How the Shale Oil Industry Hurts Itself By Alex Martinelli | Monday, February 9th, 2015 Alex Martinelli By nature, the U.S. shale oil industry has a self-effacing business model...
That means to stay in business, shale oil companies have to hurt their profitability.
Think about it like this...
For decades, oil companies and government officials knew there were billions of barrels of reserves locked away in shale rocks in North Dakota, Texas, Pennsylvania, and Colorado. However, those reserves were not economically recoverable.
That is, not until oil prices started ballooning to never-before-seen heights in the 2000s. That's when wildcatters like Continental Resources CEO Harold Hamm exploited new technologies to frack shale wells and recover what was previously uneconomical.
The tight oil producers could only get big with high prices — and big they got. But after a few years of unbelievable growth, these producers drilled so much (about 4 million barrels per day added to global supply in the last five years) that they created a supply glut.
Said glut began to take its toll last July, as supply outpaced demand and prices started their fall to the lows of December and early January. Prices dropped nearly 60% between June 2014 and January 2015.
With that drop came a drop in the profitability for frackers. These companies only existed because prices had erupted to all-time highs — but once the glut they created caused prices to drop, they essentially ruined their business models.
This means shale oil companies will continue on this painful, self-effacing trend. Every time the price goes up, these companies will be able to enhance production, which will, in turn, force prices back down and hurt profits.
Nice to have a new investor posting here. With an initial attitude like yours " Am new to this, and see there is a lot of info but it's a guess as to how accurate." I am sure you will do will as you seem to have grasped the number one principle ... DO NOT TRUST FREELY GIVEN ADVICE ON BULLETIN BOARDS.
Then go on to follow the second rule, CHECK EVERYTHING FOR YOURSELF, that is believe no-one until it checks out to be the truth and it makes sense to you, if you don't understand it all the more reason to check it out.
Another one is do not trust overly optimistic forward looking statements, that is one very important consideration because they often arrive in official looking documents and presentations although the document should tell you to be cautious about any forward looking statement.
That was a great link, thank you. I have re-posted it just in case it was removed by a robot on some sort of technical/censorship issue.
It appears that the article was written on 6th Feb.and said "According to the schedule, in the next week will demobilization rig and other equipment used for the drilling. Then will be delivered the equipment necessary to carry out the tests. Car traffic in the vicinity of Szymanów may be times during this period increased."
Please keep me/us updated with any new research you have.
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