The companies behind the U.S. fracking boom are turning to asset sales, drilling partnerships and other alternative – and costly – financing to supplement their cash flow as they face dwindling access to traditional sources of capital after routinely failing to turn a profit for years, according to a WSJ analysis. Producers mostly have avoided borrowing in 2019: There has not been an issuance of public equity by a fracking company since late last year, the longest gap since 2014, and bond issuances by shale companies are on pace to reach their lowest levels in more than a decade. Permian producer Pioneer Natural Resources (NYSE:PXD) is looking to pay for drilling some of its less promising acreage through joint ventures; CEO Scott Sheffield tells WSJ the company is seeking financing for wells it otherwise would not drill for 10-15 years.
Over 170 shale companies have declared bankruptcy since 2015, affecting $100 billion in debt, including 8 bankruptcies already this year.
Describing the current climate for shale companies, Sheffield says, “It’s been a 10-year run and the equity markets are closed, and the investors want return to themselves.” A new report from the Institute for Energy Economics and Financial Analysis and Sightline Institute studied 29 North American shale companies and found a combined $2.5B in negative free cash flow in Q1, even worse than the $2.1B in negative cash flow from Q4 2018 and despite a 16% Q/Q decline in capital spending. “Until fracking companies can demonstrate that they can produce cash as well as hydrocarbons, cautious investors would be wise to view the fracking sector as a speculative enterprise with a weak outlook and an unproven business model,” the report says. Nick Bit frackers cannot make any money at the present price of oil. At best US oil production will increase by 200,000 Barrels a day this year. Venezuela alone has taken 1.5 million BPD out of the market. Now add Iran, Libya and massive production cuts just confirmed by Russia and the Saudis and you can see why 200,000 barrels are not squat compared to the 10 million BPD that will be taken out of the market. And while you are at do not buy into the bulshit of a global trade induced slow down. Presidentie bullshitter has one of 2 choice… get reelected or go to jail. And even that old fool knows that he better have a booming economy to get reelected.