Are Producers Haunted By Gas Price Drop Still Profitable? | Seeking Alpha

For most investors, it’s hard to believe that an oil and gas company can lose money. It may seem clear, that junior companies that are in need of huge amounts of investment to develop their fields, cannot earn money for their first years, but losses for mature companies with production figures well above 100 kboepd are seldom. Those rare cases are normally associated with a huge decline in the oil and gas price, which trigger high impairment of reservoir assets. In 2013 some North American companies suffered this fate, as natural gas prices trembled due to high shale gas overproduction. Nevertheless, the fact of a one-year loss alone does not contain much information about the profitability of the company, as the true earning power is related to total costs the enterprise needs to produce its commodities. In this article I will investigate production costs for 4 American companies that reported losses in 2014 (Devon (NYSE:DVN), Encana (NYSE:ECA), Pioneer (NYSE:PXD), Talisman (NYSE:TLM) ). All of these companies produce significant amounts of gas in North America.

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