Friday, June 12, 2020 11:36:55 PM
A 'no-fail situation' for oil CEOs
https://markets.businessinsider.com/commodities/news/power-line-shale-ceo-salaries-oil-price-bp-layoffs-2020-6-1029304777
WTI dropped below 10 in April, 2020
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Remarkably, even as companies head towards bankruptcy, their top execs can get big payouts.
Days before Whiting Petroleum filed for Chapter 11, its board approved a $6.4 million cash bonus for its CEO.
In early May, Chesapeake Energy announced it would pre-pay $25 million of executive bonuses, days before Bloomberg News reported that the natural gas giant was preparing a bankruptcy filing.
Neither company responded to Business Insider's request for comment.
"If you're an oil CEO, you're kind of in a no-fail situation because you get compensated even if you don't make any money," Kelly Mitchell, senior analyst at Documented, told me.
It was a week of whiplash. On Tuesday morning, we reported on the recovering price per barrel. By the afternoon, we wrote that Goldman Sachs was expecting the price to fall — and then it did.
So what's what?
The rise: Oil gained value faster than most Wall Street analysts expected.
In May, US crude oil posted its sharpest monthly gains ever. Today, it's up more than 15% since mid-March.
OPEC+ extended its record supply cuts through July, but the recovery is mostly about rising demand for fuel. Apple data suggest people are driving a lot more.
Demand could fully recover by the end of 2021, Morgan Stanley analysts say.
Some US producers are taking shuttered oil wells back online as a result of the recovery.
The stall: The rally that sent prices surging has stalled as concerns of a second coronavirus outbreak mount.
Oil prices are on track to fall for the first week in about two months.
Good job, Goldman Sachs! The Wall Street bank predicted this earlier in the week.
Goldman analysts said fear of a second outbreak, an enormous oil surplus, and an uncertain future of demand would cause the price to fall in the "coming weeks."
The bank went as far as to call reversing well shut-ins "premature."
BP froze layoffs for 3 months. Now it plans to cut 10,000 workers.
It might have come as good news when BP announced a three-month layoff moratorium back in March, amid the oil market meltdown. But any assurance quickly dried up on Monday, when the London-based company announced that it would cut about 10,000 workers.
BP's chief said it costs about $22 billion a year to run BP, and more than one-third of that budget is allocated to personnel.
"The oil price has plunged well below the level we need to turn a profit," he said in a memo published on LinkedIn. "We are spending much, much more than we make — I am talking millions of dollars, every day."
https://www.etftrends.com/us-shale-oil-energy-sector-etfs-are-still-at-risk/
U.S. Shale Oil, Energy Sector ETFs Are Still at Risk
Exchange traded funds that track the U.S. shale-oil industry could continue to come under pressure from the depressed crude prices due to the ongoing coronavirus pandemic.
According to the Institute for Economics and Peace, the COVID-19 pandemic has dragged down the price of oil, which will affect political regimes in the Middle East, especially in Saudi Arabia, Iraq and Iran, and it may “result in the collapse of the shale-oil industry in the U.S. unless oil prices return to their prior levels,” MarketWatch reports.
While oil prices have quickly recovered after recently trading in the negative territory for the first time ever, Goldman Sachs warned that the rise in the oil price has been overdone and projects declines in Brent crude prices to $35 a barrel, from around $43 a barrel, in the weeks ahead.
Meanwhile, shale oil, which is produced through fracking or the controversial process of pumping high-pressure water and sand underground to fracture rock and release valuable new energy reserves known as shale, may be particularly affected due to the high cost of extracting oil through this method.
The IEP pointed out that warned that the combined weakness in commercial, travel and industrial activity contributed to the rapid price decline in global oil markets. “These markets were already affected by an oversupply, emanating from Russia and Saudi Arabia who could not agree on production curbs,” it added.
https://markets.businessinsider.com/commodities/news/power-line-shale-ceo-salaries-oil-price-bp-layoffs-2020-6-1029304777
WTI dropped below 10 in April, 2020
Remarkably, even as companies head towards bankruptcy, their top execs can get big payouts.
Days before Whiting Petroleum filed for Chapter 11, its board approved a $6.4 million cash bonus for its CEO.
In early May, Chesapeake Energy announced it would pre-pay $25 million of executive bonuses, days before Bloomberg News reported that the natural gas giant was preparing a bankruptcy filing.
Neither company responded to Business Insider's request for comment.
"If you're an oil CEO, you're kind of in a no-fail situation because you get compensated even if you don't make any money," Kelly Mitchell, senior analyst at Documented, told me.
It was a week of whiplash. On Tuesday morning, we reported on the recovering price per barrel. By the afternoon, we wrote that Goldman Sachs was expecting the price to fall — and then it did.
So what's what?
The rise: Oil gained value faster than most Wall Street analysts expected.
In May, US crude oil posted its sharpest monthly gains ever. Today, it's up more than 15% since mid-March.
OPEC+ extended its record supply cuts through July, but the recovery is mostly about rising demand for fuel. Apple data suggest people are driving a lot more.
Demand could fully recover by the end of 2021, Morgan Stanley analysts say.
Some US producers are taking shuttered oil wells back online as a result of the recovery.
The stall: The rally that sent prices surging has stalled as concerns of a second coronavirus outbreak mount.
Oil prices are on track to fall for the first week in about two months.
Good job, Goldman Sachs! The Wall Street bank predicted this earlier in the week.
Goldman analysts said fear of a second outbreak, an enormous oil surplus, and an uncertain future of demand would cause the price to fall in the "coming weeks."
The bank went as far as to call reversing well shut-ins "premature."
BP froze layoffs for 3 months. Now it plans to cut 10,000 workers.
It might have come as good news when BP announced a three-month layoff moratorium back in March, amid the oil market meltdown. But any assurance quickly dried up on Monday, when the London-based company announced that it would cut about 10,000 workers.
BP's chief said it costs about $22 billion a year to run BP, and more than one-third of that budget is allocated to personnel.
"The oil price has plunged well below the level we need to turn a profit," he said in a memo published on LinkedIn. "We are spending much, much more than we make — I am talking millions of dollars, every day."
https://www.etftrends.com/us-shale-oil-energy-sector-etfs-are-still-at-risk/
U.S. Shale Oil, Energy Sector ETFs Are Still at Risk
Exchange traded funds that track the U.S. shale-oil industry could continue to come under pressure from the depressed crude prices due to the ongoing coronavirus pandemic.
According to the Institute for Economics and Peace, the COVID-19 pandemic has dragged down the price of oil, which will affect political regimes in the Middle East, especially in Saudi Arabia, Iraq and Iran, and it may “result in the collapse of the shale-oil industry in the U.S. unless oil prices return to their prior levels,” MarketWatch reports.
While oil prices have quickly recovered after recently trading in the negative territory for the first time ever, Goldman Sachs warned that the rise in the oil price has been overdone and projects declines in Brent crude prices to $35 a barrel, from around $43 a barrel, in the weeks ahead.
Meanwhile, shale oil, which is produced through fracking or the controversial process of pumping high-pressure water and sand underground to fracture rock and release valuable new energy reserves known as shale, may be particularly affected due to the high cost of extracting oil through this method.
The IEP pointed out that warned that the combined weakness in commercial, travel and industrial activity contributed to the rapid price decline in global oil markets. “These markets were already affected by an oversupply, emanating from Russia and Saudi Arabia who could not agree on production curbs,” it added.
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