U.S. oil boom a bust for shale exploration and production companies

first_imgU.S. oil boom a bust for shale exploration and production companies FacebookTwitterLinkedInEmailPrint分享Bloomberg:Last month, two days before the latest government prediction that U.S. shale production would hit new heights, an oil industry conference in Houston opened with a clip of Eeyore making one of his bleak utterings: “End of the road, nothing to do and no hope of things getting better.”It made sense to kick things off with Winnie the Pooh’s depressed donkey friend. As Kim Bourgeois, a managing director who focuses on energy at HOS Investment Partners, told the assembled crowd, “That’s what most of our Monday mornings have felt like.”For the exploration and production companies behind what has been spectacular growth in U.S. crude output, the boom has busted. Many are burning through cash and struggling to meet investor expectations. In Texas, the biggest oil-producing state and home to most of the prolific Permian Basin, the number of active rigs tumbled 24% last year. Oil prices are down as much as 19% this year as the coronavirus outbreak hits Chinese oil demand.“North America is full of companies that, on the E&P side, probably shouldn’t be here anymore,” said Marcel Hewamudalige, a Houston-based managing director at Evercore Group LLC. “There’s too much debt in the system and those guys won’t survive.”The shale revolution unlocked previously inaccessible reserves of oil and natural gas, making America’s production of both the highest in the world. But that abundance has also helped create a global glut, keeping a lid on prices.What’s more, the shale sector has found itself on a treadmill. Fracked oil and gas wells experience steep declines in their production compared to conventional wells, compelling shale producers to keep drilling simply to maintain output levels and cash generation, even in the face of stagnant prices.[Kevin Crowley, Rachel Adams-Heard]More: America’s oil boom feels more like bust in the shale patchlast_img

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