[BMax]

Ever wanted a good glimpse at an oil companies year end, without having the media leave out expenditures or calling revenues profits. I would post the link to the full text but it doesn't let me.



FULL YEAR HIGHLIGHTS

* Earnings excluding special items were a record $40,610 million, up 4%, reflecting record performance across all business segments.
* Earnings per share excluding special items increased 11% to $7.28, reflecting strong business results and the continued reduction in the number of shares outstanding.
* Net income was up 3% from 2006, which included a special item of $410 million for a tax-related benefit. Net income for 2007 did not include any special items.
* Cash flow from operations and asset sales was approximately $56.2 billion, including $4.2 billion from asset sales.
* The Corporation distributed a total of $35.6 billion to shareholders in 2007 through dividends and share purchases to reduce shares outstanding, an increase of $3.0 billion versus 2006.
* Dividends per share of $1.37 increased 7%.
* Capital and exploration expenditures were $20.9 billion, an increase of 5% versus 2006.
* Excluding the Venezuela expropriation, divestments, OPEC quota effects and price and spend impacts on volumes, production on an oil-equivalent basis increased nearly 1%.

[Freakinoldguy]

Nice to see that these asshats are making that kind of money and still won't invest the money to build new refineries.

These guys make ENRON and their manipulative energy traders seem like bush leaguers.

[BMax]

Freakinoldguy wrote:

Nice to see that these asshats are making that kind of money and still won't invest the money to build new refineries.

These guys make ENRON and their manipulative energy traders seem like bush leaguers.

They are making that kind of money on the up stream side, it has nothing to do with refineries. Nor are they anything like Enron, and in fact are the exact opposite. Enron was a company that made bad business decisions and became over extended in natural gas. When the price of natural gas bottomed they were unable to meet their financial commitments and thus failed to protect the share holders and employees. They cooked the books to try and hide their insolvency. Unless someone can show that Exxon is doing the same, then your analogy is wrong.

[Freakinoldguy]

BMax wrote:

Enron was a company that made bad business decisions and became over extended in natural gas.

Much as I'd like to believe you, I don't. After privatization of the electrical grid in the US west, Enron ended up controlling the energy market for California and other western US states.

Their traders then went on to have down power plants shut down "for maitenance" when it wasn't required thereby creating an energy shortage, so they could boost the price of energy. They also diverted power from California to other states to also give the impression of a lack of electricity.

So blaming bad investments in natural gas as a cause of their demise isn't exactly true. One of the main causes of their demise was that they got caught manipulating the energy market to their own benefit. When California put a moritorium on the cost of electricity it hit Enron directly because alot of their supposed wealth was made up of over inflated charges for energy, which disappeared when that happened.

If you don't believe me watch a documentary called "Enron the smartest guys in the room". The most telling part of it is when they show taped phone calls of their traders to power plants telling them "they need maintenance" and then laughing about it amongst themselves.

Now, I'm not saying the oil companies are doing the same thing, but when you control the production of any product, it's pretty apparent that you control the price, especially one that most people require. Supply and demand is the determining factor in the equation. The problem I have is that in how many years of record profits, they haven't built any new refineries...........why?

The answer is simple. The more refineries you have means more gas on the market, which in turn means lower prices. All of which would impact their bottom line.

Perhaps perception is the factor here and people percieve the oil companies in the same light as ENRON, given things like the VECO bribing of officials in Alaska and the Senate hearing after Katrina, in which no oil company executive was ever sworn in prior to testimony.

[BMax]

Freakinoldguy wrote:

BMax wrote:

Enron was a company that made bad business decisions and became over extended in natural gas.

Much as I'd like to believe you, I don't. After privatization of the electrical grid in the US west, Enron ended up controlling the energy market for California and other western US states.

The facts speak for themselves. Enron was created as a result of deregulation. Enrons primary business was in natural gas and its transportation. Bad business practices exposed the company to high risk, and falling commodity prices eventually took them down.

Contrary to that, unless Exxon is doing something similar, they would seem to be a well run company. Building more refineries which run in the billions, would not change the price at this time. Refineries must buy the oil. The increase in prices at the pumps is on the up stream side of the oil business, not on the down stream side.

(Snip)

THE ROLE OF MARK-TO-MARKET ACCOUNTING

Enron incorporated “mark-to-market accounting” for the energy trading business in the mid-1990s and used it on an unprecedented scale for its trading transactions. Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealized gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to base valuations. Companies having these types of derivative instruments are free to develop and use discretionary valuation models based on their own assumptions and methods.

The Financial Accounting Standards Board’s (FASB) emerging issues task force has debated the subject of how to value and disclose energy-related contracts for several years. It has been able to conclude only that a one-size-fits-all approach will not work and that to require companies to disclose all of the assumptions and estimates underlying earnings would produce disclosures that were so voluminous they would be of little value. For a company such as Enron, under continuous pressure to beat earnings estimates, it is possible that valuation estimates might have considerably overstated earnings. Furthermore, unrealized trading gains accounted for slightly more than half of the company’s $1.41 billion reported pretax profit for 2000 and about one-third of its reported pretax profit for 1999.

CAPITALISM AT WORK

In the latter part of the 1990s, companies such as Dynegy, Duke Energy, El Paso and Williams began following Enron’s lead. Enron’s competitive advantage, as well as its huge profit margins, had begun to erode by the end of 2000. Each new market entrant’s successes squeezed Enron’s profit margins further. It ran with increasing leverage, thus becoming more like a hedge fund than a trading company. Meanwhile, energy prices began to fall in the first quarter of 2001 and the world economy headed into a recession, thus dampening energy market volatility and reducing the opportunity for the large, rapid trading gains that had formerly made Enron so profitable. Deals, especially in the finance division, were done at a rapid pace without much regard to whether they aligned with the strategic goals of the company or whether they complied with the company’s risk management policies. As one knowledgeable Enron employee put it: “Good deal vs. bad deal? Didn’t matter. If it had a positive net present value (NPV) it could get done. Sometimes positive NPV didn’t even matter in the name of strategic significance.” Enron’s foundations were developing cracks and Skilling’s house of paper built on the stilts of trust had begun to crumble.

[romanP]

If you don't like oil companies getting rich, stop buying oil.

[mtbr]

romanP wrote:

If you don't like oil companies getting rich, stop buying oil.

Better yet by some Exxon for yourself it's not a private corporation.

"...the world’s largest publicly traded oil company"

[Freakinoldguy]

romanP wrote:

If you don't like oil companies getting rich, stop buying oil.

I would if I could, but, like millions of others I'm stuck with it because of cost constraints.

BTW Since I'm a capitalist,I have no problem with oil companies making a profit, but I don't believe that it should be an obscene amount of money, even though they are publicly traded stock and the same thing goes for the Government.

The only thing I would really like know is, given the dramatic rise in refined petroleum useage, why they haven't built more refineries?

Like I said before it's all perception and that perception, rightly or wrongly isn't all that good for big oil.

[BMax]

Freakinoldguy wrote:

romanP wrote:

If you don't like oil companies getting rich, stop buying oil.

I would if I could, but, like millions of others I'm stuck with it because of cost constraints.

BTW Since I'm a capitalist,I have no problem with oil companies making a profit, but I don't believe that it should be an obscene amount of money, even though they are publicly traded stock and the same thing goes for the Government.

The only thing I would really like know is, given the dramatic rise in refined petroleum useage, why they haven't built more refineries?

Like I said before it's all perception and that perception, rightly or wrongly isn't all that good for big oil.

You are right about the perception part, and the perception is largely due to misinformation put out by activists and their media enablers. New refining methods over the years that have been added to existing refineries have been able to increase capacity to keep up with demand. Although Irving is building, or a least trying to build a new refinery down east to supply the north eastern seaboard of the US.

[dino_bobba_renno]

I know this is a little off topic but I never realized we had an oil patch forum. When did this start?

[Freakinoldguy]

BMax wrote:

Although Irving is building, or a least trying to build a new refinery down east to supply the north eastern seaboard of the US.

If you build it, they will come.

I can see them making a shitload of money from a larger refinery capacity, when the whole worlds clamouring for oil.

[BMax]

Freakinoldguy wrote:

BMax wrote:

Although Irving is building, or a least trying to build a new refinery down east to supply the north eastern seaboard of the US.

If you build it, they will come.

I can see them making a shitload of money from a larger refinery capacity, when the whole worlds clamouring for oil.

Refining margins are only around 2 1/2 to 3 percent. They are enough, but I don't know if I'd call it a shitload. I think when all the new heavy up graders start coming on line we will see new refining capacity created. I hear they are adding the ability to refine product from up graders at a couple of refineries in the US, and are in the process of building new pipelines to them now. There are a lot of projects on the books slated for construction but it's costly and takes time. Shells new up grader has a twenty five billion price tag, and I don't know when it's first phase is suppose to come on line. Stelmach has said that new projects that are books just for Alberta are well over one hundred billion dollars.

[RoyalHighlander]

Ill tell you a lil something most peeps dont know.. The housing market here in Edmonton had gone fuckin wild for a time, and builders could not keep up, then the market started to slow and ya know what the builders did?? The filled in dug basements and stopped building to keep the market tight and thus prices high,, but that only worked for so long now prices have dropped a lot and are still dropping.. A unit in my complex that was selling for 300,000.00 , they cant get a bid of 218,000.00 for it now, and prices are still coming down.. People are starting to get wise to the bullshit speculaters and home flippers were doing to keep prices high.. Its not much different with gas prices.. keep a perceived shortage and you can fuck the public...

[BMax]

RoyalHighlander wrote:

Its not much different with gas prices.. keep a perceived shortage and you can fuck the public...

The Asian markets open first every day and start bidding the price up. However, there is no reason in world that north America should not be energy independent. Alberta and even Sask. now is doing their part. The US which is worlds third largest producer of oil is not.