Big oil worse than big miners in overspending

Think the mining majors take the prize as the most profligate spenders? It's certainly true that the world's largest mining companies have been blamed for spending like drunken sailors during the boom times only to have it all come back to haunt them during the current downcycle, but a recent report from the Wall Street Journal shows that oil companies and their investors have it worse.

The financial news authority published a chart on Sunday showing that miners slashed capital expenditures and shelved expensive, ambitious projects starting in 2012, whereas oil companies, insulated by oil prices about $110 a barrel, have taken longer to rein in spending. Timing of the respective commodity price declines is of course critical. Iron ore and coal started falling in 2011 whereas crude oil has been on a tear the past five years and only last September took a major hit from which it has yet to recover.

But WSJ notes that mining investors were calling for a brake on spending even before the price of iron ore collapsed.

Looking at capex as a percentage of cash flow forecast in 2015, the chart has Total at the top of the spending heap, with capital expenditures exceeding cash flow by 105 percent. Royal Dutch Shell and Eni both weigh in at 93 percent while BP is showing a 90 percent capex-cash ratio. Mining companies, by comparison, are positively frugal. Anglo American is the top spender at 85 percent capex to cash, while BHP Billiton shows 62 percent. Rio Tinto is at 61 percent while Glencore is dead last at 57 percent.

Among major mining projects shuttered in 2014, Barrick mothballed its bloated Pascua Lama development in South America and Cliffs Natural Resources shut down its Bloom Lake iron ore mine in Quebec.