SRSroccoReport wrote:U.S. Shale Energy Industry Is Choking On Debt & Interest Expense
Yeah... the Great U.S. Energy Superpower is choking on debt while it pays 75% of its operating cash just to service its INTEREST EXPENSE:
onlooker wrote:@SRSroccoReport
This is in line with the Etp analysis and current observations from the Hills Group
Yoshua wrote:I guess we all can agree on that things could be better and that the oil industry has a problem right now.
Yoshua wrote:It is pointless for me to try to tell people in the industry what the problem is... since I have zero experience from the oil industry and since I have no solution to the problem.
I believe that it's a net energy problem.
SRSroccoReport wrote:rockdoc123,
Maybe you should tell that to the analysts at the EIA. But, maybe they are just flunkies who don't know anything about financial balance sheets of energy companies.
SRSroccoReport
https://srsroccoreport.com/
SRSroccoReport wrote:AdamB,
Ah... I see. Making lots of comments all at one time. I know children who behave in the same fashion.
SRSroccoReport wrote:However, if you FOCUS on the EIA Chart, you will notice that the ENTIRE INDUSTRY is suffering from a 75% Interest Expense, just not one or two companies.
SRSroccooReport wrote:While I appreciate you pointing out the obvious that a bankrupt company can be bought out by another... what happens when the ENTIRE INDUSTRY is in trouble??
SRSRoccoreport wrote:I gather you would want the Fed & Central Banks to bail out the Shale Oil & Gas Industry. And why not. They purchased $1.5 trillion in assets in the first five months of 2017.
SRSroccoReport
https://srsroccoreport.com/
They are the ones that created the first chart that shows the 75% interest expense ratio. But, maybe they are just flunkies who don't know anything about financial balance sheets of energy companies.
ROCKMAN wrote:BANKRUPTCY. I'm wondering again if many folks using that word really understand what the f*ck they are talking about? I went over this a few weeks ago...maybe time for a refresher course. LOL.
Being in the biz for 41 years the Rockman can only guess how many companies he recalls that filed "bankruptcy": 20? 30?. But I recall only 2 going out of business. The vast majority came out ahead: reduced debt (often times completely flushing bond holders), reduced interest rates, longer repayment schedules, etc. But some times those bankruptcies led to corporate acquisitions which typically worked out better for the companies owning the notes/bonds: the acquiring companies would take that debt on.
Filing "bankruptcy" in the oil patch doesn't automatically mean a company is going out of business. It often means they get a new breath of life pumped into the while some of their creditors take a hard hit.
Do folks really have that bad a memory? From 2009:
"SINCE the start of the year it had seemed probable, and for several weeks inevitable. General Motors' application on June 1st for Chapter 11 bankruptcy protection from its creditors, triggering the biggest industrial bankruptcy in history, was nonetheless a momentous event."
And just 8 years later GM has a market cap of $58 BILLION.
ROCKMAN wrote:ralfy - As Cog says: bankruptcy destroys debt. Or, in many cases reorganizes it into a more manageable form. And typically it is the unsecured bond holders that take the biggest hit and not the vendors and suppliers.
ralfy wrote:Also, debt becomes more manageable only if the opposite of peak oil takes place.
ralfy wrote:Finally, vendors and suppliers can be hit if they are eventually forced to rely on the same unsecured bonds to produce and process more oil.
ROCKMAN wrote:ralfy - "...vendors and suppliers can be hit if they are eventually forced to rely on the same unsecured bonds to produce and process more oil." I assume the "hit" you're referring to is declined business activity. The decrease in such work is much more a function of lower oil prices.
Actually a company going into Chapter 11 bankruptcy usually means more business and guaranteed payment for vendors and suppliers. The C11 order typically puts those folks ahead of bond holders and requires payment on a set schedule. Oddly many years ago Halliburton didn't want to do any work for a small operator that had built of a lot of debt pre-bankrutcy. But the bankruptcy judge ORDERED Halliburton to work for them since it was GUARENTEED payment for the new charges.
Bankruptcy judges are a lot more powerful then many realize. Especially when it comes to helping companies survey bad debt situations.
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