i just read that exxon report...
seems like they believe they will be able to sell LNG for $3...pretty cheap, but i cant believe that is a realistic number...of course it wont start to be delivered in the US until 2009....
their reserve additions and production is pretty flat with profits coming from cost reductions and share buybacks and increased oil/gas prices..
all their production increases of cheap reserves is coming from more geopolitically unstable areas...middle east, africa, russia...and major reduction in US and canada and europe..
they seems to think with over time their cost of F&D will get lower, even though costs in the real world now are going up, from energy used to develop the site to drilling rigs. i would have thought all the cheap easy oil would have been found and developed now but they think their technology will make their F&D costs lower and lower...
they see no use of any significant alternative energy for decades, including solar, hydrogen and even wind(which is very cost competitive even now)....why then are they paying 70% of their profits in dividends and share buybacks? wouldnt it be in their best interest to buy all the gas and oil in the world "on the cheap" now so they could sell it for higher later...they admit to understanding that world demand for oil is growing rapidly, and they also believe there will be no rush to alternative sources, so you would think they would have even heavier investment now in their field(oil and gas) rather than the sharebuybacks and dividends as mentioned above....
their explanation of accounting of reserves is rather hazy and per his report admits that he does not follow the "p95" or "p50" method..and he emphatically states their will be no reserve writedowns.. with all the costcutting in F&D costs it seems to me that costs could be cut by reducing number of "confirmatory" wells to further qualify reserves. not sure if exxon does that or not, but like i mentioned before, a lot of their profits come form cost cutting.
curiously he does not mention what he think the price of oil will be in 2020 although he believes their will be plentiful oil at that point...i suspect that oil will always be available, but not ever "cheap" again....lots of unconventional oil/gas out there for the right price...uneconomic at $40 but economic at $100 oil, for example. of course at that price so does solar and hydrogen and that can be home grown here in the US without any geopolitical or external risk... |
