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| Economy |
| Debt Bomb Ticking for US Shale |
| 2015-11-29 |
| Reported as some apocalyptic event, this is how industries shake out the weak and improve the bottom line for the survivors. Found via Free Republic and Zero Hedge. [EnergyIntel] The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get and when? It increasingly looks like a number of the weakest companies will run out of financial stamina in the first half of next year, and with every dollar of income going to service debt at many heavily leveraged independents, there are waves of others that also face serious trouble if the lower-for-longer oil price scenario extends further. "I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession," Timothy Smith, president of consultancy Petro Lucrum, told a Platts energy conference in Houston last week. Much has been made about the resiliency of US oil production in the face of low prices, but the truth is that many producers are maximizing their output — even unprofitable volumes — because they need the cash flow to service their debt (related). "As an industry, we're at the point where every dollar of free cash flow now goes to paying back debt," Angle Capital's Steve Ilkay told the same conference. Ilkay, who advises North American producers on asset management, said during the boom years of 2012-14 about 55% of the sector's free cash flow, which is calculated by subtracting capital expenditures from operating cash flow, was allocated toward debt repayment. |
| Posted by:badanov |
| #3 That's why the incessant attacks on Trump. They can't control him. They like the managed way our officials promulgate with emphasis on implementation and enforcement with however non transparency. Easy money to be made knowing outcomes. |
| Posted by: Dale 2015-11-29 13:37 |
| #2 Remember the Beltway Party rubber stamps big mergers. |
| Posted by: Procopius2k 2015-11-29 09:24 |
| #1 And so more centralization in yet another industry, at a time when we so desperately need to be dispersing to the smallest unit and dispersing power. If a few big firms gobble up everything they'll be like IT or finance or big agriculture. Guess which party those industries bankroll? |
| Posted by: no mo uro 2015-11-29 08:35 |