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Energy Quote of the Day: 'Not Everyone is Going to Survive'

Fracking In California Under Spotlight As Some Local Municipalities Issue Bans

Unconventional oil and gas operators that is. Bloomberg research indicates numerous companies operating in various US shale plays are severely overleveraged, with interest expenses making up significant double-digit percentages of revenue in many cases.

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.” – Bloomberg

The problem is comparatively expensive shale wells – with longer laterals and more frack stages – have steeper production decline rates than typical conventional wells. So drillers must keep drilling and often need to borrow money to continue making money from their wells. This has gotten several companies into dangerous debt situations, Bloomberg found.

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Keith Pickering's picture
Keith Pickering on June 1, 2014

Just as Gail Tverberg predicted, right here at The Energy Collective, in a number of posts over the past few months: the capital crunch for fossil extraction is upon us, and it will never improve. From this point forward — or rather, whenever the next credit crunch smacks the industry down  — fossil fuels will never be cheap again.

Make your non-fossil plans now, folks.

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