Jeff Matthews Is Not An Oil-Bear

More good stuff from Jeff Matthews who differs from the emerging chorus of bears on oil.  As we reported recently, the bear case has received fresh ammunition for it's case in the form of new research and, arguably, a slowing economy.  But this take is interesting and compelling:

Exxon Mobil, for example, generated $40 billion in cash flow last year, and spent $12 billion drilling—but paid $7 billion in dividends and spent $10 billion on share repurchases.

Now, over the July 4th weekend, comes a report from the British press that the two largest foreign oil companies, British Petroleum and Royal Dutch Shell, will “hand back $60 billion” to shareholders over the next two years in the form of share buybacks and dividends.

This amount is, according to the reports, “equivalent to Bulgaria’s gross domestic product,” which, while interesting, is a less-than-meaningful way of thinking about the money.

The meaningful way to think about that $60 billion is that it represents 6 to 12 billion barrels of crude oil that will not be found over the next two years by BP and Royal Dutch. And that is because oil exploration costs as much as $5 to $10 a barrel of reserves in large (usually deepwater) fields.

6 to 12 billion barrels of new oil that could (assuming the exploration is successful) be added to the world's supply in a two year period are nothing to sneeze at when you consider that every two years the world consumes 60 billion barrels of oil.

Definitely read the whole entry as excerpts don't quite do it justice.

Comments

[Jeff Matthews is useless]

Don't read the whole entry. Jeff Matthews is just a whiny cut and paster. He routinely cribs from analysts work. I don't believe he does any original research.

When he disagress with analysts, he does another cut and paste--taking their content out of context then twisting it to mock it.

[birkenstock]

So fun article is! I agree the idea!

[Coach Factory Outlet]

I really like this article. Also support the author's point of view.