or BBF to the BFFs....
i have been writing a bit about the Frackers.
http://www.dailykos.com/...
well now that Oil has dropped through the floor, we are seeing the results.
http://www.bloomberg.com/...
Lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter.
Sabine Oil & Gas Corp. became one of the first companies to warn investors that it faces a cash shortage from a reduced credit line, saying Tuesday that it raises “substantial doubt” about the company’s ability to continue as a going concern. About 10 firms are having trouble finding backup financing, said the people familiar with the matter, who asked not to be named because the information hasn’t been announced.
Frackers were on about how great their business was, but,,,
in the decade of which they have operated, they have very little
in the way of retained earnings.
http://www.macrotrends.net/...
even when oil prices were way high,
http://www.wsj.com/...
The companies at the forefront of hydraulic fracturing consistently have spent more cash leasing land and drilling than they made selling oil and gas.
,,,
The era when energy executives cared more about rapid growth than cash flow is over, says Arun Jayaram, a Credit Suisse energy analyst. The companies were run in the early days "by a group of teenagers," he says, "and now they've grown up to be real adults."
Well now the banks are shutting off the cash.
What happens once the lines of credit get turned off?
Well, it gets ugly fast.
they get to go from
http://www.globalresearch.ca/...
Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, [and a] former stockbroker with Merrill Lynch … showed that wells were petering out faster than expected.
“These wells are depleting so quickly that the operators are in an expensive game of ‘catch-up,’ ” Ms. Rogers wrote in an e-mail on Nov. 17, 2009, to a petroleum geologist in Houston, who wrote back that he agreed.
*
A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old.
*
“Looks like crap,” the Schlumberger official wrote about the well’s performance, according to the regulator, “but operator will flip it based on ‘potential’ and make some money on it.”
In 2012, the New York Times pointed out:
The gas rush has … been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.
Well, so much for the Texas Miracle.
Rick Perry won't be talking much about the Texas Miracle in May.
A lot of things in Energy country are going to end.
I've seen some arguments that in April, things will get uglier as oil storage limits get
hit at Cushing.
if Oil drops below 40 just as the repricing hits, well, i expect a lot of these
firms will just shut down