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Debt Destroys A Shale Giant

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Editorial Dept

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The Shale Bust Has Arrived

1. Shale bust is here

- Shale wells decline somewhere between 70 and 90 percent from their initial peak within 3 years, with the bulk of that decline coming within the first 12 months.

- As a result, the pause in drilling quickly translates into U.S. oil production declines.

- “We just have no new drilling and these decline curves are going to catch up,” Mark Rossano, founder and chief executive officer of private-equity firm C6 Capital Holdings LLC, told Bloomberg. “That hits really fast when you’re not looking at new production.”

- With no drilling at all, U.S. shale oil production would theoretically fall by more than a third to less than 5 mb/d by the end of the year.

2. Bankruptcies to spike

- Between 2015 and 2019, there were roughly 200 bankruptcies in the North American oil and gas sector.

- Through April of this year, there have been another 7 bankruptcies, according to Haynes and Boone, although the value of the debt involved is 2.8 times larger compared to the first quarter bankruptcies in 2019.

- Around 70 companies are on track for bankruptcy by the end of the year with WTI averaging $30 per barrel, according to Rystad Energy. If WTI remains stuck at $30, that total would rise to 150 to 200 by the end of 2021.

- “In our view, we will need WTI prices of $40 to $45 per barrel to eliminate the upcoming explosion in the number of financially distressed US E&Ps,…





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