Seeking Alpha

Oil companies have a $700B problem, Goldman analyst says

As much as ~$700B oil companies have in their capital spending pipeline may no longer be needed, as the big discoveries of shale oil in recent years have added ~66B barrels of crude oil resources, enough to meet demand growth in the coming years, according to Goldman Sachs' head of European energy research Michele della Vigna.

New projects that require oil prices to be above $80-$85/bbl to break even ought to be delayed or canceled - which could include big investments considered in Canadian heavy oil or in deep waters off shore - della Vigna says.

It's also potentially bad news for the oil service companies that make money helping oil companies with their big projects; the winners are likely to be companies with the best roster of low-cost investments: SNP, BRGXF, BRGYY, AFRNF, STOSF.

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Comments (1)
  • Hendershott
    , contributor
    Comments (1656) | Send Message
    Shale drilling is quite capital intensive due to the decline rates of the wells. Deepwater has become a lot more expensive and that's clearly reflected in the stocks of the service companies involved. Onshore NA is booming, HAL, PTEN, BHI, BAS...all making new highs.
    12 Jul 2014, 10:31 AM Reply Like
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