AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 148286 times)

Offline AJ

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Re: Oil Price Crash: Who Cooda Node?
« Reply #885 on: September 14, 2019, 01:16:45 PM »
You sure about that?? I would think that the Saudi's EROEI would be pretty high, unlike all of the frackers out there in the USA.
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Offline RE

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Re: Oil Price Crash: Who Cooda Node?
« Reply #886 on: September 14, 2019, 02:01:57 PM »
You sure about that?? I would think that the Saudi's EROEI would be pretty high, unlike all of the frackers out there in the USA.
AJ

Break even for Saudi last I read was $75/bl.  Price is currently in the $60s for Brent.

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Re: Oil Price Crash: Who Cooda Node?
« Reply #887 on: September 14, 2019, 02:05:07 PM »
You sure about that?? I would think that the Saudi's EROEI would be pretty high, unlike all of the frackers out there in the USA.
AJ

Break even for Saudi last I read was $75/bl.  Price is currently in the $60s for Brent.

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Offline RE

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🛢️ Oil Continues To Plunge On Bearish Crude Inventory Data
« Reply #888 on: September 18, 2019, 06:01:06 AM »
https://oilprice.com/Latest-Energy-News/World-News/Oil-Continues-To-Plunge-On-Bearish-Crude-Inventory-Data.html

Oil Continues To Plunge On Bearish Crude Inventory Data
By Julianne Geiger - Sep 17, 2019, 3:49 PM CDT


The American Petroleum Institute (API) has estimated a surprise crude oil inventory build of 592,000 barrels for the week ending September 12, compared to analyst expectations of a 2.889-million barrel draw.

Last week saw a large draw in crude oil inventories of 7.227 million barrels, according to API data. The EIA estimated that week that there was a slightly smaller inventory draw instead, of 6.9 million barrels.

After today’s inventory move, the net draw for the year is 25.31 million barrels for the 38-week reporting period so far, using API data.

Oil prices were trading down sharply on Tuesday prior to the data release, after anonymous Reuters sources gave a more optimistic timeline for Saudi Arabia’s oil production to return to normal within weeks, rather than within months. Oil prices had risen by 20% on Monday after oil giant Saudi Aramco suffered widespread oil production outages in the wake of an airstrike that targeted critical oil infrastructure.

At 11:35am EDT, WTI was trading down $3.44 (-5.47%) at $59.46—a $1.50 rise from this time last week. Brent was trading down $3.69 (-5.45%) at $63.99, or a $1.00 per barrel increase over last week’s levels. 

The API this week reported a build of 1.599 million barrels of gasoline for week ending September 12. Analysts predicted a draw in gasoline inventories of 1.033 barrels for the week.

Distillate inventories rose by 1.998 million barrels for the week, while inventories at Cushing fell by 846,000 barrels.

US crude oil production as estimated by the Energy Information Administration showed that production for the week ending September 6 stayed at 12.4 million bpd mark, down just 100,000 bpd from its all-time high.

At 4:42pm EDT, WTI was trading at $59.01, while Brent was trading at $63.21.

By Julianne Geiger for Oilprice.com
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Offline BuddyJ

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Re: Oil Price Crash: Who Cooda Node?
« Reply #889 on: September 18, 2019, 06:14:49 AM »
Until the current peak demand problem sorts itself out (assuming it does), oil prices have nowhere to go but down until A) enough marginal (mostly US) production comes off line or B) OPEC chooses to cut production more than they already have.

The good news for OPEC being that as US production decreases, OPEC can replace it at a price below that of the US marginal barrel, keeping it off-line. Doesn't cure government take problems in those countries, but at least they can get back in control of price.

Offline RE

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https://markets.businessinsider.com/news/stocks/oil-plunges-on-report-saudi-arabia-to-fully-restore-output-next-week-2019-9-1028544369

Oil is plunging after a report that Saudi Arabia is set to fully restore production by next week
Yusuf Khan
Sep. 23, 2019, 07:45 AM


Associated Press

    Oil dropped more than 2.6% at about 12:30 p.m. on Monday in London after Reuters reported that production in Saudi Arabia would be back to normal by next week.
    Just a day earlier, The Wall Street Journal had reported that it would take months for production to be back to normal.
    The September 14 attack on two Saudi oil facilities wiped out half of Saudi's production capabilities.
    One trader called it "a mess of conflicting reports," adding that "no one knows what's accurate info."
    Watch oil trade live here.
    View Markets Insider's homepage for more stories.

"Saudi Arabia to restore full oil output by next week: Source," was the Reuters headline on Monday. After the report, the price of oil dropped more than 2.6% at about 12:30 p.m. on Monday in London.

Reuters, citing a singular unnamed source, reported that Saudi Arabia already had gotten about 75% of its output up and running since the attacks on Saudi Aramco fields last weekend.

"Saudi's oil production from Khurais is now at more than 1.3 million barrels per day, while current production from Abqaiq is at about 3 million barrels per day," Reuters said, citing one unnamed source.

Less than 24 hours earlier, oil had soared after a vastly different headline from The Wall Street Journal: "Aramco's Repairs Could Take Months Longer Than Company Anticipates, Contractors Say."

The Journal, citing Saudi officials and contractors, reported that a timeline of 10 weeks previously provided publicly by the Saudis would be only a fraction of the time it would take to repair the damage.

Neil Wilson, the chief markets analyst at Markets.com, described the situation as "a mess of conflicting reports," adding, "No one knows what is accurate info."
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🛢️ $10 Oil - How Far Could Oil Prices Fall If We See A 2009 Style Crash?
« Reply #891 on: October 08, 2019, 03:36:18 AM »
https://oilprice.com/Energy/Oil-Prices/10-Oil-How-Far-Could-Oil-Prices-Fall-If-We-See-A-2009-Style-Crash.html

$10 Oil - How Far Could Oil Prices Fall If We See A 2009 Style Crash?

$10 Oil - How Far Could Oil Prices Fall If We See A 2009 Style Crash?

While predictions about volatile oil prices abound, one theme keeps popping up: geopolitical risk premium. First it was theories about a closure at the Strait of Hormuz. Then it was fears of an all-out war between Iran and the United States or Iran and Saudi Arabia. All those are merely possibilities, but the reality suggests that a whole different kind of extreme is far more likely: crushingly low oil prices.

In amongst the screams of geopolitical risk premium are far scarier whispers of words such as demand destruction, trade disputes, and economic climate deterioration. And those words describe the current reality in the market, and as such, suggest a similar future reality—a reality where demand destruction continues to push prices down, down, down. Is $10 oil really possible?

Dented Demand Outlook

Throughout 2019, it seems like the forecasters can’t revise down their projections for oil demand fast enough.

The International Energy Agency has continued to revise downward its oil demand growth projections for 2019 and beyond.

From the 1.4 million bpd of demand growth the IEA was projecting for 2019 back in January, their estimates have fallen to 1.1 million bpd demand growth this month. These estimates were based on actual global demand, which in May fell by 160,000 bpd year over year, according to the IEA.

For its projections of 2020 global oil demand growth, they, too, were revised downward, starting at 1.4 million bpd in their June report before falling to 1.3 million bpd in their August report. For September, the IEA is holding fast their projections for 2020 oil demand growth at 1.3 million bpd. Related: Oil Slumps Again… Will OPEC Act?

OPEC has its own demand growth projections, which also have been revised downward on a pretty regular basis this year.

While an oil demand growth of a bit above 1 million bpd doesn’t necessarily spell doom and gloom for the oil markets, the downward trend is clear, and suggests weakness going forward.

And we’ve seen this historically, despite the significant geopolitical events that have been specifically tied to oil. Those significant geopolitical events have moved the needle, with prices spiking at each event, but those events are now unable to sustain these higher prices. Instead, we are seeing temporary blips. This suggests that oil prices are beholden to the fundamental realities: sluggish demand paired with robust production. And all indications are that this will continue.

History Repeats Itself

Taking a stroll down memory lane should be enough to sober up those recent predictions that foretold of $100 oil as unrest in the Middle East continues.

Boom and bust cycles are a given in the oil industry. Brent has seen some ugly crashes in the past, and there’s no reason we should expect anything different in the future.

(Click to enlarge)

The pricing booms and busts continue their familiar pattern, stemming from variety of stimuli. The usual suspects that prompt oil price crashes are:

  • Strong dollar
  • High OPEC crude oil production
  • High US crude oil production
  • High US crude oil inventory
  • Weak economy/collapse in demand
  • Speculators

In 2009, oil prices fell from more than $140 per barrel in 2008 to below $40 per barrel in 2009—a fall of more than 50%. And if you think that those prices are in the rearview mirror for good, you might be mistaken. The 2009 crash wasn’t simply the result of collapsing demand. If only it was that easy. No, it was a perfect storm of oil prices that were flying high, spooking traders who thought the peak was right around the corner. It was also the financial crisis, which sparked a global credit crisis. This bolstered the US dollar, which further dented oil demand. As the prices fell, long positions were closed. Panic ensued. More long positions closed as traders wanted to get out, and get out fast. Rinse, lather, repeat. Related: Oil Markets: Everything Is About Weak Demand

In 2014/2015, oil prices saw a similar plunge. From over $100 per barrel to below $40—again a more than a 50% plunge. This time it was economic slowdowns in major oil importers such as China and India.

And then the final blow was dealt by the United States, which had just entered the fracking boom.

We see similarities this time around, too. While oil prices are not at record highs by any stretch of the imagination, US production is at all-time highs. And the global economic outlook is not so great. The trade war between the US and China is threatening to dent demand in the world’s largest oil importer: China. And try as it might, OPEC’s production quotas are just not enough to swing the needle the other way.

And once again, speculators are in control of the market, and hedge funds are making a mad dash for the exit, with money managers offloading 64 million barrels of WTI and 17 million barrels of crude as of October 1. It’s a nervous market with a short memory, and hedge funds have already forgotten the attack on Saudi oil infrastructure. Now, bullish bets on WTI and Brent have dropped to their lowest in eight months, according to Bloomberg. Short of some oil-related disaster, it’s hard to see a major rebound in prices in the short term.

FX Empire has predicted with the help of its Adaptive Dynamic Learning modeling systems has suggested that prices will be below $40 per barrel. Reuters polls and the EIA are expecting that oil will stay in the $60s. Meanwhile, Goldman Sachs’ Jeff Currie is getting on the gloomy train:

“The risk of USD 20 is driven by what we call a breach in storage capacity, meaning that you have supply above demand, you fill every storage tank on planet earth and then you have nowhere to put it,” Currie told CNBC at the Oil & Money conference in London last month. Their base case estimate, however, is for a more robust.

Sure, eventually these ultra-low prices would stymie additional investments in the sector—which would inevitably lead to higher prices as the cycle starts over again, but that is small consolation to any oil and gas players with hefty debt that would be unable to pay back creditors at sub-$40 oil.

The question then is not how high prices could climb. It’s how long will the next boom and bust cycle take to complete, and how many oil and gas companies get swept under in the process?

By Julianne Geiger for Oilprice.com

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Offline RE

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🛢️ Why Natural Gas Prices Might Crash in Winter
« Reply #892 on: October 13, 2019, 01:20:10 AM »
https://articles2.marketrealist.com/2019/10/why-natural-gas-prices-might-crash-in-winter/

12 Oct
Why Natural Gas Prices Might Crash in Winter
WRITTEN BY Rabindra Samanta


On October 11, natural gas prices fell just 0.2% and settled at $2.214 per MMBtu (million British thermal units). However, the United States Natural Gas Fund LP (UNG) rose 0.8%. UNG follows natural gas futures. Interestingly, it diverged from active futures. On the same day, natural gas December futures rose. It might explain the divergence.

Why Natural Gas Prices Might Crash in Winter
EIA sees warmer winter

The EIA released STEO (Short-Term Energy Outlook) report on October 8. It shows trouble for natural gas ahead. The US household expenditure for heating fuel will decrease on a year-over-year basis in 2019-2020 winter. This winter will be warmer than last year’s winter, based on the EIA report.

Moreover, the winter season is very important for gas prices. Winter season starts in October and ends in March. During this period, natural gas demand usually reaches its peak. In addition, higher demand supports natural gas prices. This might be the reason that December futures have outperformed November futures. However, a warmer winter could lead to a crash in natural gas prices.
Natural gas prices could crash

During the 2015-2016 winter season, the weather stayed warmer. In March 2016, natural gas prices plunged to their 17-year low. Similar patterns could occur next year. And, a large plunge in gas prices will impact energy stocks like Chesapeake Energy (CHK).

Besides, CHK makes more than a 60% production mix in natural gas. By contrast, Henry Hub natural gas spot prices could average $2.43 per MMBtu in the fourth quarter of 2019. The EIA expects a 29.2% decline in spot prices than was seen in the fourth quarter of 2018.
Inventory data

On October 10, the EIA ((US Energy Information Administration) reported a rise of 98 Bcf (billion cubic feet) in natural gas inventories. It was on par with a Reuters poll for the week ending on October 4. However, the negative inventories spread contracted by 20 basis points. Natural gas inventories minus their five-year average contracted in percentage terms is known as inventories spread.

Also, on October 17, the EIA might report a rise of 107 Bcf. This is based on a Reuters forecast. With this rise the inventories spread will turn positive. This could be a bearish development for prices. Additionally, Henry Hub natural gas prices and inventories spread are inversely related.

In the next week, active natural gas price futures are expected to close between $2.09 and $2.34 per MMBtu. It is based on natural gas’s implied volatility of 48.3%. Also, this is with a confidence level of 68%. Moreover, the model assumes a normal distribution of prices. Reuters’ weather forecast shows favorable weather for natural gas prices. However, prices could be flat next week. This is because the EIA inventory data is expected to block any upside.
Natural gas prices technicals

Active natural gas futures were 8.9% below their 20-day moving average. Prices were below this moving average for the third consecutive week. This indicates the continuation of short-term weaknesses in prices. Incidentally, the negative inventories spread contracted in the EIA report in these weeks. With any further weakness in gas prices, the 50-day moving average will fall below the 100-day moving average. And, the 50-day moving average was already 9.3% below the 200-day moving average. These moving averages’ cross-over is bearish for natural gas futures.
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Offline RE

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🛢️ Oil Nosedives As EIA Confirms Huge Inventory Build
« Reply #893 on: October 18, 2019, 05:34:41 AM »
https://oilprice.com/Energy/Energy-General/Oil-Nosedives-As-EIA-Confirms-Huge-Inventory-Build.html

Oil Nosedives As EIA Confirms Huge Inventory Build
By Irina Slav - Oct 17, 2019, 10:11 AM CDT


Crude oil prices fell sharply today after the Energy Information Administration reported a 9.3-million increase in crude oil inventories for the week to October 11.

The EIA said that at 434.9 million barrels crude oil inventories were 2 percent above the five-year average for the season.

Last week’s build extended a three-week series of inventory increases.

In gasoline, the EIA reported a decline of 2.6 million barrels for the week to October 11, compared with a drop of 1.2 million barrels a week earlier. Gasoline production stood at 10 million barrels daily last week, versus 10.1 million bpd a week earlier.

In distillate fuels, the EIA reported inventories had shed 3.8 million barrels, which compared with a decline of 3.9 million barrels a week earlier. Distillate fuel production averaged 4.7 million barrels daily last week, down from 4.8 million bpd a week earlier.

At the time of writing, Brent crude traded at $59.17 a barrel, with West Texas Intermediate changing hands at $53.23 a barrel. Both benchmarks were down from yesterday’s close, which marked the third straight day of losses.
Related: Higher Oil Exports Insufficient To Cut Brimming Venezuelan Stocks

These came on the back of more bad news about the global economy. On Tuesday, the International Monetary Fund revised downwards its forecast for global growth to 3 percent for this year. This would be the slowest rate of growth for the global economy since the crisis year of 2008.

“There is more concern about a slowing global economy, with weak import and export data out of China, which one might think would make China want to get done with the so-called phase one of this complex U.S.-China deal,” a senior analyst from Price Futures Group said in a note.

This concern has overshadowed both the U.S.-China trade deal and any supply concerns driven by geopolitical tensions in the Middle East as evidenced by the short-lived price spike that followed the strikes against an Iranian tanker off the Saudi coast last Friday.

By Irina Slav for Oilprice.com
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Offline RE

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🛢️ Saudi Arabia's Best Bet Is to Crash the Price of Oil
« Reply #894 on: October 20, 2019, 05:29:15 AM »
The TRUE price of oil is a price too high for consumers to pay.

RE

https://www.bloomberg.com/opinion/articles/2019-10-20/saudi-arabia-should-let-markets-decide-the-true-price-of-oil

Saudi Arabia's Best Bet Is to Crash the Price of Oil

Market management just isn’t working. Instead of supporting oil prices, the kingdom’s output cuts are propping up higher-cost rivals.

By Julian Lee
October 19, 2019, 10:00 PM AKDT


Half full, or half empty? Photographer: Simon Dawson/Bloomberg

Julian Lee is an oil strategist for Bloomberg First Word. Previously he worked as a senior analyst at the Centre for Global Energy Studies.
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3:43

Saudi Arabia should give up trying to manage the global crude market and return to the pump-at-will policy it briefly adopted in 2014 under its longest serving oil minister Ali Al-Naimi.

In the mercantilist world in which we now live, where decisions are based on narrow national interest, it makes no sense for the world's lowest-cost oil producer to subsidize shale and prop up other high-cost suppliers.

Of course when it does, oil prices will crash just as they did in 1986 when the country finally abandoned fixed official selling prices. And then, in the aftermath, global investors will get in a flap about all things Saudi: the IPO of the kingdom’s state oil company, the financing required to fund a young and under-employed population, Mohammed bin Salman’s ambitious Vision 2030 plan to transform the economy away from its dependence on oil.

Despite the risks, it’s time to admit that market management is failing, even though Saudi Arabia and it “allies” say that it isn’t.

The OPEC+ agreement was meant to drain excess stockpiles in six months. But we are now approaching a fourth year of Saudi Arabia leading a global alliance of producers in trying — and failing — to push up oil prices in a sustainable way.
Stubbornly Stuck

Three years of OPEC+ output cuts have failed to keep crude prices above $60

Source: Bloomberg

For a while it appeared that the cuts were having the desired effect. Inventories came down and Brent prices rose from about $45 a barrel in June 2017 to reach a high of $86 in October 2018. But they swiftly fell back towards $50 and a second round of cuts that began in January has failed to keep them above $60. Even the temporary loss of more than half of Saudi Arabia’s oil production — and most of the world’s spare capacity — in an attack on two of the kingdom’s biggest processing facilities failed to lift prices for more than a few days.

The latest data from OPEC itself — along with the International Energy Agency and the U.S. Energy Administration — show the failure of the policy.
Trouble Ahead

There's consensus that oil stockpiles will build again in the first half of next year if OPEC+ doesn't cut further

Source: Bloomberg, IEA, EIA, OPEC

Note: Positive numbers represent stock builds, negative numbers are draws
 

All three see global oil inventories building in the first half of next year in the face of what is starting to look like America's forever trade war. The global gridlock has also prompted a reduction in forecasts for growth in oil demand this year and next. The average level of Saudi oil production in the first eight months of 2019 was the lowest since 2014 — even excluding the dip caused by the Sept. 14 attacks on the kingdom’s oil processing infrastructure. And it will have to come down further next year if the kingdom wants to continue trying to manage the market.

Meanwhile Russia, the kingdom’s leading partner in the OPEC+ group of countries that came together to manage supply, has seen its output continue to rise each year, even as it has come to dominate OPEC+ policymaking.
Out of Step

So far this year, Saudi Arabia's crude production is the lowest since 2014, while Russia's is on track for another consecutive increase

Source: Bloomberg

Note: Russian data for 2019 are for the first nine months; Saudi data cover the first eight months to exclude the dip caused by the Sept. 14 attacks on its oil facilities

Saudi Arabia should let American shale drillers take the strain. After all, aren't they the producers of the marginal barrel of crude now? As long as Saudi Arabia and its cohorts continue to restrict output and subsidize shale they are merely delaying an answer to the question.

It’s time to discover a true price of oil.

Saudi Arabia will learn to work with this over time, just as it did after 1986. And it will probably find that that price isn’t as low as the kingdom fears. Eventually, shale producers will be forced to cut back — or they won’t.

If they are forced to cut, then Saudi Arabia will get the price support it craves, without having to lower its own output. But if shale production can just keep going up and up, even in a lower-price environment, then it proves just as emphatically that the Saudi-led policy of market management is a busted flush anyway.

Will they do it? I doubt it.

Current oil minister Abdulaziz Bin Salman sees it as his job “to ensure that the oversupply doesn’t continue.” December’s OPEC and OPEC+ meetings will likely yield the promise of further output cuts and Saudi Arabia will pump even less next year in a vain attempt to prop up prices. But it would be nice to believe that they are capable of change.
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Offline Surly1

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Meet The Biggest Losers Of The US Shale Bust
« Reply #895 on: December 04, 2019, 03:41:39 AM »
Nothing new here for Diner Forum readers, but the bill has... finally... come due. Sad.

Meet The Biggest Losers Of The US Shale Bust

Authored by Anes Alic via OilPrice.com,

After a decade of unprecedented growth and seemingly endless investments, the writing is now on the wall: the Great American Shale Boom is slowing down and this could have some grave consequences both the industry and the financial markets. 

A total of 32 oil and gas drillers have filed for bankruptcy through the third quarter, with the total number of bankruptcy filings since 2015 now clocking in at more than 200.

Unlike Phase 1 of the oil bust that featured shale production declining due to an epic global price collapse, the current slowdown is being driven partly by industry-wide core operational issues, including declining production due to wells being drilled too close to one another as well as production sweet spots running out too soon. 

Yet, the most important underlying theme precipitating the collapse is a growing financial squeeze as banks and investors pull in the reins and demand that shale drillers prioritize profitability over production growth.

The shale industry has been built on mountains of debt and the day of reckoning is finally here. 

As many company executives who hoped to drill their way out of debt are belatedly discovering, trying to squeeze a profit from shale-fracking operations is akin to trying to draw blood from stone with the industry having racked up cumulative losses estimated at more than a quarter of a trillion dollars.

From the Permian of the Southwest to the Eagle Ford in Texas and the Bakken of central North America, the future is looking decidedly bleak for shale companies that racked up the most debt and expanded too aggressively.

Bingeing on debt

Chesapeake Energy Corp. (NYSE:CHK) is widely considered the posterchild of debt-fueled shale investments gone woefully wrong. A decade ago, the company’s deceased CEO, Aubrey McClendon (aka the Shale King), was the highest paid Fortune 500 CEO. McClendon had a rather unusual modus operandi: instead of trying to sell oil and gas, he was essentially flipping real estate using borrowed money to acquire leases to drill on land, then reselling them for 5x- 10x more.

He was unapologetic about it, too, claiming it was far more profitable than the drilling business.

McClendon’s aggressive leasing tactics finally landed him in trouble with the Oklahoma authorities before he was killed in a car crash shortly after being indicted. 

He left the company that he founded in a serious liquidity crunch and corporate governance issues from which Chesapeake has never fully recovered--CHK stock has crashed from an all-time high of $64 a share under McClendon in 2008 to $0.60 currently. 

The shares plunged 30% in early November after management fired a warning that the company was at risk of defaulting on an important leverage covenant, something that would trigger the entire balance immediately coming due:

‘‘If continued depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant, our ability to comply with the leverage ratio covenant during the next 12 months will be adversely affected, which raises substantial doubt about our ability to continue as a going concern.’’

Unmitigated disaster for shareholders 

Yet, if shale companies are having it rough, shale investments have been nothing short of disastrous for individual shareholders and investors.

As Steve Schlotterbeck, former CEO of largest natural gas producer EQT, has attested:

“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions. In fact, I'm not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”

According to Schlotterbeck, the scale of value destruction has been mind-boggling with the average shale company obliterating 80% of its value (excluding capital) over the past decade.

Chesapeake and the 200+ companies that have gone under should serve as a cautionary tale for an industry that’s big on promises and loves to finance its big ambitions on borrowed dimes with little to show for it in the way of profits. 

Yet, the vicious cycle of high debt, high cash burn and poor returns refuses to go away. Starved for cash, energy companies have devised a new instrument with which to court investors and continue bankrolling their operations: shale bonds. These companies are now floating asset-backed securities wherein producers transfer ownership interests to investors with proceeds from the wells used to pay off the bonds.

A good case in point is Denver-based oil and gas company Raisa Energy LLC, which closed the first shale bond offering in September. Raisa will pay nearly 6% interest on the best quality wells, with higher rates offered on riskier assets. 

After years of low interest rates, fixed-income investors are finding junk bonds increasingly attractive and might find the lure of shale bonds irresistible. But these bonds are a potentially high-risk investment considering that modeling future production remains an inexact science due to the complex geology of shale basins.

Investors will only have companies’ estimates when trying to model potential returns, never mind the fact that there are literally thousands of shale wells that are pumping well below forecasts. 

To get a better grasp of the underlying risks, consider Whiting Petroleum (NYSE: WLL) whose June 2018 unsecured bonds recently traded as low as 57.8 cents on the dollar.

It’s not just retail investors getting torched in this shale snafu. 

Bloomberg has reported that former shale billionaires Farris and Dan Wilks have seen their Permian shale investments decimated in the latest oil bust.

Energy independence

As Schlotterbeck deadpanned: 

“Nearly every American has benefited from shale gas, with one big exception--the shale gas investors.”

No one can deny that the US shale industry has been highly beneficial to the country in a number of ways. For starters, it has helped to lower gas and energy prices for the consumer while freeing the nation from over-dependence on oil imports. Indeed, in November, the US posted its first full month as a net exporter of crude oil in 70 years, with Rystad Energy predicting the country is only months away from achieving total energy independence.

But unless these companies can figure a way to drill profitably and stem the ballooning debts, this is going to continue being a race to the bottom with investors at the bottom of the totem pole paying the highest price.

“The old world is dying, and the New World struggles to be born: now is the time of monsters.”

Offline RE

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Re: Meet The Biggest Losers Of The US Shale Bust
« Reply #896 on: December 04, 2019, 03:50:26 AM »
Nothing new here for Diner Forum readers, but the bill has... finally... come due. Sad.

Wonder how Moriarty is doing with this?  ;D

RE
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Re: Meet The Biggest Losers Of The US Shale Bust
« Reply #897 on: Today at 04:53:54 AM »
Nothing new here for Diner Forum readers, but the bill has... finally... come due. Sad.

Wonder how Moriarty is doing with this?  ;D

RE

With any luck, enduring rape in prison .
“The old world is dying, and the New World struggles to be born: now is the time of monsters.”

Offline RE

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Re: Meet The Biggest Losers Of The US Shale Bust
« Reply #898 on: Today at 05:07:28 AM »
Nothing new here for Diner Forum readers, but the bill has... finally... come due. Sad.

Wonder how Moriarty is doing with this?  ;D

RE

With any luck, enduring rape in prison .

That would be Santa's best gift EVAH!  :icon_sunny:  I'm putting it first on my Christmas Wish List.

RE
« Last Edit: Today at 06:20:04 AM by Surly1 »
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Offline RE

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It's the DEMAND, Stupid!

RE

https://oilprice.com/Energy/Oil-Prices/Saudi-Arabia-Threatens-To-Flood-Oil-Markets-If-OPEC-Members-Dont-Cut-Output.html

Saudi Arabia Threatens To Flood Oil Markets If OPEC Members Don’t Cut Output


Three days after oil tumbled following a Bloomberg report that Saudi Arabia was angry at its (N)OPEC co-members for not complying with production quotas, and was no longer willing to compensate for excessive production by other members of the cartel, the WSJ reports that Riyadh, furious that the price of oil refuses to rise, is threatening to boost oil production and unilaterally flood the market if "some" OPEC nations continue to defy the group’s output curbs, cartel officials say.

The surprising ultimatum which reeks of what Saudi Arabia did in November 2014 when it effectively dissolved the cartel, and flooded the world with oil in hopes of putting shale producers out of business only to fail miserably as it never accounted for cheap money and the stupidity of US junk bond investors, comes one day ahead of a gathering between OPEC and non-OPEC nations including Russia on Thursday and Friday in Vienna.

Saudi Arabia, the argument goes, is contending with weak oil prices and members of the cartel who aren’t complying with the collective output cut they agreed to last summer. As a result, the Saudis are considering radical measures, including a new pact that would deepen production cuts although if there is one thing the cartel is notorious for, it is ignoring self-imposed production limits when it suits the individual member states as the Crown Prince is finding out now.

As the WSJ reports, at a technical meeting Tuesday, a Saudi delegate said his government is growing tired of indirectly benefiting the budgets of countries that are flouting the OPEC pact by overproducing oil, said a person who was present. If the noncompliance continues, "the Saudi official signaled that the kingdom would begin merely complying with its commitment—rather than overcutting to make up for laggards in the group."
Related: How Much Crude Oil Do You Unknowingly Eat?

The target of Saudi ire are reportedly three specific nations, namely Iraq, Nigeria and Russia; this emerged during a slide presentation by a Saudi official who said the trio of oil-producing nations weren’t adhering to the pact that commits the 14 OPEC nations and 10 allied countries to a collective 1.2 million-barrel output curb.

The stakes for Riyadh are huge: the (N)OPEC spat comes as Saudi Arabia is finalizing the IPO of its national oil company, Aramco, and hopes to bring the company public at the highest possible price, however that also needs a much higher oil price. While the company wasn’t mentioned at the meeting, another delegate said the Saudi position was "all about the IPO of Aramco."

Meanwhile, in a paradoxical twist, with Saudi Arabia raging at Iraq for overproducing, the Iranian neighbor signaled that it, along with other cartel members, favor deepening collective cuts by 400,000 barrels a day. Which of course it is all for... as long as Iraq itself doesn't have to cut further.

Saudi Arabia indicated privately that it would support such a cut if it received watertight guarantees that current laggards would respect the deal, the WSJ said citing people familiar with the matter. What was left unsaid is that the only reason why the OPEC production cut worked as well as it did and as long as it did, is because Venezuela's and Iran's output has collapsed, not because it wanted to but because the two countries had no choice, being subject to US embargo.
Related: Meet The Biggest Losers Of The U.S. Shale Bust

In further disappointment to Riyadh, the WSJ gloats that the kingdom "had hoped to keep such option a secret to create an upside surprise in oil prices", with officials instructed to discuss it face-to-face rather than electronically, one person said. Yet following the WSJ report, the price of oil actually slumped amid fears that Saudi Arabia may have no choice but to boost production as it squares off with increasingly hostile cartel members.

The irony: while a new, lower collective target wouldn’t force Saudi Arabia to carry more reductions, as it is already overcomplying, but others would be unlikely do any cutting, OPEC delegates said. The group has also been looking at extending curbs until end 2020 to avoid a glut. There is one other concern: Russia is emerging as a key obstacle to both deeper and extended cuts, according to OPEC officials. Moscow is seeking exemptions from cuts on its gas liquids and failing that, will stick to keeping curbs until March only, the OPEC delegates said.

What OPEC fails to grasp is that the price of oil is no longer determined by the marginal producer but by the secular decline in demand, and nothing OPEC does can boost that.

By Zerohedge.com
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