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  1. #1

    Where Are the US Fracking Oil Companies Heading?

    In the last decade, the US has become the largest oil producer in the world due to fracking. However, are fracking companies actually making money?

    Here is an article from The New American, which is about as far right as you can get without falling off the edge, about fracking.

    As Oil and Gas Prices Drop, Frackers Declare Bankruptcy

    U.S. frackers haven’t turned a profit in 10 years, and investors have not only been putting pressure on them to show them a return on their investments, but have largely shut off the flow of new investment capital until they do. Last year oil companies raised about $22 billion from both equity and debt financing, less than half what they raised in 2017 and less than a third of what they raised just five years ago.

    More than 170 small fracking companies weren’t able to survive and declared bankruptcy last year. Another eight small fracking companies have cratered so far this year. And if oil prices continue to slide — crude oil hit $66 a barrel less than two months ago but now trades at $54 a barrel — lack of investors’ funds will be the least of their worries. Survival will be their top priority. Those companies going bankrupt last year left investors holding the bag on nearly $100 billion, and new investors aren’t interested in repeating the experience.

    So fracking companies, determined to expand their operations while making them more efficient in order to make them profitable, are using riskier and higher-cost strategies to keep them pumping. Some are selling off some of their assets, while others are considering new issues of bonds. But investors are likely to rate their bets as high risk, and will demand much higher interest rates to offset the perceived risk. Some estimates place the cost of new money at 13 percent a year, almost double what investors were willing to accept just a year ago.

    Another strategy being used is a partnership between an investor and a company, called a drillco. The investor receives all the income from the wells he is funding until he has received all of his money back, plus 15 percent. The remaining income, if any, goes to the producer. The problem there is that new technology pushes most of the new production to the front, with production from a newly fracked well dropping precipitously within a year.

    Note: Fracking companies are basically paying credit card interest rate to borrow money.

    Profitability is elusive enough as it is. Rystad Energy, a Norwegian energy consultant, looked at 40 U.S. shale companies and learned that only four of them had positive cash flow in the first quarter of 2019.
    Lets take a look at two of these so called most stable companies.

    Have anybody heard of EOG? It stands for Enron Oil and Gas. Yup. It is a spin off of that Enron. In 2017, the company reported a net income of $2.6 billion. The previous years? An average loss of $1.1 billion per year. That financial turnaround seems very impressive until you realize that $2.2 billion, or about 85 percent, of its 2017 income was the result of the new tax law. Without that gift from the GOP and Trump which allowed EOG to write off their losses in 2018, EOG would have lost approximately $700 million between those two years. Instead they are $1.5 billion ahead of the game. The company is still 6 billion in debt by the way.


    Continental Resources is another of the shale companies being heralded as a good investment in 2018. Thanks to the new tax law, Continental took home an extra $700 million because its effective tax rate for 2017 was negative 406 percent.



    In 2007 Continental had $165 million in debt and paid $13 million a year in interest on that debt. In 2016 its debt had ballooned to $6.5 billion and the annual interest payments rose to $321 million. The GOP tax law essentially pays off two years of Continental’s interest payments, allowing this failing business model to continue because Continental has not been generating enough income to pay even the annual interest on its debt.

    In 2017, Anadarko CEO Al Walker told an investor conference that Wall Street investors were the problem:

    “The biggest problem our industry faces today is you guys. You guys can help us help ourselves. It’s kind of like going to AA. You know, we need a partner. We really need the investment community to show discipline.”
    Imagine begging banks to stop loaning you money. And being ignored.

    The Economist summarized the situation in 2017:

    “It [the shale industry] has burned up cash whether the oil price was at $100, as in 2014, or at about $50, as it was during the past three months. The biggest 60 firms in aggregate have used up $9 billion per quarter on average for the past five years.”
    Higher oil prices are now being touted as the industry’s savior but, as The Economist noted, the shale industry was losing money even when oil was $100 a barrel. Imagine a company losing $1 billion on a revenue of $700 million per annum. Well the fracking oil industry has dozens of companies that not only fit that description, but been doing it for years.

    Lets go back to Continental. The company recently reported plans to drill 350 new wells at an estimated cost of $11.7 million per well, which adds up to over $4 billion in total costs on those wells. The company currently holds more than $6 billion in debt and less than $100 million cash.

    Anybody see similarities between this and housing market crash in 2008. What would happen when investors finally wake up and lose their appetite for an industry that has been losing money for more than a decade?
    Last edited by Rasulis; 2019-06-16 at 11:05 PM.

  2. #2
    It's always about the money it takes to extract a barrel of oil. I read somewhere that it costs a fracking operation about $50 a barrel of oil to extract it. If that's the case, a barrel of oil needs to cost $70 or more you'd think.

    This is the same thing that's hurting Venezuela. It costs like $80 a barrel to extract down there because the oil is so thick.
    .

    "This will be a fight against overwhelming odds from which survival cannot be expected. We will do what damage we can."

    -- Capt. Copeland

  3. #3
    The Unstoppable Force Ghostpanther's Avatar
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    I hope to less profits. Not a fan of fracking. I am glad I live in a part of Ohio where it is not a good area for that crap. They approached me many years ago, wanting to run seismic tests for possible oil potential from fracking. I told them a flat no. I have also had companies wanting me to sign a oil lease. They got another firm no.
    " If destruction be our lot, we must ourselves be its author and finisher.." - Abraham Lincoln
    The Constitution be never construed to authorize Congress to - prevent the people of the United States, who are peaceable citizens, from keeping their own arms..” - Samuel Adams

  4. #4
    Great jobs! i mean thats what we need more menial labour jobs with the great workforce de regullation, i remember in seattle there was a big deal about a crane falling and killing someone, but without the great de regulation of our great admin he might of died JOBLESS, sure fracking is causing earthquakes and poisoning water, but what about average comman man joe and his 13$ an hour joob that is great vs the evil green energy job hillary wanted to give him free college to go to!!!

  5. #5
    18 years ago the US declared war on the middle east. this is how you win wars

  6. #6
    Quote Originally Posted by Ghostpanther View Post
    I hope to less profits. Not a fan of fracking. I am glad I live in a part of Ohio where it is not a good area for that crap. They approached me many years ago, wanting to run seismic tests for possible oil potential from fracking. I told them a flat no. I have also had companies wanting me to sign a oil lease. They got another firm no.
    That's the point. There is no profit. There has never been any profit. Not even when oil was $100 per barrel. In the entire history of fracking for oil, there has never been a single profitable fracking oil company.
    Last edited by Rasulis; 2019-06-17 at 03:33 AM.

  7. #7
    Merely a Setback Kaleredar's Avatar
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    Fossil fuels should continue to be fazed out. I'm glad that they aren't able to unnecessarily extend the life of unnecessary technologies.
    “Do not lose time on daily trivialities. Do not dwell on petty detail. For all of these things melt away and drift apart within the obscure traffic of time. Live well and live broadly. You are alive and living now. Now is the envy of all of the dead.” ~ Emily3, World of Tomorrow
    Quote Originally Posted by Wells View Post
    Kaleredar is right...
    Words to live by.

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    Old God Vash The Stampede's Avatar
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    Quote Originally Posted by Rasulis View Post
    Anybody see similarities between this and housing market crash in 2008. What would happen when investors finally wake up and lose their appetite for an industry that has been losing money for more than a decade?
    I personally believe we're still in a recession since 2008 and that we've been lied to about much information on how healthy the current economy is. The oil industries hands in the economy depends on cheap gas. I'm worried that big oil is trying to shut down fracking in order to drive up prices. As it is the price of gas is still much higher than it was before 2019, even though the price of oil is really low.

    Considering how many companies are doing stock buy back and continue to rally the markets, I don't know why the economy hasn't fully collapsed? My guess is that it will during Holiday season of 2019, or even early 2020. There's so much hyper inflation that someone's bubble has to pop soon.

  9. #9
    Burning melted dinosaur bones so we can be lazy and drive to work.

    What the fuck are we?

  10. #10
    Old God Vash The Stampede's Avatar
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    Quote Originally Posted by XangXu View Post
    Burning melted dinosaur bones so we can be lazy and drive to work.

    What the fuck are we?
    Or you could look at it like capture energy from the sun.

  11. #11
    The Unstoppable Force Ghostpanther's Avatar
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    Quote Originally Posted by Rasulis View Post
    That's the point. There is no profit. There has never been any profit. Not even when oil was $100 per barrel. In the entire history of fracking for oil, there has never been a single profitable fracking oil company.
    Well good. I just want them to stay the hell away from my 14 acres.
    " If destruction be our lot, we must ourselves be its author and finisher.." - Abraham Lincoln
    The Constitution be never construed to authorize Congress to - prevent the people of the United States, who are peaceable citizens, from keeping their own arms..” - Samuel Adams

  12. #12
    Quote Originally Posted by Rasulis View Post
    That's the point. There is no profit. There has never been any profit. Not even when oil was $100 per barrel. In the entire history of fracking for oil, there has never been a single profitable fracking oil company.

    Either that, or you made a mistake in your math.


    OPEC tried to crush the frackers by lowering the price of oil. They did crush them. Soon as the price went up, the frackers were back in business.

    I'm going to go with you made a mistake.
    .

    "This will be a fight against overwhelming odds from which survival cannot be expected. We will do what damage we can."

    -- Capt. Copeland

  13. #13
    At this point in history, public and privately owned vehicles should be regulated to electric by law while heavy duty work vehicles should be the only ones authorized to use gas.

    But that makes too much sense. We have to keep burning fuel until we’re 100% out. Then we can try to work on powering bulldozers with the fucking sun.

  14. #14
    The Unstoppable Force Ghostpanther's Avatar
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    Quote Originally Posted by freefolk View Post
    Either that, or you made a mistake in your math.


    OPEC tried to crush the frackers by lowering the price of oil. They did crush them. Soon as the price went up, the frackers were back in business.

    I'm going to go with you made a mistake.
    Personally I do not think we should be exporting oil or natural gas. Extract just enough for our own use. Keep a strategic reserve supply for emergencies. Exporting oil can lead to pressure to defend that trade, even cause a war. If the other countries can not get enough oil, then they can develop means to rely on it less.
    " If destruction be our lot, we must ourselves be its author and finisher.." - Abraham Lincoln
    The Constitution be never construed to authorize Congress to - prevent the people of the United States, who are peaceable citizens, from keeping their own arms..” - Samuel Adams

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    Banned JohnBrown1917's Avatar
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    This why the guilotine was invented.

  16. #16
    Frackers Could Make More Money Than Ever in 2018, If They Don’t Blow It

    U.S. shale companies are poised to earn real money this year for the first time during the fracking boom.

    Crude prices have surged almost 40% in the past six months. Yet shale producers are so far touting cautious spending plans for 2018—in contrast with past price spikes, when companies mounted aggressive drilling campaigns that quickly increased supplies and pushed prices back down. While the companies have posted profits in the past, they have never done so while limiting spending to the amount of cash they generate from operations.

    Shale drillers are heeding growing calls from investors who have chastened the companies for pumping ever more oil and gas even as they incur losses doing so. But some investors and analysts remain skeptical that U.S. wildcatters will fulfill promises to live within their means, saying that higher prices have almost always led them to boost drilling.

    “These companies can say that, but will they follow through?” said Norm MacDonald, vice president and portfolio manager at Invesco Ltd. “Given what oil prices have done in the past few months, the proof will be in the pudding.”

    Companies such as Anadarko Petroleum Corp. already have detailed plans to reduce 2018 spending on drilling and operating wells. Even oil giant Chevron Corp. plans to cut such investments almost 10%.


    Among smaller operators, spending is expected to rise about 8% in 2018, compared with a 55% increase in 2017, according to an analysis of over 20 companies by Jefferies. About one-third of the biggest producers have released preliminary spending guidance, and the rest are expected to do so in coming weeks.

    https://www.wsj.com/articles/fracker...-it-1516536000

    It's from 1/22/2018, but The Wall Street Journal, the biggest business paper in America thinks frackers make money.
    .

    "This will be a fight against overwhelming odds from which survival cannot be expected. We will do what damage we can."

    -- Capt. Copeland

  17. #17
    The Unstoppable Force Ghostpanther's Avatar
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    Quote Originally Posted by freefolk View Post
    It's from 1/22/2018, but The Wall Street Journal, the biggest business paper in America thinks frackers make money.
    Well, the Keystone pipeline was built in order to help transport oil from a lot of fracking in western Canada. So yeah, I think they are for the most part, making money.
    " If destruction be our lot, we must ourselves be its author and finisher.." - Abraham Lincoln
    The Constitution be never construed to authorize Congress to - prevent the people of the United States, who are peaceable citizens, from keeping their own arms..” - Samuel Adams

  18. #18
    Quote Originally Posted by Ghostpanther View Post
    Well, the Keystone pipeline was built in order to help transport oil from a lot of fracking in western Canada. So yeah, I think they are for the most part, making money.
    But does it come from selling oil or from other sources?

  19. #19
    I'm up here in Northern Ohio, I know down south Ohio Fracking is or was a big deal. It's terrible for ground water wells and farming. They inject tons of these chemicals into the ground to get the oil out. People have been documented that they now no longer have drinkable water because of it over the past 5 years. Sucks bad.

  20. #20
    Legendary! Dellis0991's Avatar
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    Fuck fracking.

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