.4 billion in 2011.

Even though these three oil companies posted a combined net income profit of $3.7 billion last year, their financial situation is much worse when we dig a little deeper.  We must remember, net income does not include capital expenditures (CAPEX) or dividend payouts.  If we look at these oil companies Free Cash Flow, they have been losing money for the past two years:

Their combined free cash flow fell from a healthy $46.3 billion in 2011 to a negative $8.7 billion in 2015 and a negative $7.3 billion in 2016.  Now, their free cash flow would have been much worse in 2016 if theses companies didn’t reduce their CAPEX spending by nearly a whopping $20 billion.  I don’t have a chart to show their capital expenditures, but here are some of the annual figures:

Top 3 U.S. Oil Companies Total CAPEX Spending:

2013 = $87.2 billion

2014 = $85.4 billion

2015 = $66.0 billion

2016 = $46.6 billion

The combined CAPEX spending from these three oil companies fell 29% in 2016 versus 2015 and 46% since 2013.   Basically, ExxonMobil, Chevron and ConocoPhillips have cut their combined CAPEX spending in half in the past three years.  This is bad news for either building or at least maintaining oil production in the future.

NOTE:  Free Cash Flow is calculated by subtracting CAPEX spending from the company’s operating cash or profits.

Even though these companies slashed nearly $20 billion in CAPEX spending in 2016, they still suffered a negative free cash flow of $7.3 billion.  However, this does not include dividend payouts to their shareholders.  Not only did these companies pay a total of $46.6 billion in CAPEX in 2016, they also forked out an additional $21.4 billion in shareholder dividends.  Dividend payouts do not come out of thin air.. they must come from cash from operations.

If we include dividend payouts, this would be the net result on these companies Free Cash Flow:

Here we can see that the large dividend payouts by these three oil companies impacted their bottom line much worse than the figures shown in the Free Cash Flow chart above.  Thus, the free cash flow minus dividend payouts provides us evidence that these oil companies have been seriously in the RED since 2013, not just the past two years displayed in the Free Cash Flow chart.

As we can see, the group’s free cash flow minus dividends was a negative $32.8 billion in 2015 and a negative $29 billion last year.  Of course, these three companies may have sold some financial investments or assets to reduce these negative values, but a company can’t stay in business for long by selling assets that it would need to use to produce oil in the future.

So, what has falling free cash flow and dividends done to ExxonMobil, Chevron and ConocoPhillips long-term debt?  You guessed it… it skyrocketed:

When these three companies still enjoyed positive free cash flow in 2011 and 2012, after paying CAPEX and dividends, their long-term debt did not increase.  However, as their operating profits really started to decline, the debt on their balance sheets increased significantly.  As we can see, the combined long-term debt in these three companies balance sheets ballooned from $40.8 billion in 2012 to $95.7 billion in 2016.

Basically, these three companies combined long-term debt has doubled in just the past three years.  This is bad news as the situation in the energy markets continues to disintegrate.  Zerohedge published this article, Goldman Stunned By Collapse In Gasoline Demand: “This Would Require A US Recession” which stated the following:

So yes, both gasoline stocks and supply remains at extremely high levels, but what set off alarm bells is not supply, but demand: the EIA last week reported that the 4-week average of gasoline supplied – or implied gasoline demand – in the United States was 8.2 million barrels per day, the lowest since February 2012. And, as Reuters adds, U.S. refiners are now facing the prospects of weakening gasoline demand for the first time in five years.

Unfortunately, the massive amount of debt overhanging the U.S. economy has put a lot of leverage on the public’s ability to continue purchasing consumer goods and services.  While the market has become clever at selling cars for example, by first offering lower interest rates and extended loan payouts, it is now resorting to leasing vehicles at ultra low monthly payment plans… just to get rid of them.  Leasing automobiles at monthly rates that are uneconomic for the auto industry in the long run, only allows the GREATEST FINANCIAL PONZI SCHEME to continue a little longer.

When we start to add up all the data, the U.S. economy is getting ready to hit a BRICK WALL.  Furthermore, the situation at the top three U.S. oil companies will only get worse going forward.  As ExxonMobil, Chevron and ConocoPhillips continue to bleed to death, watch for U.S. oil production to fall precipitously in the future.

Yes, it is true that U.S. oil production has increased over the past several months due to the DRILLING RIG HAMSTERS doing their thing by taking good investment money and producing more crappy low quality oil.  However, this isn’t something to cheer about.  Rather, I call this…. turning GOLD into LEAD.

Some readers send me information of the growing drilling rig count and oil production in the Permian field in Texas.  Yes, that is where the activity has moved to.  Why?  Well, it is one of the last fields that can produce oil similar to the Bakken and Eagle Ford.

That being said, I would refrain from believing that this bump up in U.S. oil production will SAVE THE DAY.  Why?  Because it is being done on the back of a massively indebted energy sector which has been able to continue drilling by using rigs that have seen their rental rates cut in half, or more, due to the implosion of the drilling rig industry in 2015 and 2016.

The evidence provided in this article showing the continued financial disintegration at these top three oil companies suggests that the U.S. energy sector is in serious trouble.  We must remember, the top oil companies are supposed to be the most profitable.  However, if we take a look at what is taking place in the top shale oil and gas producers, the situation is even more dire.  I have republished this chart from a previous article showing that the shale oil and gas industry hasn’t really made a profit since 2009:

While some of the companies made free cash flow profits in various years, as an industry, these oil and gas producers have been in the RED since the U.S. Shale Energy Industry really took off in 2009.  So, the notion that rising oil production from increased drilling rig activity is going to change the SEA OF RED taking place in the entire U.S. energy sector, suggests individuals or the market has gone completely insane.

As I have stated before, Americans continue to suffer from an increasing amount of BRAIN DAMAGE.  Now, I am not just talking about the typical JOE BAG of DONUTS, as they at least have an excuse due to the propaganda put out by the Mainstream media.  However, I am really surprised that “supposedly” intelligent individuals continue to either believe in U.S. energy independence or the more silly “Abiotic oil” theory that the Earth has a CREAMY NOUGAT CENTER of oil… that will refill all the oil fields in the world.  (James Howard Kunstler gets the credit for that wonderful term).

While I realize the “Abiotic Oil Theory” is complete HOGWASH, many individuals still believe it is true.  This theory has been propagated by a few Russian scientists and engineers, but I can assure you the bulk of the Russian oil industry is not drilling down to ultra deep depths to get their oil.  I will be publishing an article shortly as a rebuttal to a recent newsletter post titled, How I came to Realize I was Wrong About Peak Oil – F. William Engdahl.  Unfortunately, Mr. Engdahl has failed to look at the real evidence, instead has fallen HOOK, LINE and SINKER by faulty information and lousy conspiracy theories.

The number of individuals who fail to believe in PEAK OIL will diminish greatly as the Thermodynamic Oil Collapse picks up speed over the next five years.  During this time, it would be prudent to own physical precious metals rather than highly inflated debt-based paper assets or real estate.

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43 Comments on "THE BLOOD BATH CONTINUES IN THE U.S. MAJOR OIL INDUSTRY"

  1. Putting their money where their mouth is… or not!

    There were 150 major global corporations that defaulted in 2016, that is 40% more than the previous year 2015. Of these 150 corporations, 75% are domiciled in the US with 50 being in the oil and gas sector.

    So as you can deduce from the ‘tale of the tape’ the writing is on the wall for all to see, including reading between the lines. The future is not known, however the past and present does have a bearing upon how that energy future unfolds. At this point it does not look good. I wonder how many oil and gas corporations will default by the end of 2017?

  2. *Nougat

    • Bobbybobbob,

      Thanks…LOL. My spell check corrected it, incorrectly.

      steve

      • How do you spell pedantic? Excellent article Steve! I wish I could convince my family and friends who just spit at me that I have been saying the same old thing for years. And laugh at me every time the price of petrol goes down.

  3. Wow…what a powerful article. Your research is greatly appreciated and I am sending a small donation in appreciation.

    Has anyone looked at gasifiers? I live in a heavily wooded area and am thinking on investing in a gassifier for personal use and to possibly sell syngas as a trade good should we experience a SHTF future.
    http://www.leafgenerator.com These guys are in my state and I like supporting local businesses. Thoughts appreciated.

    • petedivine,

      I really appreciate your donation and support. Thanks again. I looked at the leafgenerator. While I looked over the science and FAQ’s on the site, I could not find a wood to gas conversion figure. I have no idea how much gas is generated from wood or biomass.

      That being said, this sort of equipment will be useful in the future for those who live in the country. I don’t see biomass as a big factor in changing the dire energy predicament we are facing as a modern society, but it will provide options for those trying to survive in the country.

      Before petroleum based gasoline became widespread in the United States, farmers made their own ethanol out of corn or other forms of biomass to power their tractors and automobiles. The advantage of producing a liquid fuel source is that it is easier to deal with than a gas.

      Either way, people in the country will become quite creative and inventive in producing energy sources when the centralized energy system disintegrates.

      steve

    • Hi Pete, I´m not an expert by any means, but here´s some potentially useful history for you. This leaf generator is exactly the same as an old device that was extensively used in my country (Spain) after the civil war (1936-1939) It was named “gasógeno” (google it and check it if you will) and was used extensively to power cars, due to oil shortages.

      The produce is overwhelmingly CO. Hydrogen and methane are almost negligible and are in fact pretty dangerous otherwise. Methane explodes violently in contact with oxygen and hydrogen adds power to the burst, the “gasógenos” went off some times and a number of deadly incidents happened, mainly because of poor manufacturing.

      The good news is the stuff works, it is real and proven technology. The bad thing is the yield is horrendous. The spanish gasógenos used coal, much more powerful than biomass, and you couldn´t possibly get over 10 mph at best, besides, this is close to useless to power small engines (forget about chainsaws or things like that) and also a hell to store. These guys claim this can power a standard generator. Maybe, but check extensively this point or, better yet, see it for yourself if possible.

      You get 48% of the thermal energy of diesel fuel by burning biomass directly, so get yourself also a wood pelletizer (they are cheap, 100% manual, and last virtually forever) and a good quality wood pellet stove, you won´t regret that.

      Best wishes and best of lucks

  4. Steve,
    It does look grim. I’ve looked at peak oil for more than 15 years now. it is REAL!

    My prediction:

    1. More bankruptcies in the oil patch. smaller ones first. The big three will the last to go. they can cut dividends, they can cut CAPEX, they can cut production, they can cut staff. They may be lousy investments, but they will probably make it till the end. Might even merge together.

    2. I read the full Hills report and waded through the math. It pretty solid, but I’m not convinced the price of oil will keep falling. For two reasons. (1) the price of oil is set overseas in Saudi Arabia. (2) Production can be cut, and the price will rise. Lower income Americans will not be able to afford gasoline, but some people will be able. This will create political problems for sure.

    3. High cost oil will be shut down for good. the real question is; What is the distribution of oil production in terms of EROI and total cost? This will tell us who will survive and how long. I assume he middle east has the lowest costs and fracted shale oil the highest. Maybe some oil sands are higher.

    4. It may make sense to produce some oil that has an EROI of THREE. However, society will fail if it is all that low. Ethanol’s EROI is 1.3 and it gets produced. the result of lower EROI’s will be a society that has to spend more on energy than it is accustomed to spend. right now we spend more on cigarettes, alcohol and illegal drugs than energy.

    5. In the end the oil companies will fail when the oil EROI is too low to bother. This will be a long story that might take until 2035 to play out. Read the Hills’ rreport Error Analysis section. If Exxon fails to diversify it will fail. History suggests that it will not try hard enough early enough.

  5. “Make America great again” should be changed to “take LSD and hallucinate 100 to 1 EROI oil again.

  6. Fascinating article. Supported again.

    For some future writing, I wonder if your opinion has changed (pros vs. cons) re: BTC. I disdain it myself, but that’s mainly because I strongly dislike some individuals who are the most ardent supporters, not because I’ve done the research and found anything specifically ‘wrong.’ I find it hard to believe that statists will continue to leave such an unregulated instrument for capital flight untrammled.

  7. Love the scary articles and the comments. Thankx.
    I hate the robot spell checkers. I used to be a fair speller, even with dyslexia. Now it is hopeless, I have to slowly go back and check. Even after that, sometimes the robot changes things later. AA@@@@rrrrggg!!!

  8. Is it possible to make a fair estimate of the breakeven price for the oil majors?

    • My guess is – having followed the WTI crude prices and some related forum of traders quite a bit the last year or so – that the big banks (the market riggers) play the price movements and hand some of these profits to the (big) oil companies. Oil price is not moving like a normal market (anymore), it’s more like silver on steroids! Something is not kosher in oil trading (just like in PMs) and it seems all the market does is stop out the maximum of paper players up or down, thus the violent +3%, -4% +5%, -2% … moves. *Someone* is getting off like a bandit, but most are being robbed.

    • My guess is – having followed the WTI crude prices and some related forum of traders quite a bit the last year or so – that the big banks (the market riggers) play the price movements and hand some of these profits to the (big) oil companies. Oil price is not moving like a normal market (anymore), it’s more like silver on steroids! Something is not kosher in oil trading (just like in PMs) and it seems all the market does is stop out the maximum of paper players up or down, thus the violent +3%, -4% +5%, -2% … moves. *Someone* is getting off like a bandit, but most are being robbed.

      @ Steve – Great article!!! Major thumbs up.

  9. Thanks Steve.

  10. Steve this post is as every time extreme convincing stuff. After reading it I am more than a 100% sure that my investment strategy is correct.

    Thank you.

  11. Could this be the most bearish news for gold and silver ever?
    https://www.youtube.com/watch?v=t580j47Y0Do

  12. There is some evidence in support of abiotic oil theory.

    Though nothing at all to suggest that the Earth creates 32,000,000,000 barrels of it per year.

    • What is “some evidence” ? Could you provide some references to high-quality, scientific peer-reviewed international journal articles?

      As far as I see it (and read about it), the C14 signature of oil and the C02 in the air (with air sampled over several 100000 years from antarctic ice cores), there is no evidence of constant oil replenishment whatsoever. For me that dismisses the case of any meaningful abiotic oil.

    • Yeah, I too would like to see some ‘evidence.’ Much of what I’ve seen up to this point is misconstrual and context-stripping of ordinary geological processes.

  13. What a great article, good job Steve !

  14. Nice post steve. It’s really an eye opener

  15. Hey Steve,

    Excellent analysis albeit horrific in terms of its implications. It’s no coincidence that Trump’s Secretary of State (PLUNDER) is Tillerson. Who better to have at the levers than a guy who knows where every ounce of accessible oil is located. I’m sure “Mad Dog” Mattis (no coincidence either) and the war planners are working around the clock preparing for the onslaughts.

    The energy giants are not simply components of the market in the same way that energy is simply not inputs as those useless economists like to say. The energy industry is EVERYTHING to our economy and civilization in the same way that oxygen is to humans. No amount of Central Bank shenanigans or war mongering can replace either. All these fascists can do is pretend and extend.

    Your graphs don’t lie Steve. They illustrate the end of an era. The oil industry is terminally ill. There are no replacements (necessary to maintain our current and future infrastructure needs, food supplies etc.) and won’t be EVER! So… the Deep State with Trump et al as their bludgeon grinds on and with full license prepares to take what’s left from whomever and wherever. We haven’t seen anything yet, but those horrid graphs are prelude to all out war.

    • Bill Sodomsky,

      Yes, very true. Trump’s team will have their hands full when they try to offset OIL DEPLETION. I believe the motivating factor for the U.S. Govt to screw up a half a dozen or more countries in the Middle East and North Africa was to get control of those oil sources. Furthermore, when the domestic economy is destroyed, so is domestic consumption.

      The less oil the domestic oil exporting country uses, the more can be sent to PHAT WESTERNERS so they can become even PHATTER.

      steve

  16. W Bishop Jordan | February 9, 2017 at 9:49 am | Reply

    Steve

    Thank you for the great reports

    If we have a crash in crude production and oil companies what do you see the price of crude into the future 5 10 15 years

    Bishop

    • W Bishop Jordan,

      According to the work of The Hill’s Group and Louis Arnoux, they forecast the price of oil will continue lower towards $20 a barrel, and then lower still. This is due to the “MAXIMUM AFFORDABLE” price paid by the market as the net energy delivered to the market declines even further.

      It goes against the theory of SUPPLY & DEMAND because it is based on thermodynamics that rules energy, not man’s economic principles. Just think about the same way as a brand new car versus one that is 15 years old. The brand new car would fetch $30,000, while a 15 year old car might be only worth $5-7,000. All the embedded energy in all the parts have been worn out in the old car.

      So, its market value would be less. We need to look at the falling NET ENERGY in a barrel of oil the same way.

      It just isn’t worth much in the future.

      steve

  17. Slithereen Guard | February 9, 2017 at 12:45 pm | Reply

    So I guess that oil price will fall in next five months instead of stabilizing around USD 50.
    Otherwise, your theory will be failing.

  18. BP spent 5 years to design and construct the largest offshore oil rig in world history for utilization off the north slope of Alaska – this was done AFTER the exploration and drilling ban enacted by Bush. Were they planning on that to extract just a tiny little bit of oil? When the rig finally arrived at site the ban was lifted by Obama. After all the knowledge we have on the banks/fed/treasury since 2008 could there be any doubt the oil industry and gov are working together?

    The publicly traded oil companies represent only a minor fraction of the global entities involved in oil and gas extraction. There are significant strategic and competitive reasons for with holding asset and other data from the public. Quarterly and annual reports only record history, they do not disclose strategic future plans. Very few folks within the system even know certain truths.

    Hindsight is 20/20. Let’s look at the last decade or so. If the industry knows interest rates will be going lower for many years because they have that inside knowledge, why not drill the more expensive shale? If there are light sweet crude pools untapped, why tap them at relatively low prices and drive prices even lower? Why even announce them? That would impact prices too. That would be a really lame business strategy. Russia and Saudi are good recent examples. Better to wait until prices rise. In the meantime utilize the cheap debt model. When the debt model matures, sell the expensive to produce assets.

    They say follow the money. Who is buying all these assets from the big oil companies in the last 2 years? Why? How is that even possible given the declining economic activity, limited capital and the so called thermodynamic oil collapse that supposedly started 5 years ago? The integrated money links needs to be understood, not just a single point in the food chain. Otherwise you can paint the picture around that single point any way you want.

    • kb,

      You bring up some interesting points indeed. However, there are these people called INDEPENDENT GEOLOGISTS in the United States and rest of the world. While it is true that BIG GOVT and INDUSTRY can hide secrets from the public, the oil geology of the USA is not one of them. I have spoken to oil geologists on the phone who have been looking for oil in the United States for 30-40 years. There is very little conventional oil remaining to produce. Which is why we are drilling lousy SHALE OIL.

      Anyhow, I could spend a lot of time proving why there isn’t much high quality oil remaining. Hell, even Mexico’s PEMEX national oil company is bankrupt when you look at their reserves to debt.

      Sometimes LOUSY CONSPIRACY THEORIES are just LOUSY CONSPIRACY THEORIES.

      steve

      • The supermajors control around 6% of global oil and gas reserves. Conversely, 88% of global oil and gas reserves are controlled by the OPEC cartel and state-owned oil companies, primarily located in the Middle East. While obvious, the 3 selected majors recent historical performance is NOT representative of what will happen in the future of the total 100% global oil supply.

        PEMEX is a sound representation of technical creativity, efficient governance and sound capitalism for energy extraction? Anyone can read the wiki on PEMEX, why are they are even used as an example to back thermodynamic oil supply THEORY.

        While I understand what one can learn from phone calls, it’s just anecdotal evidence and provides no factual credence to support a theory.

        To my limited understanding this thermodynamic oil supply THEORY is just that, it really has no comprehensive factual data to stand on, and the data it does would appear to be cherry picked. On the other hand I could be totally wrong so I look forward to them publishing and standing a reasonable amount of time in a peer reviewed journal. Heck with their acclaimed background it should be easy.

        In the meantime the elephant in the room is debt, derivatives, and a whiff of rising interest rates compared to the relatively tiny oil industry.

        • Kb,

          Yes, we all have our own differing opinions. However, your statement here: “In the meantime the elephant in the room is debt, derivatives, and a whiff of rising interest rates compared to the relatively tiny oil industry.”

          How on earth do you think all the DEBT, DERIVATIVES and FALLING INTEREST RATES were able to take place without ENERGY??? Without ENERGY, DEBTS, DERIVATIVES and FALLING INTEREST RATES would have been impossible.

          Your statement that the THERMODYNAMIC OIL COLLAPSE is just a theory comes from someone who has not read the entire report, spent a half a dozen conversations with the authors of the report or understand the true nature of thermodynamics.

          I can assure you the math is SPOT on. However, The Hill’s Group was measuring the average barrel. So, there is some degree of error baked in the model.

          Regardless… let’s just wait around a while and see what happens.

          steve

          • Steve,

            Well… interest rates and debt have been around for thousands of years.

            Any decent engineering program has thermo as a graduation requirement, good enough to understand how that would be applied in any example including this theory. Maybe there is a reason the tens of thousands of engineers even those in the oil and gas industry are not proclaiming the same thing?

            I agree, let’s see what happens. According to Hills Group it started in 2012 and will climax in 2022. So that means we are half way through and in the last 2 years oil has risen from the low 40’s and stabilized in the 50’s.

          • Steve,

            When I was a kid in the early 60s, cutting lawns to make some money, gas was 19.9 cents per gallon and a pack of cigarettes was 20 cents per pack. Recently gas has been about $2.60 per gallon and a pack of cigarettes is about $5.00 per pack. I always thought cigarettes went up so much more just because of increased taxes. But, an article by a guy named Eric Peters, Gas Doesn’t Cost More . . . Our Dollars Are Worth Less. (https://www.theburningplatform.com/2017/02/12/gas-doesnt-cost-more-our-dollars-are-worth-less/#more-143092)
            as made me realize that a big part of my problem with the Hills Group conclusions is the dollar centric point of view. It is possible for the price of oil to skyrocket but have the actual cost decrease.

            SteveW

  19. Steve,

    What in God’s name is the rational for what is going on in the Permian basin?
    “Parsley Energy just announced its decision to spend another $2.8 billion on Permian acquisitions. The additional 71,000 net acres will give it one of the largest holdings in the Permian for an independent company. ..and ExxonMobil, which spent more than $6 billion in January to double its holdings in the Permian.” (Wolf Street)

    What do they know or what is the angle for these massive investments if , a priori, they know they cannot make any money?

    Something just ain’t right.

    SteveW

    • SteveW,

      The only rational reason I can come up with, is that without adding more reserves or replacing production, these OIL COMPANIES ARE FRICKEN TOAST. I find it simply amazing that ExxonMobil continues to increase their quarterly dividend payout.

      When you get a chance, scroll down ExxonMobil’s dividend payout page here: http://corporate.exxonmobil.com/en/investors/stock-information/dividend-information/overview

      As you can see, ExxonMobil’s quarterly dividend payout was only $0.47 a share ($1.85 for the year) in 2011 when they were making money HAND OVER FIST. Now that they are forking out more money to pay for CAPEX or DIVIDENDS, than cash from operations, they have increased their quarterly dividend to $0.75 currently ($3.00 a year).

      Just doesn’t make a lot of sense. But, I would imagine that if they started to lower their dividends… then why would shareholders hold onto a stock that will continue to decline in the future??? Basically, increasing dividends keeps investors staying PUT… LOL.

      steve

  20. Thanks for all your work. If we lived in a society run by responsible wise adults, this would be front page news in all the newspapers and news websites

  21. Another point I wanted to make, is how the shale oil and gas industry sustains itself without making a profit. I would guess that as long as they make the interest payments on their loans, Wall Street and their other lenders aren’t too concerned about their long term viability. Especially because there is a dearth of profitable lending opportunities in a continually depressed economy subsisting on McJobs. Also possibly because their collateral of oil and gas reserves is seen as a good backstop to these loans, though this might change with plunging Capex and sustained lower oil prices.

  22. My prediction?

    “Pain”

    (8 second Rocky clip)

    https://www.youtube.com/watch?v=lSPNQ82Sq4E

  23. The constant emissions from fossil fuels is harming our planet. Combustion of fossil fuels produces air pollutants, such as nitrogen oxides, sulphur dioxide, volatile organic compounds and heavy metals which poisons our air and water. Carbon dioxide is also produced, some of which is absorbed by our oceans making them more acidic. I live in Gibraltar (Europe) near an oil refinery and I’m reminded of the damage we are doing every time I see or smell the plumes of smoke coming out of the refinery’s chimneys.

    Cancer rates carry on increasing as well as respiratory illnesses and I am overwhelmed at just thinking of all the other related diseases that can be linked to fossil fuel pollution.

    If we really do care about our children and our children’s children we have to be responsible enough to find and apply solutions to these serious problems.

    “In 2011 Mark Z. Jacobson, professor of civil and environmental engineering at Stanford University, and Mark Delucchi published a study on 100% renewable global energy supply in the journal Energy Policy. They found producing all new energy with wind power, solar power, and hydropower by 2030 is feasible and existing energy supply arrangements could be replaced by 2050. Barriers to implementing the renewable energy plan are seen to be “primarily social and political, not technological or economic”. They also found that energy costs with a wind, solar, water system should be similar to today’s energy costs.”

    My intention is not to preach but to create awareness of the harm we are doing to ourselves in the relentless pursuit of profit and short sighted goals. We have to start implementing the long term plan, the one that is sustainable and will give our children a greater opportunity to build a better world for their children.

  24. Hi Steve another angle which is hardly ever discussed , what will be the oil industry like and the western world economies when the petro dollar finally dies? Will it be replaced by the petro yuan or petro rubble?
    It will have dire consequences for the way our not so capitalistic countries will operate. The flow of recycled us dollars is drying up.

    rgds Pieter

  25. I think the natural follow on to this article is whether deepwater and indeed the GOM) ever recovers at all. Every time the price of oil goes up $5, another geographic area of shale oil becomes economic and there can be 20 rigs turned on in two months. The risk for shale oil is low, probability of success 100%, literally hundreds of thousands of well locations, and a cost structure that is very reactive to oil price. Contrast that to offshore and especially DW – long project timelines, very high costs, sticky service company pricing, much lower probability of success, regulatory risk, and geopolitical risk since the only new DW projects are not in garden spots. My two cents, until the cost of money is higher then there is no hope for DW relative to shale in a free money/loose economic environment climate.

  26. Great work Steve, as usual.

    I am subscriber to some of the most reputable media in the world, and they never provide this kind of vital information.

    Regards.

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