Annual reserves report could lower oil
Energy companies are annually required to report the size of their reserves by year's end to determine what is economically feasible. This process could make oil prices drop even further. Sam Eaton reports.
Stacks of empty barrels used to hold fuel in Baghdad (Ali Al-Saadi/AFP/Getty Images)
More on Oil
TEXT OF STORY
Scott Jagow: Energy shares were a real drag on the Dow last week, with the price of oil continuing to plummet. Oil's back up some this morning to about $42 a barrel. But by the end of the year, energy companies have to report the size of their reserves. And in this case, price matters. Here's Sam Eaton.
Sam Eaton: It's an annual ritual in the oil and gas industry. Securities rules require companies to calculate how much of their reserves are economically feasible. And that's based on the price of oil and gas at year's end. The calculation is then used to estimate a company's value, so it's not exactly a time when energy companies want to see oil prices plunge.
Fadel Gheit is an analyst with Oppenheimer and Company:
Fadel Gheit:It is a physical asset that has certain market value, and banks use it as a collateral, you know, for loan as well as an indication of the financial viability of the company.
And oh, what a difference a year can make. The financial viability of energy companies at last year's $96 a barrel close looks a lot different from this year's lows.
Gheit says companies with high-cost portfolios like oil sands or deep water projects may find it harder to borrow or attract investors.
In Los Angeles, I'm Sam Eaton for Marketplace.
Comments
Comment | Refresh
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.