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U.S. Shale Continues To Struggle

Friday July 26, 2019

1. Shale finances still unimpressive

- In the first quarter, an EIA survey of 43 U.S. oil producers finds a deterioration in cash flow of a combined $1.2 billion compared to the first quarter in 2018. Much of that can be pinned on the $8-per-barrel decline in prices over that time period.

- Notably, aside from mostly breaking even in the middle of 2018, the 43 companies have been cash flow negative for years.

- But year-on-year cash flow had been steadily improving since 2016…until the first quarter of this year.

- Liquids production from the 43 companies jumped by 0.7 mb/d in the first quarter and capex declined by $0.3 billion.

- The shale industry, under pressure from shareholders over the last year or two, has begun to prioritize shareholder payouts. The 43 companies spent $4 billion on shareholder distributions in the first quarter, or 31 percent of cash flow from operations. In 2018, the companies had only spent an average of 28 percent.

2. Water is big business in West Texas

- Drilling in the Permian basin is putting stress on the region’s scarce water reserves.

- The median water use per well used in oil drilling in the Permian surged from 2 million gallons to over 11 million gallons between 2012 and 2016, according to the Wall Street Journal.

- Drillers spend between 50 to 75 cents per barrel of water, according to Bluefield Research, which translates to about…




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