Shale bluff: why the American oil industry mired in debt

© AP Photo / David ZalubowskiДобыча shale oil in Colorado, USAShale bluff: why the American oil industry mired in debt© AP Photo / David Zalubowski

The proceeds from the sale of quarters produced in the US shale oil entirely goes to interest payments on corporate debt. For full repayment of loans to kancevica would require as much oil as it was removed from the earth in the entire history of the industry. Why shale oil will never be repaid — in the material RIA Novosti.

Quantity vs profit

In the middle of this year, the United States has reached the level of production at 11 million barrels per day. To achieve such a measure has been solely due to the activity of producers of shale oil are now producing about 6.2 million barrels of black gold daily.

It would seem that such large volumes have to bring huge profits, but, to the great disappointment of investors. According to estimates by the Wall Street Journal, the cumulative loss of 50 companies engaged in the extraction of shale oil in the country, exceeded two billion dollars in the second quarter alone.

One of the main reasons for this is the debt load the shale oil. According to the Federal Agency the U.S. energy information only to service debt of companies involved in the industry, the daily care cost of 1.5 million barrels, and that a quarter of all mined shale oil.

With a total debt situation is even more interesting: in order to extinguish it, you must extract nine billion barrels of oil. It’s almost as much as kancevica pulled from the depths for all time of existence of the industry (about ten billion barrels).

In absolute terms, the debt reached $ 300 billion. It’s like the entire foreign debt of Greece.

In addition to the high cost of servicing debt, to get a profit prevent increasing costs for modernization of drilling rigs.

It would be logical to Fund it from earnings, but instead representatives of the industry prefer to issue all new shares, pumping up the already inflated stock bubble. So, one of the key players in the market of shale oil Pioneer Resources from 2011 to 2016 released shares for $ 5.4 billion. Almost the same amount of placed securities on the stock exchange and Continental Resources, despite the constant losses.

Thus, the shale oil companies can easily turn any stock market crisis in the energy. If investors begin EN masse to get rid of stock, kancevica will stop, causing the total amount of American oil production will be reduced by 56%.

You should pay attention to the fact that the shale industry between increased capital costs and increased production there is no direct connection. In some cases, the situation is reversed: the same Pioneer Resources in the second half of 2017 spent 1.36 billion dollars, earning more than 30 thousand barrels per day, and in the first half of this year spent $ 1.7 billion, producing three times less.

Slate is not honored

The prospects for shale industry is generating more questions.

The U.S. Commission on securities and exchange Commission (SEC) believe that the shale oil in the three major production areas — the Permian basin, the formations of Eagle Ford and Bakken — can be much less than expected: a total of 13.8 billion barrels.

In other words, pay off your debts, shale companies will have to profit reserves of 4.8 billion barrels, and this will last just two years.

In addition, by itself, shale oil refers to the lighter grades of low density and low sulfur content. It is ideal for petrol, but no diesel, no jet fuel from light oil will not get.

Meanwhile, in the coming years the most in demand in the US will be the aviation and marine fuel, and the demand for gasoline will continue to decline due to the increasing number of electric vehicles and energy efficiency of gasoline engines.

But the key problem lies elsewhere. Additional volumes of light oil is simply nowhere to recycle. On assurances of representatives of the us shale industry in the next five years they are ready to increase production to more than four million barrels per day.

© AP Photo / Patrick Emphas in the port of Baltimore, USAShale bluff: why the American oil industry mired in debt© AP Photo / Patrick Emphas in the port of Baltimore, USA

But for processing will have to purchase special equipment for light oil. These costs will include the cost of shale fuel, which will further reduce the profitability of the industry.

The overabundance of light shale oil will inevitably impact on its price. Now the raw material of the Bakken (North Dakota) on the stock exchanges quoted at five to six dollars cheaper than WTI. This gap will grow, not allowing oil shale companies to go to decent profitability.