Monday, September 14, 2015

Shale Oil's "Dirty Little Secret" Has Been Exposed

"So what's the endgame, you ask? According to Citi, "two things become clear in an analysis of the financial health of US hydrocarbon production: 1) the sector is not at all homogenous, exhibiting a range offinancial health; 2) some of the sector indeed looks exposed todistress [and] lifelines for distressed producers could include public equity markets, asset sales, private equity, or consolidation. If all else fails, Chapter 11 may be necessary." 
Got it. So essentially, with HY all but closed, banks re-evaluating credit lines, and the cost of funding set to rise, there are essentially only three options: liquidation of assets, tap the dumbest of the dumb money by selling more shares, or else throw in the towel.
Of course there's another possibility: oil prices rise sharply. And while everyone seems to think that's highly unlikely, the irony of ironies here is that if Saudi Arabia continues to beat the war drums in Yemen and Syria, Riyadh could end up being shale's savior..."


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