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Message: REUTERS ...US Fracking Industries ..
Realities of US Fracking Industry
Reuters reported: "The group's cash flow deficit has narrowed to $945 million as U.S. benchmark crude hit $70 a barrel and production soared."
The promoters tout fracking as an economic miracle for the U.S. economy, yet the industry needs about a billion dollars of debt and capital injections every quarter to operate in addition to the revenue they make selling oil and gas.
The industry talks up their low "break-even" numbers and how great the economics of some individual wells are, yet somehow the companies themselves keep losing money quarter after quarter and year after year.
The explanation is actually simple: shale companies are not counting many of their operating expenses in the break-even calculations. Convenient for them, but highly misleading. The companies do not factor in the actual costs of running their business.
The Wall Street Journal explained the flaws in the fracking industry's questionable claims:'break-evens exclude such key costs as land, overhead and transportation.' Other tricks, The Wall Street Journal noted, include companies only reporting the break-even prices of their most profitable area (known in the industry as a sweet spot) or using artificially low costs for drilling contractors and oil service companies -- reporting only the lowest cost paid during the past quarter or year rather than the current cost or even the average cost during the reporting period.
335 energy producers, oil field service companies and pipeline operators in North America have gone bankrupt since early 2015; sticking lenders and investors with over $70 billion in losses.
Analysts said the financial fallout of the 2015-2016 oil bust was worse than the internet-telecom bust of the early 2000s.
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