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ronnie

Oil Companies

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does anyone know why the big oil companies trade on a pe ratio of only 10times earnings??? are earnings seen as unsustainable? cheers

Say that again, I saw a BBC newsplayer that commented on the Oil companies not making the profit but the process.

This process is based on debt!

I think you have something here.

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does anyone know why the big oil companies trade on a pe ratio of only 10times earnings??? are earnings seen as unsustainable? cheers

I think that you may wonder why the pe is so low.

Some points:

I don't think it is so much that the current pe is an issue - so much as it is hard to rapidly grow earnings as oppose to junior exploration or oil service companies for example.

The big oil companies are "integrated". i.e. in effect they have separately run buisinesses. In exploration / upstream, refining / downstream, retail / sales, chemicals / manufacturing. There are increased energy and material costs to these components during a period of high oil / metals prices. High commodity prices are a two way street!!!!

Typical yield is 3 to 4%. Taking, uncompounded, 25yrs to get your money back through dividends. Not a spectacular return.

This may surprise some folk but................I don't really see a pe of 10 being cheap considering the risks in the markets at the moment FWIW.

Say that again, I saw a BBC newsplayer that commented on the Oil companies not making the profit but the process.

This process is based on debt!

I think you have something here.

Could you expand on this MM please? I'm not getting your meaning!!!

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I think that you may wonder why the pe is so low.

Some points:

I don't think it is so much that the current pe is an issue - so much as it is hard to rapidly grow earnings as oppose to junior exploration or oil service companies for example.

The big oil companies are "integrated". i.e. in effect they have separately run buisinesses. In exploration / upstream, refining / downstream, retail / sales, chemicals / manufacturing. There are increased energy and material costs to these components during a period of high oil / metals prices. High commodity prices are a two way street!!!!

Typical yield is 3 to 4%. Taking, uncompounded, 25yrs to get your money back through dividends. Not a spectacular return.

This may surprise some folk but................I don't really see a pe of 10 being cheap considering the risks in the markets at the moment FWIW.

Could you expand on this MM please? I'm not getting your meaning!!!

What is a PE? and debt is offered to any oil holding country as a way of offering this so called OIL largesse. It's not just money but debt that is offered.

Are any of these countries better off?

In the simplest terms the 1% profit the oil comapnies make represents the tip of the iceberg for the profits made before this.

Who builds and services these places (Halibuton maybe) and others.

Edited by music man

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What is a PE? and debt is offered to any oil holding country as a way of offering this so called OIL largesse. It's not just money but debt that is offered.

Are any of these countries better off?

In the simplest terms the 1% profit the oil comapnies make represents the tip of the iceberg for the profits made before this.

Who builds and services these places (Halibuton maybe) and others.

I'm sorry MM - but I still don't understand this (may be just me being thick)!!!

Are you saying that "poor" countries are offered credit by some oil majors in return for exploration rights etc?

Also are you saying that in effect oil companies "hide" their profits? - This is rumoured (I don't want to be sued) a well (no pun intended) established practice amongst oil firms.

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P/E is a ratio. The ratio being the price of a stock divided by the earnings. In isolation - The lower the P/E ratio the "cheaper" / better value the stock.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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