The slide in oil prices has been good news for drivers, but it’s sent the Texas oil business into a ditch. James Osborne has been digging into the implications of the bust. He’s the energy writer for the Dallas Morning News, and he joins KERA’s vice president of news Rick Holter for this week’s Friday Conversation.
Interview Highlights: James Osborne...
...On the significance of Exxon Mobil's big bond deal:
“Companies borrow money every day so it’s not necessarily that unusual. The fact that Exxon Mobil is doing it is – which has a huge stockpile of cash and is one of the largest oil companies in the world – that is unusual, and the sheer scale of it. You know, it’s the largest amount of money they’ve borrowed at any one time.”
…On why Exxon needs the money:
“...Exxon, as amazing as this sounds, will be running a cash-flow deficit this year. They’re going to be spending more money than they’re bringing in, and that’s a result of the fact that oil prices are half of what they were in the summer. So basically Exxon, like any company, will need some cash to keep its operations going.
It runs a capital budget in excess of the $30 billion a year to drill for new wells, so in order to keep all that going, they need more money.”
…On insider predictions of more problems for oil companies:
“There’s two camps on this. There’s a lot of people who maintain this was done very carefully and these companies aren’t ‘getting out of their skis’, so they say, but there’s definitely this line of thought that there’s a lot of money out there, and the longer oil prices stay down where they are, the more risk these companies get into and there is going to be consolidation and there might be bankruptcies.”
…On the impact of idle oil rigs and low prices on Texas:
“Economists as a whole have said Texas is going to take a hit, but we’re going to continue to grow, just at a slower rate. The economy has diversified a lot since the 1980s, which anyone who was around back then will remember. DFW, for instance, is expected to continue to grow. Houston will no doubt take a hit and Midland will take a hit. I think a lot of it will be how long this oil price will stay down where it is, but there’s certainly a lot people who think we haven’t seen the worst of it yet.”