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.
Comments (1)
  • Hendershott
    , contributor
    Comments (1619) | 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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