Read this article & Appreciate PTA's Stellar Balance SheetFolks, read this article very carefully and appreciate what you own. Appreciate PTA and its DEBT-FREE balance sheet, among others.
This factual article is very bullish for oil and very bearish for the indebted producers. It also shows you the BIG PICTURE and why you have to appreciate PTA's stellar balance sheet amid this turmoil.
You have now the chance to dump the indebted producers and load PTA at the current levels as many shares as you can. Separate the wheat from the chaff as sooner as possible to NOT cry your hard-earned money.
The link:
https://finance.yahoo.com/news/shale-industry-could-swallowed-own-052327361.html
I quote:
The debt that fueled the U.S. shale boom now threatens to be its undoing.
Drillers are devoting more revenue than ever to interest payments. In one example, Continental Resources Inc., the company credited with making North Dakota’s Bakken Shale one of the biggest oil-producing regions in the world, spent almost as much as Exxon Mobil Corp., a company 20 times its size.
“The question is, how long do they have that they can get away with this,” said Thomas Watters, an oil and gas credit analyst at Standard & Poor’s in New York. The companies with the lowest credit ratings “are in survival mode,” he said.
The problem for shale drillers is that they’ve consistently spent money faster than they’ve made it, even when oil was $100 a barrel. The companies in the Bloomberg index spent $4.15 for every dollar earned selling oil and gas in the first quarter, up from $2.25 a year earlier, while pushing U.S. oil production to the highest in more than 30 years.
“There’s a liquidity issue, and you start looking at the cash burn,” Watters said.
Distressed Debt
Almost $20 billion in bonds issued by the 62 companies are trading at distressed levels, with yields more than 10 percentage points above U.S. Treasuries, as investors demand much higher rates to compensate for the risk that obligations won’t be repaid, data compiled by Bloomberg show.
“Credit markets have played a big role in keeping the entire sector alive,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd., a consulting firm in London.
Financial Drain
Companies have reduced spending to cope with lower prices, but those cuts will eventually lead to production declines, further shrinking revenue, Watters said.
U.S. oil production will begin to fall this month and will continue to slide until early 2016 as shale drillers reduce spending, the Energy Information Administration said in a June 9 report.
Interest expense can drain a company’s finances. At this time last year, Quicksilver Resources Inc. was spending more than 20 percent of its revenue on interest. The company missed a debt payment in February and has since filed for bankruptcy. Sabine Oil & Gas LLC missed an interest payment in April and another this month.
Corporate Defaults
The new debt issued by Halcon and SandRidge is secured by oil and gas assets, making it less likely that unsecured bondholders will get repaid in a default.
“It provides us with liquidity we otherwise wouldn’t have had,” said Justin Lewellen, a SandRidge spokesman. “It bought us some significant time.”
SandRidge’s shares fell 84 percent in the last year to $1.08.
The financial troubles of the smaller players become amplified with lower oil prices, Sen said.
“We haven’t seen the worst,” she said.