Shale Industry Loses Billions

by Elizabeth Alford on September 9, 2015

In the first half of 2015, U.S. shale producers lost more than $30 billion as the prolonged slump in oil prices continue to take its toll.

Related: Crude Prices & the Stock Market: A Wild Ride

Bankruptcies and restructuring are on the rise as independent oil and gas companies do what they can to survive. Data company, Factset, reports that capital spending exceeded cash from operations by about $32 billion in the first six months of the year and is quickly approaching the deficit of $37.7 billion reported for the whole of 2014.

U.S. shale oil producers have reported steep improvements in the productivity of the rigs they use and the wells they drill, but even this cannot save them from the financial constraints they face. The EIA reported that U.S. oil production fell in May and June, with some analyst predicting continued drops, as companies are unable to pay for more drilling and well completions.

Related: EIA: U.S. Oil Production Has Peaked

According to gulfnews.com, companies have made up for their shortfall by selling shares and borrowing cash to stay afloat, but there are signs this is drying up. During the first quarter of 2015, E&P companies sold $10.8 billion of shares compared to only $3.7 billion in the second quarter and the total for July and August is $1 billion.

Edward Morse, global head of commodities research at Citigroup, said that there would have to be a shake-up in the US shale oil industry to separate the good companies from the bad. “Just as it drove the industry to spectacular growth, the financial sector is going to drive the industry to consolidate and contract,” he said.

 

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