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OPEC Deal Shaky While U.S. Shale Prospers

Rig

Friday March 17, 2016

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Top shale companies finally cash flow positive

(Click to enlarge)

- The U.S. shale industry is arguably healthier than it has ever been – a surprising argument given that they are just emerging from a nearly three-year bust.
- But shale drillers by and large were not generating positive cash flow even when oil prices were in triple-digit territory. The drilling frenzy between 2010 and 2014 was fueled by debt.
- Continental Resources (NYSE: CLR), for example, is expected to finally post positive cash flow in 2017 after years of running up debt on negative cash flow.
- But they are not in the clear yet. Oil prices could fall again if the newfound strength in the shale industry leads to a steep rise in output this year. As Bloomberg Gadfly notes, Continental’s CEO Harold Hamm was uncharacteristically cautious in his comments to the industry crowd in Houston last week, warning drillers not to ramp up too quickly for fear of “killing” oil prices.

2. Contango strengthens

(Click to enlarge)

- Oil prices have hit a rough patch again, and the contango has not only returned but…

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