Explain why oil companies are loosing money?

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Originally Posted By: grampi
Break even point of $60/$70? That must be another exaggeration claim by the industry, just like them claiming they're losing money....if they were actually hurting as bad as they claim they are, considering how long oil has been cheap now, they would've gone under by now....


Seriously? Maybe posts like this are just an act, I really wonder.
 
Originally Posted By: NHHEMI
I don't believe they are as bad off as they claim. They are still making money just not hand over fist at record amounts as they were. My heart bleeds for them - NOT!


Originally Posted By: grampi
What makes you think they're struggling? They're still making money, they just aren't making the insane profits they were making when oil was $100+ and gas was $3.50 - $4...


I too find it hard to believe that they are losing money. I think they didn't know what to do with all that cash when they were using $10,000 bills to wipe their [censored] and could have easily paid off the entire US debt and ended world hunger, so they expanded too quickly and hired too many people. Now that the price is lower, they are slow to adjust their spending and thus, claim that they are hurting so badly... I don't buy it.
 
Oh they are hurting. Lately, I've been seeing a bunch of advertisements for exchange traded funds (ETFs) boasting dividend yields of 4% or higher.
Nowadays, the only way that an ETF can achieve a 4% dividend yield is through multinational companies and commodity-related companies. These two types of companies are getting slammed by the strong U.S. dollar. Commodities stocks are particularly dicey; their sales and earnings are so terrible that they're still grossly overvalued at current prices.
Now compare that to this: The average energy stock trades at 28.7 times trailing earnings. And the average forward P/E ratio is nothing short of horrific, thanks to negative earnings. According to FactSet, the energy sector is expected to see EPS fall 14.8% in the fourth quarter. The materials sector is expected to see EPS plunge 21.7%.I might be wrong but, it is futile to chase high dividend stocks unless they're also backed by strong fundamentals. If it would be me, I would not be buying high dividend stocks in ETFs, because ETFs introduce their own unique problems. Energy companies earnings are just plain dropping.
 
They made enough money to buy several small countries when they were high, and received billions of government subsidies. I remember an XOM exec specifically stating that they did not feel bad about taking those windfall profits and subsidies at the same time, because nobody was going to lift a finger to help them if the market dropped.

To paraphrase another BiTOG'er: I extend as much sympathy to them now, as they did to me when gas was over $4.00 a gallon.

Karma's a b****.
 
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Originally Posted By: Mr Nice
Bozo agreement with Iran = oil will be under $20 a barrel.


This post pretty much nailed it for me.

I read an article on the oil "glut" today. Seems a war could go equalizing it either reducing the supply (which there appears to be simply too much of at the moment,) or spiking demand to crazy levels.

Maybe that IS Iran's plan, to bring about The Great [censored], as they call it (read up on Iran.) Financial terrorism....................... state-sanctioned. Good post, Mr. Nice.

Mind still blown from that deal you referenced. Why America gotta be downgraded, to level the field with other countries. Makes no sense. But I'll stop there.
 
Originally Posted By: Drew99GT
Originally Posted By: grampi
Originally Posted By: Drew99GT
Fracking companies in the US are getting creamed currently. That is one of the main drivers of the current market slump since many fracking operations were leveraged to the ceilings with junk debt which has collapsed along with oil prices.

http://www.wsj.com/articles/oil-plunge-sparks-bankruptcy-concerns-1452560335

So how are some companies losing money? It's pretty simple when they have break even costs per barrel above $60/70 a barrel and the prices collapses! The price collapse has many reasons; Saudi Arabia/OPEC trying to force them out via increased production, the increase in output from North American shale itself, simultaneously as China's bubble pops which leads to a decrease in oil demand. It's a perfect storm of circumstances that is now unwinding.


Break even point of $60/$70? That must be another exaggeration claim by the industry, just like them claiming they're losing money....if they were actually hurting as bad as they claim they are, considering how long oil has been cheap now, they would've gone under by now....


There is this thing called debt and derivatives. It's how many companies survive. Amazon hasn't made a profit in a decade and is thriving.

http://www.reuters.com/article/idUSL3N0SH5N220141023


True, but the oil industry doesn't operate that way...they must make profits or go under, so I don't believe them every time they claim the sky is falling...
 
Originally Posted By: kschachn
Originally Posted By: grampi
Break even point of $60/$70? That must be another exaggeration claim by the industry, just like them claiming they're losing money....if they were actually hurting as bad as they claim they are, considering how long oil has been cheap now, they would've gone under by now....


Seriously? Maybe posts like this are just an act, I really wonder.


If you believe it costs $60 or $70 to bring a barrel of oil to market, then you probably also believe in the tooth fairy and unicorns...
 
Originally Posted By: stockrex
cuz they have good accountants, pls feel free to send them checks to show your patriotism if ya feel bad low oil prices.


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Originally Posted By: Drew99GT
Originally Posted By: grampi
Originally Posted By: Drew99GT
Fracking companies in the US are getting creamed currently. That is one of the main drivers of the current market slump since many fracking operations were leveraged to the ceilings with junk debt which has collapsed along with oil prices.

http://www.wsj.com/articles/oil-plunge-sparks-bankruptcy-concerns-1452560335

So how are some companies losing money? It's pretty simple when they have break even costs per barrel above $60/70 a barrel and the prices collapses! The price collapse has many reasons; Saudi Arabia/OPEC trying to force them out via increased production, the increase in output from North American shale itself, simultaneously as China's bubble pops which leads to a decrease in oil demand. It's a perfect storm of circumstances that is now unwinding.


Break even point of $60/$70? That must be another exaggeration claim by the industry, just like them claiming they're losing money....if they were actually hurting as bad as they claim they are, considering how long oil has been cheap now, they would've gone under by now....


There is this thing called debt and derivatives. It's how many companies survive. Amazon hasn't made a profit in a decade and is thriving.

http://www.reuters.com/article/idUSL3N0SH5N220141023


Then it is slight of hand financing and accounting. NO business goes a decade without a profit and survives let alone thrives. Money is being made but the accountants make it look otherwise.
 
Well if you think nice profits are ahead for the oil companies then you should buy stock in anticipation for the forthcoming dividends.
 
Originally Posted By: grampi
If you believe it costs $60 or $70 to bring a barrel of oil to market, then you probably also believe in the tooth fairy and unicorns...


Gee, did I say that? Nope, can't find where I did.

Some oil costs a lot more to extract than other oil. So you think things are booming in North Dakota just like they were a year ago?
 
Kschachn is right. Oil fracking companies are getting hurt, some going bust, and that is what Saudi Arabia wanted. Certain companies need about $40/barrel oil to even exist, we passed through $30, if they are hanging on the question is how much longer can they hang on? For offshore rigs it's even worse.

Dividend cuts are headed for share holders even in some of the big oil companies if oil stays this low.
 
Originally Posted By: Jetronic
will the saudis buy the oil wells/companies that go bust?


Very interesting................
 
Originally Posted By: kschachn
Originally Posted By: grampi
If you believe it costs $60 or $70 to bring a barrel of oil to market, then you probably also believe in the tooth fairy and unicorns...


Gee, did I say that? Nope, can't find where I did.

Some oil costs a lot more to extract than other oil. So you think things are booming in North Dakota just like they were a year ago?


No, I'm saying that claiming it costs $60/$70 to bring oil to the market is just another typical exaggeration by the industry...and why do people think it's necessary for the oil industry to rake in record profits every month? The oil industry is a business just like any other business. Why should they be impervious to the ups and downs that ALL businesses are subject to? I have better years than others, and I have worse years. I survive and so will the oil industry...their CEOs may have to lay off of the multi-hundred million dollar pensions for a while...
 
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Originally Posted By: kschachn
Originally Posted By: grampi
If you believe it costs $60 or $70 to bring a barrel of oil to market, then you probably also believe in the tooth fairy and unicorns...


Gee, did I say that? Nope, can't find where I did.

Some oil costs a lot more to extract than other oil. So you think things are booming in North Dakota just like they were a year ago?


There was an influx of people going to ND looking for work, now those people are headed back where they came from with all the job cuts.
 
Originally Posted By: grampi
No, I'm saying that claiming it costs $60/$70 to bring oil to the market is just another typical exaggeration by the industry...and why do people think it's necessary for the oil industry to rake in record profits every month? The oil industry is a business just like any other business. Why should they be impervious to the ups and downs that ALL businesses are subject to? I have better years than others, and I have worse years. I survive and so will the oil industry...their CEOs may have to lay off of the multi-hundred million dollar pensions for a while...


Impervious?? Are you crazy? Go look at historical data for the oil companies and compare profits against the price of oil. Then tell me if they make the same profit when prices are low.

I'll tell you one thing. This current situation should shut up all the idiots that kept saying that supply wouldn't affect the market price of crude. This mantra was repeated ad nauseam a few years back during debates about exploration and drilling. Of course it will be forgotten by some people when prices rise, it probably doesn't matter what the truth is. Those individuals just persist in claiming that in some magical and mysterious way the oil companies control the price of oil.
 
The Saudis have publicly said that they wish to run the "unconventional" US oil industry out of business. We were a threat to them and they have the means to neutralize that industry through price.

Of course there are people that will still claim that it doesn't actually cost more for fracked oil.

Originally Posted By: demarpaint
Kschachn is right. Oil fracking companies are getting hurt, some going bust, and that is what Saudi Arabia wanted. Certain companies need about $40/barrel oil to even exist, we passed through $30, if they are hanging on the question is how much longer can they hang on? For offshore rigs it's even worse.
 
Originally Posted By: kschachn

Impervious?? Are you crazy? Go look at historical data for the oil companies and compare profits against the price of oil. Then tell me if they make the same profit when prices are low.

I'll tell you one thing. This current situation should shut up all the idiots that kept saying that supply wouldn't affect the market price of crude. This mantra was repeated ad nauseam a few years back during debates about exploration and drilling. Of course it will be forgotten by some people when prices rise, it probably doesn't matter what the truth is. Those individuals just persist in claiming that in some magical and mysterious way the oil companies control the price of oil.


Excellent post. Many times the hype is forgotten. Today's mantra is "big bad corporations" so of course Big Oil is among the worst!

Oil is expensive to find, exploit, refine, etc. Massive resources are required. Huge risks taken, and not just financially.

Note that I do not approve of subsidies of any kind, but when you consider the contribution an oil company makes to our tax base and not the mindless TV chatter they don't look all that evil...
 
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