Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Day Of Reckoning For U.S. Shale Oil Will Have To Wait

Commodities / Shale Oil and Gas Oct 24, 2015 - 06:46 PM GMT

By: OilPrice_Com

Commodities October has been billed as a pivotal month in which indebted shale companies would see their credit lines cut, precipitating a faster consolidation in the industry that would sow the seeds of a rebound.


But banks appear to be taking a more lenient approach than expected. A new Jeffries report says that only $450 million in borrowing bases have been cut, across more than 20 companies. That amounts to just 2 percent of available credit lines, much lower than the 15 percent reduction expected by analysts. In other words, banks are allowing drillers to continue to borrow, which could delay the inevitable balancing needed in the market.

The possibility of a wave of bankruptcies could be put on hold, after banks have been "surprisingly gentle," as Jeffries put it in their report.

That doesn't necessarily mean that indebted shale companies can right the ship. It may just delay the adjustment for oil markets. "It looks generally to me like it's sort of kick the can down the road approach that's being taken at this point but that really just pushes the day of reckoning into sort of the first quarter of next year," Dave Lesar, Halliburton Chairman and CEO, told investors on October 19 when reporting quarterly earnings.

In fact, Jeffries sees the spring of 2016 as a more critical deadline for struggling drillers hoping to keep their credit lines open. "We think that banks are generally giving producers more time to improve financial health and that spring '16 redeterminations could be much tougher without significant commodity price improvement," said Jonathan Wolff, an analyst with Jeffries, according to SNL.

It is not a total win for the companies that are trying to hang on. Maintaining access to finance can come at a price. Jeffries expects that companies will have to offer up more collateral or agree to more restrictive covenants.

Furthermore, Jeffries says that a large volume of high-yield bonds will mature in the coming years, raising the likelihood that refinancing will be needed. Bond markets have essentially been ruled out as a new source of finance for high-yield producers. That means that credit lines with lending institutions become the last resort. E&P companies could resort to loans in order to pay off maturing debt, not unlike charging one credit card to wipe clean the debt on another.

Still, in the short-term, the leniency from lending institutions could delay what many had hoped would be the start of a rebound. Kicking the can means that production may not fall as fast as expected, which will mean oil prices may not begin to stage a rally as quickly as some had hoped.

Moody's Investors Service sees the contraction as too little to make a significant dent in the global supply gut. The ratings agency cut its forecasted oil price for 2016 to just $48 per barrel. "Although capital spending has dropped substantially and the U.S. rig count has declined by more than half, U.S. production has only recently begun to decline," Moody's concluded in a recent report. "Moreover, Saudi Arabia and Russia have both increased production to their highest levels since the early 1990s." Moody's sees global oil production rising by 1 million barrels per day in both 2015 and 2016.

Not only are Russia and Saudi Arabia keeping production elevated, new gains in oil production from the Middle East could offset any declines in the United States. Iraq has steadily increased output this year despite low oil prices and security issues related to ISIS. Also, although there was a lot of speculation about Iran's ability to return some capacity to the market, such an outcome appears more and more likely. Iran's oil minister insists that his country has secured buyers for 500,000 barrels per day of oil, the amount that Iran believes it can add pretty much immediately after sanctions are lifted.

That will keep the pressure on U.S. shale. But for now, banks are helping to keep the most indebted companies alive.

Article Source: http://oilprice.com/Energy/Oil-Prices/Day-Of-Reckoning-For-US-Shale-Will-Have-To-Wait.html

By Nick Cunningham of Oilprice.com

© 2015 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules