By Steve St. Angelo: The Blood Bath Continues in the U.S. Major Oil Industry

top-3-us-oil-companies-free-cash-flow-minus-dividends-2011-2016

https://srsroccoreport.com/the-blood-bath-continues-in-the-u-s-major-oil-industry/

The carnage continues in the U.S. major oil industry as they sink further and further in the RED.  The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures.  The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year.

However, the rapidly falling oil price, since the latter part of 2014, totally gutted the profits at these top oil producers.  In just five short years, ExxonMobil’s net income declined to $7.8 billion, Chevron reported its first $460 million loss while ConocoPhillips shaved another $3.6 billion off its bottom line in 2016.  Thus, the combined net income of these three oil companies in 2016 totaled $3.7 billion versus $80.4 billion in 2011.

The combined CAPEX spending from these three oil companies fell 29% in 2016 versus 2015 and 46% since 2013.   Basically, ExxonMobil, Chevron and ConocoPhillips have cut their combined CAPEX spending in half in the past three years.  This is bad news for either building or at least maintaining oil production in the future.

Here we can see that the large dividend payouts by these three oil companies impacted their bottom line much worse than the figures shown in the Free Cash Flow chart above.  Thus, the free cash flow minus dividend payouts provides us evidence that these oil companies have been seriously in the RED since 2013, not just the past two years displayed in the Free Cash Flow chart.

As we can see, the group’s free cash flow minus dividends was a negative $32.8 billion in 2015 and a negative $29 billion last year.  Of course, these three companies may have sold some financial investments or assets to reduce these negative values, but a company can’t stay in business for long by selling assets that it would need to use to produce oil in the future.

When these three companies still enjoyed positive free cash flow in 2011 and 2012, after paying CAPEX and dividends, their long-term debt did not increase.  However, as their operating profits really started to decline, the debt on their balance sheets increased significantly.  As we can see, the combined long-term debt in these three companies balance sheets ballooned from $40.8 billion in 2012 to $95.7 billion in 2016.

23 thoughts on “By Steve St. Angelo: The Blood Bath Continues in the U.S. Major Oil Industry”

  1. Hi Rob. I have been meaning to say hi for awhile, but… I’m a BC guy too btw. Currently in the LML. I had only stumbled across Varki & Brower’s work a few months back (how did I miss it?) and your site, via Reddit, a few weeks back. Great work btw – I’ve shared your articles on a number of different sites. I find Mind Over Reality to be very satisfying. I have been exploring the denial phenomena along with the entire collection of cognitive biases for many years? Why damn it why? Terror Management Theory seems to mesh with and compliment MOR. Have you ever read Dave Cohen? He has been trying to put it all together too. Did a fairly good job with his Adventures in Flatland essays.

    http://www.declineoftheempire.com/2014/10/adventures-in-flatland.html

    I like to listen to Sheldon Solomon (Terror Management) talks – great thinker and communicator. Very entertaining too.

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    1. Hi, thanks for stopping by.

      I recall being impressed with your comments somewhere many years ago and knowing you were from BC I tried to track you down without success. We finally meet.

      I respect and admire the work of Dave Cohen, but his personality not so much. I used to participate on his site but dropped out. I think I tried to bring his attention to Varki’s theory and recall being dismissed. My memory may be wrong on this because pretty much everyone I meet dismisses or ignores Varki’s theory, usually before they understand it.

      I have read Cohen’s Adventures in Flatland and recommended it a couple years ago.
      https://un-denial.com/2015/05/19/by-dave-cohen-adventures-in-flatland/

      Cohen’s theory, if I recall correctly, does not provide answers to some big questions that interest me:

      1) Why, despite overwhelming evidence, do we aggressively deny everything of substance that we should not deny (peak oil, climate change, overshoot, species extinction, etc.)?
      2) Why did only one species evolve an extended theory of mind despite its compelling reproductive fitness advantage for intelligent social species?
      3) Why is the human brain so different than the brain of other intelligent species?
      4) Why did all 7 billion of us descend from one tribe of one hominid, despite there being many other similar hominid tribes and species?
      5) Why has every human group throughout history had a religion?
      6) Why did religion emerge at about the same time as our extended theory of mind?
      7) Why does every religion have a life after death story?
      8) Why is a life after death story the only feature common to our thousands of religions?
      9) Why have we not detected intelligent life in the universe?

      Varki’s theory answers all of these questions. I think it’s as important as Darwin’s theory.
      https://un-denial.com/2017/01/09/darwin-vs-varki/

      I’m not well read on Terror Management Theory but a quick scan of Wikipedia suggests it does not provide answers to the above questions. Let me know if you disagree.

      Regards, Rob

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  2. Yes, Dave Cohen is a very grumpy man. Having trouble accepting the implications of all that research methinks and he sounds lonely. Dave has chased away many insightful commentators, so you’re in good company there. This, “1) Why, despite overwhelming evidence, do we aggressively deny everything of substance that we should not deny (peak oil, climate change, overshoot, species extinction, etc.)?” is what the flatland essays ask and answer or at least he shows the research that attempts to answer. I just brought Cohen up because he is one of the very few I have come across who actually see’s much of what I see and asks the questions and tries to find answers. If I remember correctly, Varki makes a mention or two of Terror Management Theory in the book. TMT is based on Ernest Becker’s ideas he discussed in his 1974 book, “The Denial of Death”. I found TMT to be satisfying and almost thought of MOR as a continuation and expansion of it in many ways. I think that most humans are psychologically incapable of seeing themselves and other humans under a deterministic lens. That belief in free will and hope is the default and people like me, you, James, Cohen, Gail Z and a happy few others are anomalies. We could have a TV station on cable TV, Deterministic News Network (DNN) and we would not earn a single dime in advertising revenue or make any converts, because it’s not healthy for most human minds to go there. Living in denial is beneficial for the individual, but fatally toxic for techno industrial civilization. Because of the combination of the predicament we have created, I do not think humans will make it out of this century. No one wants to hear that or even that industrial civilization will end and there will be a die back. They don’t seem to mind those scenarios in their movies, TV, books, video games, but a real conversation about it is off limits. Strange species.

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    1. Thanks. I’m an engineer so am biased to explanations grounded in genetics rather than psychology.

      We know that evolution can only tinker with things that already exist. Given that behaviorally modern humans appeared as a big bang about 100,000 years ago we need a genetic explanation that is simple and fast, and that can explain the emergence of a singular and profound increase in brain power. MOR seems to meet these criteria.

      Optimism is the mirror image of denial and resulted from the same mutation. For most of history optimism was a reproductive fitness advantage for an innovative ape, but with limits to growth it is an extinction threatening problem.

      Very strange species indeed. Most admire the ingenuity and determination required to build the pyramids. I see a crazy waste of surplus wealth to build a pile of rocks intended to deny death.

      It really is a shame. We’re experiencing something very rare and precious in the universe.

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  3. I still think that, on the individual level, optimism and a dose of denial is beneficial. I run a little thought experiment in my head. You take two healthy 18 year old boy-men and train one up as “normal”. The other you educate on the topics of, peak oil, AGW, 6th mass extinction, how economics really works, propaganda and logic. Now cut em loose from mommy and daddy. Which one, will have the better chance of getting by on their own? Which one will be stupid happy/content and which one is more likely to be morose? Over on Reddit collapse, I frequently read posts from very depressed young men and a fair number of them contemplate suicide because “what’s the point in trying” when the shit is right around the corner? Very sad. I doubt many of them do kill themselves, but they carry a weight I never had to until my 40’s and those decades of experience through pain and loss and picking myself up again have helped come to terms with the awful truth of what is right around the corner. Helped, but even with that help, I had a rough 4-5 years accepting what we are, what we have done and the consequences to come. Most cannot handle it and I can’t really blame them since evolution made them that way.

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  4. I agree that a person with denial and optimism will be much happier, at least in the short term. In the longer term, a young person with awareness may have more appropriate expectations and may select an occupation better suited to a smaller less complex world.

    I’m carefully re-reading Cohen’s Flatland essays through the lens of MOR. I may write a summary and translate Flatland into MOR language. I find Cohen to be similar to Greer in that he uses 1000 words to express a 10 word idea. The ideas are great but they don’t need 3 long essays.

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  6. Hi Rob. Do you have any links or books that explore the cognitive revolution/leap? Yuval Harari mentions it frequently in his excellent book, “Sapiens”. Claims it happened about 75,000 years ago. A number of years ago there was a PBS documentary about it “The Brains Big Bang” and it was claiming 50,000 years ago. You say 100,000. I have seen a few bloggers discuss it also, but that’s all. If there is a book out there I would love to read it.

    The Minds Big Bang:Liam Neeson(narrator)

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    1. Thanks for the link to The Mind’s Big Bang documentary. I had not previously seen it. I noted that it understands the importance of an extended theory of mind but does not explain why it emerged only once. Nor did it comment on the significance or peculiarity of denial of mortality.

      I wrote a brief review of Harari’s book. While Harari’s ideas may be true he does not answer the bigger questions that interest me.
      https://un-denial.com/2015/10/25/yuval-hararis-sapiens/

      A pretty good book that I have read 3 times and that summarizes many of the various theories for human evolution is “The Last Ape Standing” by Chip Walter. He is not aware of Varki’s theory but it is a good overview of mainstream thought. Also, if you have not yet read Varki’s book, he also does a pretty good job of summarizing the various theories. Send me a email via the contact form on this site if you would like help obtaining these books.

      Here is Wikipedia’s timeline:
      https://en.wikipedia.org/wiki/Timeline_of_human_evolution

      There are many competing theories with different timelines and my 60ish brain struggles to remember all the details. Here is a rough condensed history of human evolution that helps me sift and sort the various theories.

      About 4 million years ago climate change forced our ancestors out of the trees into the savanna and to walk upright. Through some combination of mastery of fire to predigest food, increased nutrition from meat, harsh conditions requiring increased social cooperation, and neoteny, our brains increased in size and power.

      We evolved into several species that explored different survival strategies and used our growing brains to develop tool and weapons technology, rudimentary language, and the skills and adaptability necessary to migrate out of Africa.

      Eventually all the species bumped up against the barrier of mortality awareness described by Varki and the trend for evolving a larger brain and the technologies it enabled stalled.

      Then about 100,000-150,000 years ago, one group of one species in Africa experienced an improbable double mutation for a more powerful brain plus denial of reality. Note that I intentionally use the vague words “more powerful” because it is not yet clear to me exactly what happened. I suspect it was a subtle but powerful rewiring of the brain, perhaps like the opposite of what happens today when an autistic person is born.

      These mutations fixed in the gene pool. What had been a fitness disadvantage suddenly became a powerful fitness advantage. The brains of that tribe now rapidly increased their capabilities through the fitness advantage of improved social cooperation and technology development.

      The first visible new behavior would probably have been denial of mortality and the life after death customs it would have created. Thus the best method for firming up the timeline of the mutation will probably prove to be religious artifacts.

      Many other unique human behaviors then emerged over time such as an extended theory of mind, symbolic hierarchical thought, advanced communication skills, imagination, planning, advanced tools and weapons, etc.

      It is these modern behaviors that most theories focus on to explain the emergence and success of behaviorally modern humans. Since these new behaviors emerged at different times this probably explains why the various theories have different timelines.

      All the theories I am aware of, except Varki’s, miss the key singular event that enabled the new behaviors. In other words, they all focus on the wrong thing. This is not surprising since our brains are wired for religiosity and so frequently miss just how strange the emergence of religion really is.

      When you are studying the various theories, pay attention for this singularity. I find they all wave their hands, acknowledge something mysterious happened, and then move on to discuss some new behavior enabled by the event that happens to interest them. Varki is the only one I have found that confronts the singularity head on.

      The best analogy I can think of is the emergence of the eukaryotic cell 2 billion years ago. Without this improbable singular event there would be no complex multicellular life on earth.

      To finish the story, about 60 thousand years ago the species left Africa, caused the extinction of all the other hominid species and most of the large prey species, discovered a one-time bonanza of fossil energy, increased to 7 billion via Haber-Bosch and diesel, caused the 6th great species extinction, triggered 4 plus degree climate change, and now due to the mutation that made it human, denies that it is in a severe state of overshoot.

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  7. Other relevant books I’ve read and enjoyed include:

    Our Inner Ape by Frans de Waal
    A Short History of Progress by Ronald Wright
    Before the Dawn: Recovering the Lost History of Our Ancestors by Nicholas Wade
    The Faith Instinct: How Religion Evolved and Why It Endures by Nicholas Wade
    The Scapegoat: René Girard’s Anthropology of Violence and Religion
    Guns, Germs, and Steel: The Fates of Human Societies by Jared Diamond
    River Out of Eden by Richard Dawkins
    The Red Queen: Sex and the Evolution of Human Nature by Matt Ridley
    Being Human: Life Lessons from the Frontiers of Science by Robert Sapolsky
    On Intelligence by Jeff Hawkins
    The Accidental Mind by David J. Linden
    The Global Environment and the Evolution of Human Culture by Charles Hall
    Your Inner Fish by Neil Shubin
    Kluge: The Haphazard Construction of the Human Mind by Gary Marcus
    Sex at Dawn: The Prehistoric Origins of Modern Sexuality by Christopher Ryan and Cacilda Jetha
    Survival of the Sickest by Sharon Moalem
    Mean Genes by Terry Burnham and Jay Phelan
    Big History: The Big Bang, Life on Earth, and the Rise of Humanity by David Christian
    How We Learn: The Surprising Truth About When, Where, and Why It Happens by Benedict Carey
    Thinking, Fast and Slow by Daniel Kahneman
    The Brain: The Story of You by David Eagleman
    Who’s in Charge?: Free Will and the Science of the Brain by Michael S. Gazzaniga
    Tales from Both Sides of the Brain: A Life in Neuroscience by Michael S. Gazzaniga
    Predictably Irrational by Dan Ariely
    The Human Animal by Desmond Morris
    The Tipping Point by Malcolm Gladwell
    Everyday Survival: Why Smart People Do Stupid Things by Laurence Gonzales
    Deep Survival: Who Lives, Who Dies, and Why by Laurence Gonzales
    The Drunkard’s Walk: How Randomness Rules Our Lives by Leonard Mlodinow
    Collapse: How Societies Choose to Fail or Succeed by Jared Diamond
    Why Societies Collapse and What it Means for Us by Joseph A. Tainter
    The World Until Yesterday by Jared Diamond

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    1. I have read a number of those books. I’ll see if the library has any of the others (grateful to live in a country with libraries).

      Here is a couple you might find interesting.

      Catching Fire: How Cooking Made Us Human – Richard Wrangham

      “Catching Fire: How Cooking Made Us Human (2009)[1] is a book by British primatologist Richard Wrangham, published by Profile Books in England, and Basic Books in the USA. It argues the hypothesis that cooking food was an essential element in the physiological evolution of human beings. It was shortlisted for the 2010 Samuel Johnson Prize.”

      https://en.wikipedia.org/wiki/Catching_Fire:_How_Cooking_Made_Us_Human

      The Invaders How Humans and Their Dogs Drove Neanderthals to Extinction – Pat Shipman

      http://www.hup.harvard.edu/catalog.php?isbn=9780674736764&content=reviews

      I consider them more pieces to the puzzle and I think the thesis of “Catching Fire” is a big piece. They do not ask the same questions as Varki. I don’t think any of them want to. Almost no one wants to know. If you think about it Varki’s thesis suggests that it’s hopeless and epically if you combine it with the other know wired behaviors and cognitive biases. I am thoroughly convinced that the humans, as a whole, are unable to change their reward seeking – their short termisim. Trump and his Cancer crew are exactly what one would expect as the oil age is near the end. Almost everyone he has surrounded himself with is connected to oil and they are all deniers (or pretend to be deniers). They believe EPA and other regs are in the way of obtaining more oil/power and they have plenty of support from the plebs. The oil is our #1 energy slave. Last time there was a big fight in the US over slaves it was fucking horrific. This one does not have the same number of combatants on the no oil slaves side. That last pipeline protest was just a warm up and they sent a message with all that military hardware. As things get more desperate energy/economic and AGW consequences the government will deal with protesters quickly and harshly. There won’t be a big war over not using the oil slaves, because the fact is most humans do not want to give up the advantages of that life style. It’s evolutionary. That’s why in all the revolutions, revolts and protests the slogan was never “we want less”. Every battle has always been over how the pie is sliced and the pie will be eaten until it is gone. There is no stopping that.

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      1. Thanks for the book tips.

        There seems to be consensus that fire played an important role in the million year lead up to the big bang by predigesting food thus allowing us to shift resources from a big gut to a big brain. I believe multiple species used fire to grow bigger brains so fire may have been a necessary prerequisite but does not explain the singular emergence of the human brain.

        I’ve read about the dog theory. Our long close relationship with dogs may explain the whites of our eyes since it allows hunting dogs to track the direction of our gaze. There are also different theories to explain the whites of our eyes.

        Our inherited denial is everywhere when you start to look for it.

        Take for example the angst about Trump denying climate change. It’s true that Obama accepted that climate change is real, but he denied what it would take to do something about it, and the carbon example he set in his personal life was atrocious. The end result for climate change is the same for both Trump and Obama, so why is everyone upset? Similarly, why is no one upset that both Obama and Trump deny peak oil? Amazing.

        I agree with you that we will try to burn everything before collapsing. I have a hunch though that the Seneca down-slope may prove to be really steep due to the high energy cost of the energy that remains, and because of the insane amount of debt we have used to keep the wheels on. It would be interesting to know what the climate models predict for near term economic collapse, but of course they don’t model this scenario, despite it being probable, because they are in denial.

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  8. Hi Rob. Not everyone is upset with Trump on the environmental stuff, just the left tribe and their shrieking media. Again it’s evolutionary – tribalism where anything and everything can be rationalized. Humans are infinity clever bullshitter. Almost all Obama supporters completely ignored his shitty environmental record and they were falling over themselves hyping up his “legacy”. No different than the Trump tribe disciples.

    America’s biggest oil boom came under Obama

    http://money.cnn.com/2016/07/21/investing/trump-energy-plan-obama-oil-boom/

    Obama Admin Quietly Enables Oil and Gas Drilling on Public Lands and Waters, Weakens Endangered Species Act

    https://www.desmogblog.com/2016/09/29/obama-admin-oil-gas-public-lands-waters-endangered-species-act

    And on and on. The Obama disciples choose to only look at the few decent moves Obama made – see what you want to see and hear what you want to hear. More denial. These tribes are so predictable. Any wonder I’m a determinist.

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