Oil bankrupts will lead to production increase

[NessyOil + 5]

Shale and Small Canadian O&G players will toss in the keys to bond holders and banks quite soon.    Bond holders and banks will take their hair cut, call it 50% and take over new debt free company.  Executives will get 5% ownership in the new company, you know cause they need this expertise.   Now with no debt they can make money at $30 WTI and production continues to increase 

 

Those that are trying to hang on will be forced to cut capex and just speed up the inevitable as they run out of cash

 

This isn't 2016 where there was $100 hedges on the books, costs to cut and debt not due for 4 years.   Russia and Saudi will hope these players actually try to hold on.   Going bankrupt and re starting as debt free co will foil their plans 

[Uduak + 22]

24 minutes ago, NessyOil said:

Shale and Small Canadian O&G players will toss in the keys to bond holders and banks quite soon.    Bond holders and banks will take their hair cut, call it 50% and take over new debt free company.  Executives will get 5% ownership in the new company, you know cause they need this expertise.   Now with no debt they can make money at $30 WTI and production continues to increase 

 

Those that are trying to hang on will be forced to cut capex and just speed up the inevitable as they run out of cash

 

This isn't 2016 where there was $100 hedges on the books, costs to cut and debt not due for 4 years.   Russia and Saudi will hope these players actually try to hold on.   Going bankrupt and re starting as debt free co will foil their plans 

I guess it's true what I've been hearing; that money grows on trees in North America.

Edited March 10, 2020 by Uduak

[Douglas Buckland + 6,308]

“  Now with no debt they can make money at $30 WTI and production continues to increase “

Can you explain your rationale for this comment?

[wrs + 893]

6 hours ago, Uduak said:

I guess it's true what I've been hearing; that money grows on trees in North America.

Not exactly but it is created inside a computer at no cost.

[0R0 + 6,251]

12 hours ago, NessyOil said:

Shale and Small Canadian O&G players will toss in the keys to bond holders and banks quite soon.    Bond holders and banks will take their hair cut, call it 50% and take over new debt free company.  Executives will get 5% ownership in the new company, you know cause they need this expertise.   Now with no debt they can make money at $30 WTI and production continues to increase 

 

Those that are trying to hang on will be forced to cut capex and just speed up the inevitable as they run out of cash

 

This isn't 2016 where there was $100 hedges on the books, costs to cut and debt not due for 4 years.   Russia and Saudi will hope these players actually try to hold on.   Going bankrupt and re starting as debt free co will foil their plans 

The bigger players report ~50% hedges so will continue drilling and fracking on existing projects. No new ones though. 

I don't know if anyone can produce significant volume at $30/Bbl cash cost free of debt and lease payments. But some can at $35 and most at $40. 

So yes, the Russians and Saudis would hope to get the companies zombified so as to curtail further production growth for a prolonged period. But that is not happening. The zombies are going to die and a few like OXY will get zombified. If zombification of the shalers was their goal, they overstepped already and the zombies left over from the original 2000 rig mass drillout will go bankrupt and release their assets free and clear to be operated by stronger companies at cash costs. 

[Prometheus1354 + 178]

Those companies that are far too leveraged and unable to cut costs will fall by the wayside. But that is true in any sector.  But if the Saudis an by extension the Russians feel they can 'drown' US shale and cripple the US economy. Well, as they say "those who don't know their history are doomed to repeat it"...  Guess 2014 is ancient history too the family of Saud.

Yes there will be a retrenching (Chapter 11) of some of the small & mid sized players in the shale patch; allowing them to reach deals with creditors to re-set debt freeing up cashflow allowing them to continue while also bringing about needed fiscal reform.  Some will sell of assets or be absorbed by those with a stronger balance sheet thus bringing about a needed thinning of the herd.  During the boom, too many companies came into the Eagle Ford, Bakken and the Permian thinking they could make a quick buck at little cost.  Wrong.  As Grandaddy used ta say about situations like that (people or company) "That dawg don't hunt"  

[cbrasher1 + 272]

On 3/10/2020 at 5:48 PM, 0R0 said:

The bigger players report ~50% hedges so will continue drilling and fracking on existing projects. No new ones though. 

I don't know if anyone can produce significant volume at $30/Bbl cash cost free of debt and lease payments. But some can at $35 and most at $40. 

So yes, the Russians and Saudis would hope to get the companies zombified so as to curtail further production growth for a prolonged period. But that is not happening. The zombies are going to die and a few like OXY will get zombified. If zombification of the shalers was their goal, they overstepped already and the zombies left over from the original 2000 rig mass drillout will go bankrupt and release their assets free and clear to be operated by stronger companies at cash costs. 

Is that to say that Oxy will not make it through this rough time? They are not acting like it, currently 2 4-well pad fracs going, going to add a third in Big Springs area and 2 rigs going in the area as well.

[0R0 + 6,251]

2 hours ago, cbrasher1 said:

Is that to say that Oxy will not make it through this rough time? They are not acting like it, currently 2 4-well pad fracs going, going to add a third in Big Springs area and 2 rigs going in the area as well.

Oxy is likely to make it but be weighed down by debt, hence "zombified"