LT Good News for Canada. LT Good News for Canada. Has U.S. Shale Seen Its Profits Peak?
For the U.S. shale industry, the third quarter was more of the same: new record highs in oil production, but another quarter of negative cash flow.
A sample of 38 publicly-traded oil and gas companies posted $1.26 billion in negative cash flow in the third quarter, according to a study by the Institute for Energy Economics and Financial Analysis (IEEFA). The performance was a deterioration from the previous quarter, which saw marginal positive cash flow. In fact, the results from the second quarter, while unimpressive, were actually the industry’s best showing.
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As the years past, debt piled up but Wall Street seemed content to keep the spigots open. That is now changing, and the timing is pretty bad for the industry – oil prices are down, and a huge wave of debt soon comes due. Already there have been about 199 companies that have filed bankruptcy since 2015. Drillers are finally pulling back, but the number of chapter 11s is set to rise.
“Until fracking companies can demonstrate that they can produce cash as well as hydrocarbons, cautious investors would be wise to view the fracking sector as a speculative enterprise with a weak outlook and an unproven business model,” Clark Williams-Derry and Kathy Hipple wrote in the IEEFA report.
https://finance.yahoo.com/news/u-shale-seen-profits-peak-000000077.html