The pomp and paradox of Q3 oil producer earnings calls

— If you listened to third-quarter earnings calls of US upstream operators these last few weeks, you couldn't help but be struck by the positive note that was sounded during them.

On the one hand, the bogey of lower oil prices hunched in the background like one of those evil Disney characters with wretched hairdos, pointy noses and crooked teeth, muttering, "I'll get you, my pretty." But on the other hand, oil executives were talking about double-digit production increases despite potential activity trims that could result from a prolonged WTI oil price environment below $80/barrel.

Almost to a CEO, managers said they believed they could operate at that price level, at least for awhile, without too much in the way of consequences.  Moreover, they didn't panic. And they appeared sanguine about their ability to grow production next year, especially oil production, often by double digits.

Instead, they emphasized their flexibility, strong balance sheets and intention to focus on their highest-return projects, and said they were prepared to cut back on or temporarily shelve marginal drilling.

Here's a helping of their Q3 comments:

"At $80 oil, we should have sufficient cash flow to fully fund our Eagle Ford, Bakken and Delaware Basin plays and sustain double-digit oil growth through 2017 and beyond." --EOG Resources CEO Bill Thomas

"If we see today's oil price persist through the first quarter [of 2015], we'll look to recalibrate the capital plan in the second quarter ... The current program targets production growth between 28% and 32%." --Concho Resources CEO Tim Leach

"The current commodity price environment is going to have little to no impact on what we see over the next four to five years for things that we would be involved with in 2015 with our exploration plan." --Anadarko CEO Al Walker

"[Sanchez] has planned for and is poised to rapidly adapt to a changing commodity price environment ... total production for 2015 is expected to average approximately 50,000 boe/d for the year, which represents a growth rate of approximately 70% when compared to expected full-year 2014 production." --Sanchez Energy CEO Tony Sanchez

"Approximately 20% year-over-year growth [is] a target for us in 2015. In terms of whether or not there would be much of a change if oil prices fell to, say, $75/b or so, no, I don't think so ... I think the activity would be about the same ... I might say even all the way down to $70/b." --Whiting Petroleum CEO James Volker, adding he plans to keep 2015 capital spending flat with 2014

"We’re ... shifting our focus to the highest rate of return areas. We expect next year that the number of rigs we have working in the [Mississippi Lime] will probably go down and some areas in the Southern Midland basin may go down and we’ll shift those rigs over to ... other areas. So we feel pretty confident at this time that ... 20-25% oil growth in 2015 is achievable in a budget similar to what we had in 2014." --Devon Energy CEO John Richels

And from a small producer: "We will enter 2015 running five horizontal rigs consistent with previously stated plans. But if commodity prices haven't improved or service costs have not declined [we] will respond by drilling fewer wells in 2015 than initially anticipated." --Diamondback Energy CEO Travis Stice

These are all pretty confident words, from CEOs who have been here before and toughened by the School of Fists on how to weather an oil price tumble. Doom and gloom may have watched from the background, but if so it was far back and way out of sight.

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It's hard not to contrast that with the last down cycle that affected -- actually, ripped the stuffing out of, for awhile -- the industry, starting in mid-September 2008 after Lehman Brothers collapsed and oil prices headed down from a July 2008 peak of $147/b. Those events characterized the official start of a greater economic crash more tied to other markets, such as housing, than petroleum.

Even so, oil CEOs took the downturn seriously and immediately cut back on drilling. The US rig count plummeted from a high in late August 2008 of 1,961 land rigs and 2,031 total rigs to 1,555 land rigs and 1,623 total rigs the first week of 2009 -- a drop of about 20% in about four months -- and ultimately troughed for the cycle in June 2009 at 829 land rigs 876 total rigs, or down about 57% in nine months.

Back then, a graveness pervaded oil executives' public pronouncements. Oil company managers were trying to work out whether the recession would be "V-shaped" or "U-shaped," and their grim forecasts echoed all too well the specter of a lingering, painful downturn ten years previously.

So retrench they did. Within a month, Newfield Exploration had notched down its 2009 planned capital spending by 21% and said it would focus on development to bring in money here and now rather than exploration or more speculative work.  Permian granddaddy Pioneer Natural Resources said in February 2009 it would cut to two rigs and was publicized as running just one rig for awhile, down from the 29 rigs it had working in third-quarter 2008. Pioneer also forecast a budget slash of 75-80% in 2009.

But in remarks this week on a quarterly call, Pioneer CEO Scott Sheffield affirmed the company would grow its production by 16-21% through 2016 "at attractive returns ranging from 40% to 80% in a $70/b to $80/b oil price environment.”

What's the difference this time around? Operators have more money in the bank thanks to years of elevated oil prices, more visibility around their operations and assurance that they possess the one thing that the world will continue to need, despite current demand uncertainties: the ability to produce crude oil in sizeable volumes.

Their even-keeled comments indicate they've been through this before, albeit in different contexts, and they've absorbed the lessons of a cyclical industry to stick to their knitting and carry an ample bank balance.  For now, they're sitting -- if not pretty, at least comfortably.