Cartoon Of the Week
phenomena (plural noun)
a fact or situation that is observed to exist or happen, especially one whose cause or explanation is in question.
"glaciers are unique and interesting natural phenomena"
occurrence · event · happening · fact · situation · circumstance · experience · case · incident · episode · sight · appearance · thing
The United States shale oil phenomena has been hammering out high-dollar horizontal wells for 13 years, nearly 100,000 of the damn things. It has outspent revenue by $470,000,000,000, with a 'B,' including bankruptcies (CNBC; Haynes & Boone). Its growth-over-profit business model has been a complete business failure and is unprecedented in the history of oil and natural gas in America.
Now, because of leveraged overproduction, all of it self inflicted, the price of oil is low and all that reserve "growth," by law, has to be be impaired by the shale oil sector. By the end of 2H20 US reserve (asset) impairments, or write downs, totaled over $57,000,000,000, also with a 'B,' and those impairments will keep growing. WTI prices are now back below $40.
"Balance sheets have been weakened by US$160 billion of write-downs through Q2 2020. The seven Majors alone wrote off US$57 billion of assets, pushing leverage to 30% on average (including operating leases). That’s the highest since Q2 2006, and at the upper end of the 20% to 30% most consider as ‘comfortable’." Woodmac
In other words, the mighty US shale oil phenomena is now going... backwards.
Do non-cash impairments matter? Damn straight, particularly when you owe more than you are worth and you need to keep borrowing more money to stay afloat.
Asset growth over profit?...