Cartoon Of the Week

2019 was going to be THE year, once again, the shale industry starting raking in the free cash flow.

So far, not so good for 2019 earnings, at least from early reporters like Hess, Murphy, CNX, Nobel, Antero, Marathon Laredo, SM, Cimarex, Diamondback, Concho and Devon.

Phantom/Twitter

These shale guys are trying hard to cut spending to pay dividends to pissed off investors and or engage in stock buybacks; nobody is paying down much debt, however. None of these shale fellas have any business paying dividends; hell, they don't make any money!! When those dividends start eating away at reserve replacement ratios, then all hell is going to break lose. Investors are stupid; they made a mistake and now they want restitution, which in turn will drive the shale industry into the dirt.

Continental in North Dakota is now engaged it diluting its working interest NRI with royalty trust sales, whatever it takes to raise more money and stay on the hamster wheel. This is the 'in" way to raise money these days. It smacks of desperation; how does taking net revenue away from the entity that pay the bills help anything?

Reserve impairments thru 2019 were stunning and exceed those related to simple decline in product prices. These shale dudes are over-drilling sweet spots, wells are bumping into each other and over exaggerated proven undeveloped reserve estimates are getting whacked. Cabot Oil and Gas, rather Cabot Gas, diluted its bogus 3,000 remaining drillable locations in the Marcellus down to 500, which is still too many.

Too many analysts are discounting the non-cash aspect of these reserve impairments as they don't affect the bottom line. At first. In reality if we knew what the shale oil industry's actual asset (reserve) value were they would be underwater with regards to debt. I can almost guarantee that. You won't hear anybody discussing that too much.

After 12 years, things are getting worse, not better, in America's shale patch.