Chris Martenson
Executive Summary
- Why prices under $100 per barrel just aren’t cash flow positive for shale oil producers
- VIDEO: all you need to know about the shale oil industry
- Why the Boom/Bust cycle is swinging to ‘Bust’ for shale companies
- Why a prolonged ‘Bust’ in oil prices will create massive economic shockwaves
If you have not yet read Part 1: About That Shale ‘Miracle’… available free to all readers, please click here to read it first.
The Shale Reality
Now, let me build on the case that not only are shale companies not profitable at $50 per barrel oil, but they are often not profitable at prices nearly 100% higher than that.
I’m not about to make the case that all shale operators are unprofitable or about to go bust on the plays, but I am going to make the case that any sweeping statements like “technology will bring us Shale 2.0” are utterly adrift from the evidence at our disposal.
Let’s go back to September 2014, before any oil price weakness had crept into the picture. At that point in time, according the WSJ author, the shale operators should have been swimming in cash.
Well, that’s just not the case. And some of them were losing their shirts:
Sumitomo’s US shale oil foray turns sour
Sept 29, 2014
Sumitomo Corp of Japan has drawn a line under its disastrous two-year foray into shale oil in the US, with writedowns connected to the project almost completely erasing its full-year earnings.
On Monday, Sumitomo, the fourth biggest of Japan’s trading companies by market capitalisation, said that an impairment loss of Y170bn ($1.6bn) on a “tight oil” project in west Texas would form the bulk of Y240bn of charges for the fiscal year to March 2015.
(Source)
Hmmmm. I guess Sumitomo just failed to use enough smart technology or something, because otherwise how is it possible to lose $1.6 billion at a time when oil was solidly priced in the $100 range?
Sarcasm aside, the truth is that it’s all too easy to lose money in the shale plays, something I believe is already completely indicated by the negative free cash flows of the industry.
In fact, that negative free cash flow evidence tells me that…
The Hard Facts About Shale Oil
PREVIEWExecutive Summary
- Why prices under $100 per barrel just aren’t cash flow positive for shale oil producers
- VIDEO: all you need to know about the shale oil industry
- Why the Boom/Bust cycle is swinging to ‘Bust’ for shale companies
- Why a prolonged ‘Bust’ in oil prices will create massive economic shockwaves
If you have not yet read Part 1: About That Shale ‘Miracle’… available free to all readers, please click here to read it first.
The Shale Reality
Now, let me build on the case that not only are shale companies not profitable at $50 per barrel oil, but they are often not profitable at prices nearly 100% higher than that.
I’m not about to make the case that all shale operators are unprofitable or about to go bust on the plays, but I am going to make the case that any sweeping statements like “technology will bring us Shale 2.0” are utterly adrift from the evidence at our disposal.
Let’s go back to September 2014, before any oil price weakness had crept into the picture. At that point in time, according the WSJ author, the shale operators should have been swimming in cash.
Well, that’s just not the case. And some of them were losing their shirts:
Sumitomo’s US shale oil foray turns sour
Sept 29, 2014
Sumitomo Corp of Japan has drawn a line under its disastrous two-year foray into shale oil in the US, with writedowns connected to the project almost completely erasing its full-year earnings.
On Monday, Sumitomo, the fourth biggest of Japan’s trading companies by market capitalisation, said that an impairment loss of Y170bn ($1.6bn) on a “tight oil” project in west Texas would form the bulk of Y240bn of charges for the fiscal year to March 2015.
(Source)
Hmmmm. I guess Sumitomo just failed to use enough smart technology or something, because otherwise how is it possible to lose $1.6 billion at a time when oil was solidly priced in the $100 range?
Sarcasm aside, the truth is that it’s all too easy to lose money in the shale plays, something I believe is already completely indicated by the negative free cash flows of the industry.
In fact, that negative free cash flow evidence tells me that…
Recently, an article by Daniel Amerman caught our attention. Titled Is There A “Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings?, it details the process known as financial repression, where sovereign debts are slowly paid off by syphoning private savings from an unaware populace.
In this week's podcast, Chris discusses the mechanics of the process, as well as its probability, with Dan.
Dan Amerman: Will Our Private Savings Be Sacrificed To Pay Down The Public Debt?
Recently, an article by Daniel Amerman caught our attention. Titled Is There A “Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings?, it details the process known as financial repression, where sovereign debts are slowly paid off by syphoning private savings from an unaware populace.
In this week's podcast, Chris discusses the mechanics of the process, as well as its probability, with Dan.
Executive Summary
- Who is at risk of contracting ebola?
- What are the odds of the current string becoming more virulent?
- The worrisome responses governments are considering
- Should a pandemic occur, here's what you need to survive it
If you have not yet read Part 1: Ebola! available free to all readers, please click here to read it first.
Those At Greatest Risk
Those at greatest risk of catching Ebola have close and prolonged contact with Ebola victims. Caregivers seem particularly at risk probably because of their proximity (closeness) and the length of time they are in contact.
One measure of how much we need to fear a particular virus is how effective it is in crossing hosts. Some viruses are really incredible at it, such as measles which infects an average of 18 other people from each sick person.
The chart below puts Ebola at the very low end of infectivity:
(Source)
There are a host of complicating factors at work in determining just how infective a virus is, and one of those factors is whether or not you can look at the person while they are in the transmissive phase and see that they are sick. If you can, you may avoid them or take extra precautions.
Again, the Ebola victims are in obviously bad shape by the time they are in the infective stage.
However, I think we are going to have to nudge Ebola over to the right a bit on that above chart because it now seems probable that the mode of infection for this current strain is a whole lot easier than initially thought.
The CDC still claims that the only way to catch Ebola is by direct contact with fluids from an infected person.
However, it's been known since 2012 that direct contact is not necessary as this study rather conclusively proved that… [Sign In/Enroll to read the full article]
Prudent Precautions To Take Now
PREVIEWExecutive Summary
- Who is at risk of contracting ebola?
- What are the odds of the current string becoming more virulent?
- The worrisome responses governments are considering
- Should a pandemic occur, here's what you need to survive it
If you have not yet read Part 1: Ebola! available free to all readers, please click here to read it first.
Those At Greatest Risk
Those at greatest risk of catching Ebola have close and prolonged contact with Ebola victims. Caregivers seem particularly at risk probably because of their proximity (closeness) and the length of time they are in contact.
One measure of how much we need to fear a particular virus is how effective it is in crossing hosts. Some viruses are really incredible at it, such as measles which infects an average of 18 other people from each sick person.
The chart below puts Ebola at the very low end of infectivity:
(Source)
There are a host of complicating factors at work in determining just how infective a virus is, and one of those factors is whether or not you can look at the person while they are in the transmissive phase and see that they are sick. If you can, you may avoid them or take extra precautions.
Again, the Ebola victims are in obviously bad shape by the time they are in the infective stage.
However, I think we are going to have to nudge Ebola over to the right a bit on that above chart because it now seems probable that the mode of infection for this current strain is a whole lot easier than initially thought.
The CDC still claims that the only way to catch Ebola is by direct contact with fluids from an infected person.
However, it's been known since 2012 that direct contact is not necessary as this study rather conclusively proved that… [Sign In/Enroll to read the full article]
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