Tags: Tillerson | oil | price | energy

Exxon Mobil CEO Tillerson: We Can Withstand $40 Oil

By    |   Wednesday, 03 December 2014 01:01 PM

Exxon Mobil has plenty of room to breathe with plummeting crude prices, and can withstand the pressure even if prices sink to $40 per barrel, according to CEO Rex Tillerson.

Tillerson told CNBC the company has such a diversity of assets accumulated over such a long period that it can operate profitably with price ranges from $40 to $120 per barrel.

However, Tillerson predicted some smaller, newer players in the U.S. energy game could get shaken out, since low interest rates and high prices recently lowered the barriers to entry.

"There's been a lot of people entering this space. Some are good. Some are not as good. There will be some sorting out of that," he explained.

Tillerson noted lower oil prices would force oil companies of all sizes to examine their fundamentals.

"It really means a return to fundamentals for us," he said. "It's important about watching your cash, watching your investment decisions, being very disciplined about everything, and then looking for opportunities that may present themselves in an environment like this."

The ripple effect from plunging crude is being felt beyond the oil and shale gas fields themselves.

For instance, the energy downturn is causing Canadian railway stocks to sink because of falling demand by shippers who were previously faced with a shortage of pipeline capacity in the face of $100 oil, The Globe and Mail reported.

Oil touched $67.19 U.S. Tuesday, making the economics of moving oil to market by train less compelling for producers, the newspaper said. As a result, share prices for Canadian Pacific Railway and Canadian National Railway tumbled by 8 percent and 7 percent, respectively, in recent sessions.

The Guardian reported the collapse of oil prices could lead the world into economic trouble.

"From the fate of the Russian rouble to Venezuelan deficits to American mutual funds full of Exxon or Chevron stock, OPEC's decision [not to cut production] was the shot heard round the world for troubled commodities," the British newspaper noted.

The Guardian cited a Citi analysis that found OPEC nations could lose $200 billion in revenue if Brent prices stay at $80, which is about $600 per capita annually in those countries. Citi said for every $10 drop in oil prices, cash-strapped Venezuela loses about $7.5 billion in revenues.

"Here are the consequences: countries like Venezuela and Nigeria, which are already facing social unrest, may see even more domestic trouble. They didn't have the fiscal or investment discipline to invest in their industry or save for a rainy day when they were flush with cash," The Guardian stated.

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Exxon Mobil has plenty of room to breathe with plummeting crude prices, and can withstand the pressure even if prices sink to $40 per barrel, according to CEO Rex Tillerson.
Tillerson, oil, price, energy
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2014-01-03
Wednesday, 03 December 2014 01:01 PM
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