Did 'big oil companies' have 'obscene' losses in the 1980s and early 1990s?

Do people understand that oil wells have a 15-20 year life cycle, that most of the wells producing now were drilled 7-10 years ago? You make an investment decision based on the budgeted return and nobody 10 years ago anticipated that oil prices would be this high now. As a result fewer oil wells were drilled. And now the cost of drilling for oil and for gas has grown exponentially (which is why I told you people to buy BRNC two months ago – I did, and I’m up .75/share) – a cost that typically is shown on the cash flow statement – and if it isn’t that means that if you read the rest of the 10-K you’ll see that the E+P firm’s reserves are down, which is why E+P companies trade at such low P/Es).

If you think "big oil is raping us" then go buy some stock in an E+P company – you might wonder why Wall Street isn’t following your lead though.
BS the point is that to stay in business they have to maintain their reserves – profits are way up but so is the cost to drill, thus what goes in goes back out – the main reason big oil stocks have come up is that they HAVEN’T reinvested all the profits in new exploration, they’ve furthered their forward integration (Mobil does more marketing) and they’ve bought back stock (again XOM) – XOM’s performance adjusted for the stock buyback isn’t any better than the broader market.
Seriously – read a CASH FLOW statement.

5 Responses to “Did 'big oil companies' have 'obscene' losses in the 1980s and early 1990s?”

  1. Jinxed Says:

    Wow you sound so smart! "nobody 10 years ago anticipated that oil prices would be this high now."
    That’s right, but Chimp made it possible so he and his oil buddies could make a killing. It’s like bringing a dead skunk into a room and then selling air fresheners overpriced to everyone.

  2. Haleiwa Bound Says:

    I understand what you are saying…which is why I bought Smith International (SII) back in October…it was at $34 when I bought it…up to about $53 now…


  3. wingshooter08 Says:

    Again…oil companies profits only about 9 cents a gallon for gas! Where the state and fed tax are most of the burden, that and the designer additives that us Californiamns have to have. Ever wonder why our gas here is more expensive than other states and WE have the refineries! Where were all you people back in the early 90’s when natural gas prices hit an all time low of $1.00 per MCF. We (the oil and gas industry) took it in the shorts! Many companies closed down and went out of business. You could buy a drilling ring for a dime on the dollar! You want ot cut cost……DRIVE LESS! We are consuming more oil now than ever before, and people blame the oil companies! Geez, get a grip people

  4. bs b Says:

    No matter how you spin it or talk about it.. because you are right I won’t say you aren’t. They are still making upwards of $38 billion in profits per year. You can’t tell me that is necessary. $38 billion in profits. They can’t give back to their country. They are going to go broke I assume if they don’t make these types of profits? That is the big thing that I don’t understand about todays conservatives. They preach and preach about patriotism but yet hold their money so tight they pinch pennies in their butts so hard copper wire comes out. When is enough enough. Seriously, do they care at all about this country or only how much more money can be put in their pockets? Back in WWII most of the companies that saw huge profits gave back a majority of them and kept what they felt was fair. That is the american way. We are all so greedy… correct me if I am wrong christians, but is that not one of the lords 7 deadly sins. would this not make all of you sinners? Don’t defend $38 billion per year profits, that is ludacris.

  5. Gringo Says:

    The easily accessible oil has unsurprisingly already been used, so it costs more to produce oil now, and as the oil corporations are compelled to make even more profit than the year before we are paying these increased costs, but only until there is not enough oil for everyone, then we will see just how important oil is to the world.