RUS | ENG | All
Enter the email or login, that you used for registration.
If you do not remember your password, simply leave this field blank and you will receive a new, along with a link to activate.

Not registered yet?
Welcome!

2019-07-01 11:20:00

U.S. SHALE OIL PROBLEMS

U.S. SHALE OIL PROBLEMS

MEOG - US oil production is growing, with Rystad Energy estimating that the nation produced an average of 12.5mn barrels per day (bpd) in May 2019—an all-time high.

By December 2019, Rystad Energy forecasts that the US will produce a staggering 13.4mbpd, which would shatter its own record.

"Our US supply projections have been revised up yet again. US oil production is already higher than many in the market believe," said Bjørnar Tonhaugen, head of Oil Market Research at Rystad Energy.

US OIL PRODUCTION 2015 - 2020

However, higher output does not necessarily mean higher income. Based on a study of 40 US shale oil companies, looking at cash flow from operating activities, only four companies reported a positive cash flow balance in the first quarter of 2019. This is in contrast with the 20% that Rystad Energy says is the recent norm. Total CFO fell from $14bn in the fourth quarter of 2018 to $9.9bn in the first quarter of 2019.

"That is the lowest CFO we have seen since the fourth quarter of 2017," says Alisa Lukash, senior analyst on Rystad Energy's North American Shale team. "The gap between capex and CFO has reached a staggering $4.7bn. This implies tremendous overspend, the likes of which have not been seen since the third quarter of 2017."

With negative cash flows, shale companies have historically relied on bond markets to finance their operations. Without additional funding and any debt refinancing, capex would have to be cut.

However, no US shale company has made a public offering since the sharp fall in oil prices – and subsequent share price slide – late last year, marking the longest gap in public capital issuance since 2014.

March and April 2019 saw a few of the more indebted operators issue bonds, intended to partly cover outstanding obligations for the coming year. However, pricing for this type of issuance has risen substantially due to the increased Fed Rate and the overall increased risk associated with US oil companies from a market perspective.

"Recently released data, which confirmed dismal first quarter earnings, only served to cement negative market sentiment," Lukash said. "While shale operators continue to focus on improving capital efficiency, investors are putting the industry under extreme pressure, leaving no room for undisciplined spending in 2019."

Many operators are building production momentum now after a seasonal dip during the winter months. As oil prices improve Rystad Energy expects the second quarter will see a significant increase in CFO while capex remains stable.

The majority of US shale oil producers have slightly reduced their long-term debt by paying down obligations which will soon reach maturity. This supports the deleveraging goals of many E&Ps.

"When considering available cash for a potential stockholder payback, the majority of US shale oil operators saw free cash flow to equity below zero in the first quarter," Lukash remarked.

In the second half of 2019 Rystad Energy expects drilling activity to stay robust, potentially increasing transaction volumes rather than inducing an inflow of capital into the industry.

"Larger diversified operators, which have multiple cash generating engines and are more resistant to volatile commodity prices, will be especially poised to open up to acquisition of new acreage," Lukash added.

-----


Earlier:

U.S. SHALE OIL PROBLEMS
2019, June, 27, 18:40:00
OIL PRICE: ABOVE $65
Brent crude was down 11 cents at $66.38 by 1321 GMT. U.S. West Texas Intermediate crude fell 26 cents to $59.12.
U.S. SHALE OIL PROBLEMS
2019, June, 25, 12:50:00
U.S. FINANCIAL RISKS UP
In addition, a number of medium-term risks are growing. The financial system appears healthy but vulnerabilities in leveraged corporates and, potentially, in the nonbank system are elevated by historical standards. An abrupt reversal of the recent supportive financial market conditions or a deepening of ongoing trade disputes represent material risks to the U.S. economy, with concomitant negative outward spillovers. The U.S. public debt-to-GDP ratio is on an unsustainable path and is expected to continue rising throughout the medium-term, as aging related spending rises.
U.S. SHALE OIL PROBLEMS
2019, June, 24, 12:15:00
U.S. OIL PRODUCTION 12.2 MBD
U.S. crude oil production reached a new all-time high of 12.2 million barrels per day (mb/d) in May 2019
U.S. SHALE OIL PROBLEMS
2019, June, 24, 12:10:00
6 UNDERVALUED ENERGY STOCKS ANEW
Let’s see which companies are still undervalued and which ones are out of my radar. Some of them reached their fair value and some other stopped to satisfy my parameters.
U.S. SHALE OIL PROBLEMS
2019, June, 18, 17:20:00
U.S. PRODUCTION: OIL + 70 TBD, GAS + 798 MCFD
U.S. EIA - Crude oil production from the major US onshore regions is forecast to increase 70,000 b/d month-over-month in June from 8,450 to 8,520 thousand barrels/day, gas production to increase 798 million cubic feet/day from 80,564 to 81,362 million cubic feet/day .
All Publications »
Tags: USA, SHALE, OIL, PRODUCTION
Chronicle:
U.S. SHALE OIL PROBLEMS
2021, July, 9, 12:04:00
HYDROGEN RUSSIA AND CIS, Moscow, 20-21 October 2021
International Conference and Exhibition ‘Hydrogen Russia and CIS’ brings together more than 200 senior executives of hydrogen production plants from Russia and the CIS
U.S. SHALE OIL PROBLEMS
2021, July, 9, 12:00:00
ARGENTINA'S NUCLEAR SMR
Before work was suspended, it was in line to be the world’s first operating SMR. The government licensed it as a prototype in 2009.
U.S. SHALE OIL PROBLEMS
2021, July, 9, 11:55:00
CHILE'S COAL GENERATION DOWN
In June 2021, the Chamber of Deputies of Chile has approved a bill that prohibits the installation and operation of coal-fired power plants.
U.S. SHALE OIL PROBLEMS
2021, July, 8, 12:50:00
OIL PRICE: NEAR $73
Brent slipped by 23 cents, or 0.3%, to $73.20 a barrel, WTI were down 33 cents, or 0.5%, at $71.87 a barrel.
U.S. SHALE OIL PROBLEMS
2021, July, 8, 12:45:00
OIL PRICES 2021-22: $72-$67
We expect rising production will reduce the persistent global oil inventory draws that have occurred for much of the past year and keep prices similar to current levels, averaging $72/b during the second half of 2021 (2H21).
U.S. SHALE OIL PROBLEMS
2021, July, 8, 12:40:00
EUROPE CLIMATE RULES
According to draft proposals seen by market sources, the CBAM will replace the current system of free carbon allowances for metals sectors, and tighten allowances in the European Emissions Trading System generally, a bone of contention for some.
U.S. SHALE OIL PROBLEMS
2021, July, 8, 12:35:00
ASIA INDEXES DOWN ANEW
The Hang Seng index (.HSI) led losses with a 1.9% drop, its eighth consecutive session in the red, with more falls in internet giants Tencent (0700.HK), Meituan (3690.HK) and Alibaba (9988.HK) as the sector reels from sweeping Chinese regulatory scrutinty.
All Publications »