Petrodollars: As oil prices plummet, the squeeze grows on balance sheets

The math doesn’t work for a lot of oil projects as the price continues to slide. Robert Perkins, in this week’s Oilgram News column Petrodollars, reviews the capital investment conundrum many companies are facing.———————Brent crude saw its steepest weekly decline since April 2013 last week, losing nearly 5% as a strong US dollar, weak demand and ample supply continued to drag on prices. Since the dramatic bear streak began in July, the spot Brent price has now lost almost a fifth of its value and WTI is at a two-year low.The sudden price slide is fuelling concerns over oil companies’ balance sheets as they grapple with rising costs and demands from shareholders for increased returns.A return to sub $100/b oil also comes as oil executives confront growing investor calls for more capital discipline to defend revenues against ballooning oilfield service bills.Oil companies are certainly more vulnerable now than before. Over the last decade, crude prices have almost tripled from just above $40/b to around $100/b. Over the same period, the average return on capital from the majors has contracted by roughly by the same factor, according to Platts data.Creeping industry costs and fast-growing costs of accessing more remote, complex sources of oil and gas and have played a key role pushing breakeven costs perilously close to current oil prices.To make matters worse, new finds are generally smaller, making it even more difficult to offset accelerating decline rates at maturing assets.

via Petrodollars: As oil prices plummet, the squeeze grows on balance sheets « The Barrel Blog.

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