How Wall Street Is Killing Big Oil. Investors force big private energy companies into liquidation; energy dominance shifts to emerging markets. For generations, Exxon and its Big Oil brethren, including Chevron, ConocoPhilipps, BP, Royal Dutch Shell, and Total, dominated the global energy landscape, raking in enormous profits and delivering fat dividends to shareholders. Big Oil has long been an investor darling. Those days are over. Once reliable market beaters, Big Oil shares are lagging: Over the last five years, when the S&P 500 rose more than 80 percent, shares of Exxon and Shell rose just over 30 percent. The underperformance reflects oil majors’ inability to maintain steady cash flows and increase production in a world where much of the easy oil has already been found and project costs are rapidly escalating. Last year, Exxon, Chevron, and Shell failed to increase oil and gas production despite having spent U.S.$500 billion over the previous five years, $120 billion in 2013 alone. Under pressure from investors, the world’s largest oil companies are now forced to cut capital expenditure and sell assets to boost cash flows. Toward Liquidation Big Oil is, in short, heading toward liquidation. And this process has set in motion a tectonic shift in the global energy balance of power away from Western international oil companies, or IOCs, and toward state-owned national oil companies, NOCs, in emerging markets. Not only do the NOCs—companies like Saudi Aramco; Russia’s Gazprom and Rosneft; China’s CNOOC, CNPC and Sinopec; India’s ONGC; Venezuela’s PDVSA; and Brazil’s Petrobras—control approximately 90 percent of the world’s known petroleum reserves, they are also immune to the market pressures constraining Big Oil. Ironically, the rise of emerging-market NOCs and the decline of Big Oil come in the middle of the U.S.-led fossil fuel renaissance. Thanks to higher prices that have made it cost-effective to deploy horizontal drilling technologies to unlock shale oil and gas deposits, the United States is set to overtake Saudi Arabia this year as the world’s largest producer of petroleum liquids. theepochtimes/n3/1033563-how-wall-street-is-killing-big-oil/
Posted on: Sat, 25 Oct 2014 18:19:13 +0000
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