Subi1 ……………… there have been many reports of the debts that...

Subi1 ……………… there have been many reports of the debts that shale companies have built up and IMO the second 2Q 2015 will be critical for many companies as it’s just not possible to spend more than you earn for very long and the truth of this hits when revenue drops which bites into profit

‘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’

This is now starting to catch up with a lot of shale companies which, when revenues are falling due to lower oil prices, then a higher percentage of revenue is going into interest alone:

‘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’

I predicted in an earlier post this year that shale oil production will drop 2H 2015 and already there are signs that this is starting to happen in the IEA production figures HOWEVER it is quite likely now that conventional oil production may pickup as a result of the pending agreement with Iran plus the possible falling of hostilities in the Yemen means that supplies may be higher than earlier predictions.

Just hope the JV can lock in both appraisal and development whilst the industry is in the doldrums!!!!

HKP