Occidental Petroleum Shows Why Oil Market Adjustment is Hard
The Occidental Petroleum Corporation December quarter earnings briefing highlighted one reason why re-balancing the oil market is proving so difficult. Cost containment was the pervading theme among the executives briefing analysts. They exemplified the instinctive corporate reaction when commodity prices fall: survive by doing whatever it takes to keep business costs below the price barrier. If output adjustment is necessary, hopefully the burden will fall on someone else. Occidental oil production increased by 15% in 2015. Overall production rose 14% and unit production costs declined 14%. The Occidental chief operating officer put its total cash costs at $13-14/bbl. Noncash accounting items add another $10. More cost reductions in response to market conditions are in the wings, according to the company. Only when prices continue to push down on a lowered cost platform sometime in the year ahead, perhaps, will attention turn to reorganising the business in a way that may impact output negatively.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
No areas of expertise