The Energy Lemmings
Watching the first quarter results float in from the large cap energy companies, I keep getting one image in my mind that I can’t shake: Lemmings going over a cliff.
After all, only this image truly sums up the complete idiocy of the US oil producer right now – doing what everyone else is doing, despite the fact that this behavior is leading them all to a very, very sad moment, if not their own deaths.
Look, the outlook for crude oil producers is pretty clear – and easy to explain. And I’m going to do it, making you smarter than the entire multi-trillion dollar oil business seems to be acting today.
Oil is being overproduced and has been since late in 2013. That glut decimated oil prices in 2014, seeing a low price below $30, now recovered towards $50, but still well below a price that enabled anyone to make a profit except for the conventional Middle East producers – and even THEY need a far better margin to support their national budgets.
So, what did oil companies do? Did they stop drilling oil at a loss? Well, not really – they cut their budgets for investment in new projects, trimmed costs and called on their scientists to make getting a barrel of oil out of the ground as cheap as possible.
Then, having cut the SPEED of their losses, they patted themselves on the back, planned on INCREASED production, got Wall Street to restructure and reinvest in their losing ways, and sat back and waited for oil prices – and their profits – to recover.
Uh, so, how’s that working out for you, Sparky?
Devon Energy – down 2%
And the ever snake-bit Anadarko Corp. – last week the victim of a Colorado house fire caused by waylaid Anadarko wells leaking and exploding, killing two – Now bearing up under another losing quarter (But losing more slowly!!??!!).
Down more than 9%!
So, now what? What do you do with these lemmings, taking their money and most assuredly ours, over the cliff with them?
Well, you know what I’m going to say – you’ve got to sign up and be a part of the next Energy Word webinar, scheduled for this coming Monday, May 8th at 4PM, to get my best strategy for dealing with these illogical creatures – and which of them, if any, have a parachute that will save them from this mass hysteria.