Slugcatcher: ugly sisters prepare to show their blooming figures

How good is good? This is the week when we all find out because over the next few days the five ugly sisters of the oil industry will show all.
Slugcatcher: ugly sisters prepare to show their blooming figures Slugcatcher: ugly sisters prepare to show their blooming figures Slugcatcher: ugly sisters prepare to show their blooming figures Slugcatcher: ugly sisters prepare to show their blooming figures Slugcatcher: ugly sisters prepare to show their blooming figures

First on the catwalk is BP with a statement scheduled for Tuesday (London time) which is tipped to reveal a 50% increase in profits over the quarter to September 30.

In close succession, like a series of models strutting the latest in Parisian fashion, will come ExxonMobil, ChevronTexaco, ConocoPhillips and Royal Dutch/Shell.

Collectively, the big five will deliver multi-billion increases in profits and raise a myriad of questions ranging from demands that they be reigned in by government edict, to requests from investors that they give it all away in the form of higher dividends and/or share buybacks.

Slugcatcher has his doubts, but there might even by a suggestion that the ugly five actually boost their exploration programs to fill the gap being left by depleting oil reserves.

All of these observations will have some validity because there’s only one thing worse in business than going broke – and that’s having more money than you know what to do with.

“Oh come now Slugcatcher, what have you been drinking”, is the universal cry from readers shocked by that observation. To which Slugcatcher says, you may not like it, but it’s true.

Every time the oil industry, or any industry for that matter, makes monster profits it causes more problems than those tight times when profits are elusive.

Perhaps it’s a comment on economics and finance being such a dismal science that too few of us are brought up to know how to handle outrageous success. Perhaps it’s just that outrageous success is such an odd phenomena – or perhaps it’s just human nature that we always plan for the bad times, squirrel away our savings, and then have no idea what to do with a windfall.

Years ago, in fact the last time this problem came around, there was a famous poster of a Texan facing a wall, performing an act of nature, with the caption that read something like this: “Please let there be another boom, and I promise not to piss it up against the wall.”

Well folks, we have that other boom, and the time is upon the industry when it must decide what to do with all the loot burning a hole in pockets from Houston to the Hague.

And, do not be surprised by the headlines when BP kicks third quarter reporting season off because already there are tips that profit in the three months to September was running at $US50 million a day – with Shell earning a similar amount every 24 hours.

Between them, BP and Shell, are said to be on the verge of delivering a collective third quarter profit of $US9 billion -- $US4.7 billion from Shell and $US4.4 billion from BP.

For headline writers, the idea of BP making $US50 million a day is fabulous. Why not turn that into something the man in the street relates to, such as $US2 million an hour, or $34,700 a minute, or $US578 a second.

The point is that the big boys of oil are going to have to tread very carefully through the minefield being laid by their own success.

They will have to explain the profits, justify them, detail how they propose to reward investors, deliver more oil to a thirsty market – and do all that without appearing to be the craven capitalists that they are.

All in all, get set for a fun week, and a wonderful example of how too much success can be a difficult thing.

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