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Chevron Corporation, Royal Dutch Shell Plc & Other Oil Co.s Have Lost $1.3 Trillion Since Last Year

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By: MICHEAL KAUFMAN: Aug 5, 2015

As the global benchmark of crude, Brent currently hovers around $50 per barrel. Meanwhile, the oil and gas industry has lost $1.30 trillion of its value this year, and this eroded value equals the annual gross domestic product (GDP) of Mexico. The combined market capitalization of 157 listed oil and exploration and production (E&P) companies in North America has dropped from $3.80 trillion last June to around $2.50 trillion this July, marking a decline of 34.20%.

The crude prices have dropped more than 50% since last June, as they fell from $114 to around $50. The declining oil prices have forced oil companies, including Royal Dutch Shell plc (ADR) (NYSE:RDS.A), Total SA (ADR) (NYSE:TOT), and BP plc (ADR) (NYSE:BP) to cut their spending, as BP has started testing projects that will give it a profit of $60 per barrel. Total keeps the price outlook at $70, while Shell keeps it at between $70-110.

Last week, leading oil and gas companies announced their quarterly results, with most companies’ profits hit hard due to the price decline. Companies like Baker Hughes Inc. (NYSE:BHI), Chevron Corporation (NYSE:CVX), Halliburton Company (NYSE:HAL), and Schlumberger Limited (NYSE:SLB) have cut thousands of jobs, as they resort to cost-cutting measures to prepare themselves for the weakened, low-price environment. More than 150,000 jobs have been cut by public energy sector companies since last year.

Due to the deteriorating industry situation, investors are fleeing to other markets; Carl Icahn, who invested $2 billion last year in Chesapeake Energy Corporation (NYSE:CHK), lost $1.3 billion this year. This year, when the S&P 500 index is up 6.9%, Chesapeake has been among the worst performers in the index.

Insurance companies and state pension funds, which have their plans tied with energy stocks, have also suffered because of the crash in crude oil prices. The California Public Employees Retirement System’s stake in Pioneer Natural Resources (NYSE:PXD) dropped 56% from $91.80 million to $40 million as the value of Pioneer dropped from $33 billion to $19 billion this year.

It now depends on crude demand and prices to lure investors back to the industry. Although according to Bloomberg data crude is expected to rise by $20 per barrel in the first quarter of next year, the future market conditions will reveal the fate of the industry.

SOURCE

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