Running On Empty

by Robert Bryce

Four years ago, the analysts at John S. Herold Inc. were the first to call bullshit on Enron. On Feb. 21, 2001, three Herold analysts issued a report that said Enron's profit margins were shriveling, the company had too few hard assets, and its stock price was way too high.

Less than ten months later, Enron filed for bankruptcy.Today, the analysts at Herold -- a research-only firm that issues valuations on several hundred publicly traded energy companies -- are making predictions even bolder than their call on Enron.

They have begun estimating when each of the world's biggest energy companies will peak in its ability to produce oil and gas. Herold's work shows that the best minds in the energy industry are accepting the reality that the globe is reaching (or has already reached) the limit of its own ability to produce ever increasing amounts of oil.

Many analysts have estimated when the earth will reach its peak oil production. Others have done estimates on when individual countries will hit their peaks. Herold is the first Wall Street firm to predict when specific energy companies will hit their peaks.

Since last fall, Herold has done peak estimates on about two dozen oil companies. Herold believes that the French oil company, Total S.A., will reach its peak production in 2007.

Herold expects 2008 to be critical, with Exxon Mobil Corp., ConocoPhillips Co., BP, Royal Dutch/Shell Group, and the Italian producer, Eni S.p.A., all hitting their peaks. In 2009, Herold expects ChevronTexaco Corp. to peak.

In Herold's view, each of the world's seven largest publicly traded oil companies will begin seeing production declines within the next 48 months or so.