Kommon updated file above tested and it appears to now work. A bit tricky work for the older crowd.me..Continued from page 1
This year through December 21st, year-to-date average prices are $48.99/bbl for WTI and $52.77 /bbl for Brent crude. These are average annual prices that haven’t been seen since 2004-2005. Some oil resources that became proved reserves as prices rose will now be declassified as proved reserves if lower prices render them uneconomical to produce. This is often the reason that companies have to write down proved reserves. It’s not that a company believed there was oil or gas and discovered later that there wasn’t (although that also happens), it’s generally because a period of depressed prices has rendered those proved reserves to be no longer economical.
Companies have certainly become more efficient as they have traversed the learning curves for both shale oil and the heavy oil reserves typical of Venezuela’s reserves. The cost to produce this oil has been falling. But there are a lot of reserves that simply won’t be economical to produce at 2015 oil prices. Companies have already started to write off reserves, with many reporting major impairments in Q3 2015. Expect many more at the end of Q4, and as companies start to issue 2015 annual reports.
The good news is that the expectations of reserves write-downs are already baked into the price of most oil companies. Still, expect surprises as some companies take relatively large hits that may not yet be reflected in their market value. For example, a company that has to write off 50% of its reserves, but whose share price has only declined by 20% over the past year, is likely overvalued relative to a year ago. But the reverse is also true. Some oil companies will be relatively better values than they were a year ago.
Also keep in mind that proved reserves that come off the books when prices fall can go back onto the books once prices start to rise again. So these write-offs aren’t necessarily permanent. They just require a recovery in the price of oil.