U.S. Still Says, “Drill Baby Drill”

Comments (5)

  1. ian says:

    What you fail to mention is 90% of the oil producers are running on debt, and will drill and pump just to pay off their immeadate debt even if oil goes to $25, cos alternative is bankruptcy.


    Shelley Goldberg Reply:

    Thank you for your comment regarding oil companies’ debt. You are correct in that debt among drillers is high (and good material for a future article). Surely the price of oil falling only hurts these companies more and impairs their ability to pay off their debt. This is an even greater issue for the smaller drillers. Energy is a highly capital-intensive industry and high levels of debt can strain a company’s credit ratings and weaken their ability to make new purchases of equipment or finance other capital projects. Some debt ratios to consider when assessing drilling companies are: Deb/EBIDTA, and EBIT/Interest Expense and Debt-to-Capital.


  2. Mustosheer says:

    How about the leverages that we take in US. I make 10 Dollars a day but my leverage is 9,99 Dollars a day, if something goes wrong I am doomed. Well, I am making 10 Dollars a day but my leverage is way over my head, if something goes wrong I am dead, all I have to do is to play the game right. How can you produce oil that cost over 50 to 60 Dollars but the market price is around 40 to 60 Dollars? We all think the Iranians as well as Saudis are dummies and know nothing about the markets. But wait, they are not dummies, they just learned how to play the game our way. The era of Englishmen running the show is over. United states has well over 16 million barrel of excessive oil that wants to sell to the world, the question is “how” at current price when the production cost is around 50 Dollars in US. Do we need another revolution such as 1979 Iran’s revolution to pay for North Sea offshore drilling or a new cold war that we don’t have the money, courage, and leverage to do so.


  3. Wisesooth says:

    Other factors are quality of product, incremental cost per barrel of Aramco crude at origin, and transportation cost. Middle-East Brent crude is far away. The MGA-barges have to travel around S. Africa or S. America to reach the Atlantic. Read that expensive. Aramco’s former biggest customer was the U.S. Not anymore, thanks to shale oil. OPEC answered this customer threat with the only string on its economic fiddle . . . a price war using over-production.
    Aramco crude is light but not sweet. It costs money to get rid of the contaminants like sulfur. U.S. shale oil is light and sweet, with liberal quantities of LNG and methane.
    I read from The Economist that the incremental cost per barrel of Aramco crude at point of origin is somewhere between $6 – $8 petrodollars per barrel and Saudi Arabia has over $900 billion petrodollars as reserve currency. They can hold out for a long time before their price war starts to hurt them. The biggest potential losers are Russia and Iran. Couldn’t happen to nicer guys.


  4. Ranchman says:

    One thing that’s happening is, the oil field hands are wondering if they should invest in any new equipment, like tools and new work trucks. They don’t know if their drilling companies are going to be laying anyone off.


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