21-03-2015, 11:25 PM
Hi Hit and Run san,
I followed your postings on the other thread and understand that you a very fact based and from the oil, which I admire a lot. I have benefited a lot as you have provided many insight into an industry that I am outside looking.
There are profit and cash flow. The argument was about: when marginal unit production cost<marginal benefit, some company would still produce oil as this would generate positive cash flow, despite painful in profit. As there would be less (cash flow) generated per barrel, more barrels need to be produce to pay the same amount of interest.
As mentioned, it was a coffee shop talk style. I mentioned about "maybe USA punishing Russia with oil price" and the reply was "not sure who's punishing who".
I can't provide you with the company name because I don't have them.
But if press for facts, I can only produce something like this (google search "unit cost per barrel of oil"). I have to believe in these because I have no better info. Please comment about those economics coffee shop talks on real situation.
"The operating cost (stripping out capital expenditure) of
extracting a barrel in Saudi Arabia has been estimated to be
around $1-$2, and the total cost (including capital expenditure)
$4-$6 a barrel."
http://www.reuters.com/article/2009/07/2...7420090728
"Last month, Wood Mackenzie, an energy research organization, found that of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won't be a lot of chickening out at $40."
http://www.bloombergview.com/articles/20...mand-falls
"Two generalisations can still be made. First, in the very near term, the industry’s economics are good at almost any price. Wells that are producing oil or gas are extraordinarily profitable, because most of the costs are sunk. Taking a sample of eight big independent firms, average operating costs in 2013 were $10-20 per barrel of oil (or equivalent unit of gas) produced—so no shale firm will curtail current production. "
http://www.economist.com/news/finance-an...-boom-bind
I have a feeling that this might get removed to the oil price thread
I followed your postings on the other thread and understand that you a very fact based and from the oil, which I admire a lot. I have benefited a lot as you have provided many insight into an industry that I am outside looking.
There are profit and cash flow. The argument was about: when marginal unit production cost<marginal benefit, some company would still produce oil as this would generate positive cash flow, despite painful in profit. As there would be less (cash flow) generated per barrel, more barrels need to be produce to pay the same amount of interest.
As mentioned, it was a coffee shop talk style. I mentioned about "maybe USA punishing Russia with oil price" and the reply was "not sure who's punishing who".
I can't provide you with the company name because I don't have them.
But if press for facts, I can only produce something like this (google search "unit cost per barrel of oil"). I have to believe in these because I have no better info. Please comment about those economics coffee shop talks on real situation.
"The operating cost (stripping out capital expenditure) of
extracting a barrel in Saudi Arabia has been estimated to be
around $1-$2, and the total cost (including capital expenditure)
$4-$6 a barrel."
http://www.reuters.com/article/2009/07/2...7420090728
"Last month, Wood Mackenzie, an energy research organization, found that of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won't be a lot of chickening out at $40."
http://www.bloombergview.com/articles/20...mand-falls
"Two generalisations can still be made. First, in the very near term, the industry’s economics are good at almost any price. Wells that are producing oil or gas are extraordinarily profitable, because most of the costs are sunk. Taking a sample of eight big independent firms, average operating costs in 2013 were $10-20 per barrel of oil (or equivalent unit of gas) produced—so no shale firm will curtail current production. "
http://www.economist.com/news/finance-an...-boom-bind
I have a feeling that this might get removed to the oil price thread
(20-03-2015, 08:45 PM)HitandRun Wrote: [ -> ](20-03-2015, 01:47 PM)Raks Wrote: [ -> ]On the other hand, those that have already paid off the debts, $40 dollars a barrel is still making money and there's no reason to cut.
Raks san
Are you saying that there are companies that are making a profit on $40 oil? If so, I would be most grateful if you could list some of these companies.