/biz/ - Business & Finance

>>56471917
Bull oil thesis for the next 1-2 years is a few different data points.

One is what the companies are signaling in terms of expected cash flows. XOM buying PXD. CVX buying HES plus announcing increased dividends and share buybacks starting in January.

Smaller players have similar signals, just more muted due to scale. PBR is voting on creating a cash reserve fund which they'd only need if a lot of money is coming in soon and they want to save it for a rainy day. Equinor has been in a share buyback and dividend yield growth program since February. All things companies do when they expect excess cash flow.

Another data point is a shift into offshore oil. Shale / fracking almost put them out of business 10 years ago. All the drillships and rigs bought on credit ended up defaulting and the shipyards didn't finish most of them. Shipyards now want 50% upfront in cash on a $800m asset. And even if you pay it won't be done for 2+ years. So the offshore drilling and rigs supply can't really expand.

Onshore like Permian Basin are slowing down production, which suggests offshore demand might increase soon. This seems confirmed in a few ways. Sudden interest in offshore fields like the ones near Guyana. Also Transocean releases quarterly fleet reports: the day rate to lease drillships and rigs is rising fast. In April the drillship average was $363k/day. In July $390k, more than projected in April. This month it's $416k, more than projected in July. In earnings calls they keep mentioning that clients want to book contracts farther in advance, for longer, with more options to extend, and are willing to accept higher rates. If onshore supply falls and offshore assets can't be increased then prices will continue to rise.

Finally there's the Russia embargo and Middle East political instability angle. You know how that works I assume.

Should about cover it!