Energy Producers’ New Year’s Resolution: Pay the Tab

for the Shale Drilling Bonanza

"$200 billion in shale debt due in next four years. Roughly $200 billion in North American oil and gas debt will mature in the next four years, according to the Wall Street Journal, which includes $41 billion due this year, 2019. More than 200 companies have already filed for bankruptcy since 2015, but that number will continue to rise as drillers struggle amid the crushing weight of debt."

The Wall Street Journal

Lets for fun, sorta, put this all into perspective. It involves little more than simple arithmetic, an open mind... and some concern for the future and all of our kids.

The American shale oil phenomena has produced about 12.4G BO total in the past decade.

At current $58-$59 WTI prices, weighted across all 4-5 shale oil basins in America, after royalty, production taxes, property taxes, incremental lift costs, G&A (overhead) and interest costs on long term debt per incremental barrel of oil, the average net back price for American shale oil is about $28-$30 per barrel. That's" take home pay," so to speak.

Maturing debt of $200B outlined by the Wall Street Journal is mostly shale oil debt. Public and private upstream unconventional shale oil debt, however, is actually closer to $300B. Divide $29 bucks a barrel into $300B of debt and it will require 10.3G MORE barrels of LTO just to pay that debt back.

Let that sink in a minute; the shale oil phenomena hasn't essentially even paid for itself yet.

The 'growth over profit' business model created over-leveraged over-supply, the price of oil collapsed accordingly and now its associated gas is worth almost nothing. The shale oil industry now has to produce 80% of what it has already produced the past 10 years... just to get out of debt...and avoid mayhem, like me...

Timbalier Bay, 1992; Photo by James Tuppen