In this week’s Off The Cuff podcast, Chris and Art Berman discuss:
- Shale Oil’s Chronic Profit Drought
- Nearly all companies are cash-flow negative
- Why Drilling US Oil Isn’t Profitable
- Oil service costs eat your lunch
- Why Drillers Can’t Stop Drilling
- They need cash to service their debts
- Shale Oil Is A Business Model With No Future
- When credit tightens, the whole industry will implode
Right now, the US is still producing a record amount of oil, due mostly to shale fields developed within the past decade. But that bonanza won’t last — it can’t last — explains petroleum geologist Art Berman. Nearly every shale driller has been, and will remain to be, unprofitable. The nature of shale wells and the nature of oil service costs will ensure that:
Back in the very dark ages in the latter years of the 1970’s, I was a young technologist for a major oil company. The senior vice president who ran the Denver office said “Look, oil is a business of failing. Most of the time we lose money. And the only way you can ever make money is if you’re ready to drill the moment that prices turn around. Because if you wait until everybody has figured out it’s a good time to drill, oil field service costs will have accelerated faster than the price of oil. You think you’re making money, but you’re not.”
The enduring lesson I learned from him back then — and I’ve seen remain true every day
by cmartenson 
