Posted on 04/03/2016 2:44:18 PM PDT by Lorianne
As oil prices nosedived by two-thirds since 2014, a belief took hold in global energy markets that for prices to recover, many U.S. shale producers would first have to falter to allow markets to rebalance.
With U.S. oil prices now trading below $40 a barrel, the corporate casualties are already mounting. More than 50 North American oil and gas producers have entered bankruptcy since early 2015, according to a Reuters review of regulatory filings and other data. While those firms account for only about 1 percent of U.S. output, based on the analysis, that count is expected to rise. Consultant Deloitte says a third of shale producers face bankruptcy risks this year.
But a Reuters analysis has found that bankruptcies are so far having little effect on U.S. oil production, and a tendency among distressed drillers to keep their oil wells gushing belies the notion that deepening financial distress will prompt a sudden output decline or oil price rebound.
Texas-based Magnum Hunter Resources, the second-largest producer among publicly-traded companies that have filed for bankruptcy, is a case in point. It filed for creditor protection last December, but even as the debt-laden driller scrambled to avoid that outcome, its oil and gas production rose by nearly a third between mid-2014 and late 2015, filings show.
(Excerpt) Read more at reuters.com ...
Where does the media think these companies are going to generate some revenue to pay some of these bills? The expense is finding the oil and drilling the wells. Production isn’t the cost driver. What would these geniuses suggest they do?
Meanwhile, rig counts are still going down.
Horizontal Land Rig Count Summary 1st April 2016 (just in today)
http://oilprice.com/Energy/Crude-Oil/Horizontal-Land-Rig-Count-Summary-1st-April-2016.html
Low oil is the new QE. The big banks have been pumping the debt to producers to prolong the general default process only a little longer. When the collapse comes, though, it will probably be much worse as a result.
Many oil leases stipulate that they have to keep pumping
or..
lose the lease!
One might think... well wouldn’t it be better to lose the lease than to continue pumping and lose money... but many times they paid MASSIVE amounts to get the lease to begin with and since they already KNOW the oil or gas is there, it’s a safer bet to continue pumping well that loses them money for now which might be worth millions when the price goes back up.
When the oil flows, you’ve got cash flow...
You are correct, they are generating some revenue.
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