Cartoon Of the Week
Almost two months ago major integrated corporations drilling in West Texas (Exxon, Chevron, etal) and large independent shale oil companies (Devon and Diamondback, to name a few) all brought their financial powers to bare on the Texas Railroad Commission (TRCC) in opposition of prorating Texas oil production and the hope of balancing world oil markets. In defiance of the Texas Natural Resource Code, and the Texas Constitution that clearly mandates the prevention of resource waste in our State, the TRCC voted no on proration under the guise of "free markets."
The Institute of Energy Economics and Financial Analysis (IEEFA) recently estimated that over $750MM of associated natural gas from shale oil wells was flared in 2018 in Texas. You can bet that another $1B of associated gas was wasted again in 2019.
Rystad says 100,000 oilfield related jobs have been lost in the past three months in the United States and over 75,000 of those jobs right here in Texas. The rig count keeps going down due to low, volatile oil prices and wages are being slashed. Texas proration measures might have prevented many of those job losses.
OPEC keeps getting stronger and taking more market share away from US shale oil exports; meanwhile the US shale oil sector gets deeper and deeper in debt. The more proven developed oil reserves (assets) it must produce to service long term debt the more difficult it will be to increase reserve base lending credit lines and put rigs back to work to replace those reserves.
According to Haynes and Boone, eighteen E&P companies in N. America have filed bankruptcy in 2020, so far, totaling $26 billion. Check that, XOG filed yesterday. Mighty Chesapeake is next. It is going to be a bloodbath in 2020.
Free markets are working perfectly. In the meantime the rest of the domestic oil and gas industry in America is suffering because of low, volatile oil prices, the fiscal irresponsibility of the shale oil sector, and lack of regulatory cajones.
There is good news, however. Most of the same shale oil CEO's against proration and for free markets are kicking ass, this in spite of destroying shareholder equity, so says Reuters. Business Insider thinks these 9 sweethearts are the cream of the CEO crop. And it's just getting started. The shale oil industry now faces two existential risks going forward; low oil prices for a long time and a change in political climate in November that will raise their financing and environmental compliance costs. Bankruptcy is getting very appealing. CNBC, for instance, says Chesapeake's upper management will make a killing when it files for bankruptcy soon.
Don't feel sorry for shale oil CEO's. They have nothing personal to lose and a whole lot to gain before the ship goes down. Betcha a cold one they ALL would like out of this shale oil mess now, forever.