$20 Oil | Russell T. Rudy Energy LLC
“Rigzone” reports that almost a year ago, Ed Morse, the head of commodities research at Citigroup, said that oil could drop as low as $20. No one really listened, but my how things have changed. With oil recently dropping lower than it has been since 2003, everyone in the industry is familiar with the devastation the oil price collapse has already caused domestically. However, the worldwide oversupply and resulting low prices have hurt state owned oil companies as well.
Conoco-Phillips is losing almost $1.8 billion per quarter in net income for every $10 drop in the price of oil. Malaysian national oil company, Petronas, stands to lose $68 million for every $1 drop in price. Brazilian national oil company, PetroBras, has already cut its 5-year plans by over $30 billion.
One of the less obvious effects of current prices is access to credit. Mark Sadeghian, with Fitch Ratings Ltd., has pointed out that companies with debt to earnings, or interest coverage requirements in their loan agreements will have trouble maintaining and acquiring loans.
According to Sadeghian, “Right now the real driving factor is access to capital markets. $20 just digs an even deeper hole from where you need to be before the markets open up again.”
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/142456/20 .
