The markets started positive, but as oil dropped below $40, the markets again fell apart. Can oil companies — specifically exploration & production (E&P) companies — survive if oil remains at $40?
We'll get a better idea in the next couple days. Nearly two dozen E&P companies will be reporting Wednesday and Thursday, including Devon Energy on Tuesday.
First off, let's give up on trying to figure out where oil is going to be six months from now. No one can even get it right 30 days from now. There are a small group that have claimed that February was the bottom in oil, including Halliburton and Schlumberger. Maybe.
Let's assume oil is at $40 in the fourth quarter. Oil companies can avail themselves of four courses of action: