Category: quotes

“Oil prices simply aren’t going to rise fast enough to keep oil and energy companies from defaulting. Then there is a real contagion risk to financial companies and from there to the rest of the economy.”

Jason Schenker, president and chief economist at Prestige Economics

“Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June 2014, after that of July 2008, the ‘peak oil’ issue remains with us.”

Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, former Deputy Secretary-General of the World Energy Council

“What we are experiencing today is far beyond headwinds; it is unsustainable. My definition of an unsustainable market is one where all service companies are losing money in North America, which is where we are now.”

Jeff Miller, President of oil services company Halliburton

“Wells Fargo’s foray into oil shows how Wall Street misjudged the risks hidden in an esoteric type of energy financing long thought to be bulletproof.”

Asjylyn Loder, Bloomberg News

“Generally, it takes 18 months before the world has a decent picture of supply and demand. This is little consolation to those trying to do real time analysis on the direction of prices. That is why I can say categorically “the fix is in”. In other words, fields are declining, meaning investment is far below levels required just to replace production. The only thing that will change the vector of these declines is more spending, lots more spending, and the only thing will spur lots more spending is higher prices. Significantly higher than $40/bbl.”

Brad Beago, Oilprice.com, in Fortune magazine

“Most of the fields in Argentina are mature, and they are declining in production. A lot of investment [$20 billion per year] is needed to sustain production. This is having an impact on production curve now [with the rig count down from 112 in 2014 to 64 in February].”

Alejandro Gagliano, a partner at Giga Consulting in Buenos Aires

[Regarding natural gas prices:] “Going into summer, producers know it’s going to be a massacre.”

Sami Yahya, a Platts Bentek analyst.

“Global demand and supply will balance very quickly because we’re seeing an extended decline from producing fields.”

Per Magnus Nysveen, Rystad’s head of analysis, saying the world oil market will re-balance this year.

“It could be a lot of years before you see any meaningful rebound in the dividend [of oil companies]. It’s tough to have a really conservative, stable investment in a business that can’t control the price of its own product.”

Josh Peters, editor of Morningstar Inc.’s DividendInvestor newsletter

“I’ve covered this industry since the late 70s and I would have to say I haven’t seen a situation like this, of this magnitude. We’ve concluded that this is not a normal cyclical downturn.”

Carol Cowan, a Moody’s senior analyst

“Shale was a hot growth area and companies made the mistake of borrowing too much. It’s amazing that so many people were willing to lend them money. Many are going to file for bankruptcy, and bondholders and equity are going to get wiped out en masse.”

George Schultze, founder and chief investment officer of Schultze Asset Management in New York

About Latin America: “The 70 percent drop in prices is a major shock. Oil was contributing in some countries from 20 to 50 per cent government revenues and 50 to 96 percent of exports. No wonder we are starting to question the financial viability of some countries and some national oil companies.”

Luisa Palacios, head of Latin America at Medley Global Advisors, a risk consultancy

“The problem is going to be the money. Where is the money going to come from? A lot of people who have burned their fingers on (U.S. shale) are going to be reluctant to reinvest.”

Arnaud Breuillac, president of exploration and production at French oil giant Total.

About the proposed production freeze announced last week by Russia, Saudi Arabia, Qatar and Venezuela: “The four producers involved are already producing close to their peak. The freeze is the oil-market equivalent of calling for a cease-fire when they’re running out of ammo.”

Miswin Mahesh, an analyst at Barclays Plc in London

Due to the oil price crash and the industry’s crushing debt load, “The oil industry will be permanently damaged.”

Steven H. Pruett, CEO of Elevation Resources, an oil company based in Midland (TX)

“I never thought I would wish, let alone pray, for higher oil prices, but I am. The world badly needs higher oil prices.”

Han de Jong, chief economist at ABN Amro Bank NV in Amsterdam

“The fact that some oil is being sold at $10 per barrel – like some Canadian and Venezuelan crude grades – shows that the strain on producers has rarely been so big. At this level, some producers are not covering capital and operating expenses. And costs are even higher to shut down production. These prices will serve as destabilizing factors in many producing countries and on many bank loans.”

Marco Dunand founder and CEO of trading house Mercuria

“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief. It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians.”

William White, chairman, OECD’s review committee; former chief economist, Bank for International Settlements

“So much of the frenzy in shale in the past few years was a result of the money pouring out of Wall Street. It was as much a Wall Street play as it was an oil-and-gas play. It was putting money to work. Companies took on all that risk and now we see the result [–bankruptcies].”

Terry Clark, White Marlin Oil & Gas Co.

“At our conference, producers largely did not provide specifics on what capex/ production would look like at $35/bbl of oil. Instead, producers spoke largely of their agility to spend within cash flow and … ramp up when needed. Commentary suggested $50 per barrel WTI is now where producers would raise activity.”

Goldman Sachs, in a note to investors

Q: “Can you imagine selling shares in Saudi Aramco?

A: “This is something that is being reviewed, and we believe a decision will be made over the next few months. Personally, I’m enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”

Interview with Saudi Arabia’s deputy crown prince Muhammad bin Salman in The Economist

“By our calculations it will require additional debt formation of $39 trillion over the next decade to keep petroleum production operating. Where that funding will originate from, when it is very unlikely to ever be repaid, will be of tantamount importance. It will take very strong-willed societies to make such sacrifices. If those sacrifices are not made, the integrated global production system will have disappeared by 2026. 2016 will be witness to the beginning of this event with dramatically increasing closures and bankruptcies throughout the world’s petroleum industry.”

The Hill’s Group — “an association of consulting petroleum engineers and professional project managers”

“Around $200 billion of investments in energy have been canceled this year, with energy companies planning to cut another 3 to 8 percent from their investments next year. This is the first time since the mid-1980s that the oil and gas industry will have cut investment in two consecutive years.”

Prince Abdulaziz bin Salman al Saud, Saudi Arabia’s vice minister of petroleum and mineral resources

If the ban on US oil exports is lifted…] “The net effect of export of American oil on the market is zero. This will have no effect on the price because the U.S. still is an importing country. They export some, but they need to import the same quantity from somewhere else.”

Abdalla El-Badri, Secretary-General of OPEC

“The long-term price of oil is literally unforecastable. The only thing that can be said with absolute certainty is that oil prices will continue to defy the expectations of experts.”

John Kemp, Reuters

“Nothing is economic at today’s prices… We’re drilling the best of the best rock right now.  At some point we’ll have to move to lesser-quality rock, which will increase the break-even costs.”

James West, analyst at Evercore ISI

“Credit rating agency Fitch says defaults for oil and gas companies are already at the highest since 1999. Since the start of the third quarter, at least 12 oil and gas companies have defaulted on their debt. The ‘zombies’ bet that by shifting into survival mode they can hang on until oil prices recover, but the outlook is grim.”

Anna Driver and Tracy Rucinski, Reuters, “Zombies Appear in U.S. Oil Fields”

“It’s very clear that the production of oil and gas has carried [Texas] through this boomlet. Once the golden goose leaves, there’s nothing left but them regular gooses.”

Texas state Representative Garnet Coleman

“We’ll demonstrate that we are serious about climate change. This means making decisions based on science; it means reducing carbon emissions, including through carbon pricing towards a climate resilient economy.”

Justin Trudeau, new prime minister of Canada