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| The U.S. shale patch |
By Asjylyn Loder
in New York
The U.S. shale
patch is facing a shakeout as drillers struggle to keep pace with the
relentless spending needed to get oil and gas out of the ground.
Shale debt has almost
doubled over the last four years while revenue has gained just 5.6 percent,
according to a Bloomberg News analysis of 61 shale drillers. A dozen of those
wildcatters are spending at least 10 percent of their sales on interest
compared with Exxon Mobil Corp.’s 0.1 percent.
“The list of
companies that are financially stressed is considerable,” said Benjamin Dell,
managing partner of Kimmeridge Energy, a New York-based alternative asset
manager focused on energy. “Not everyone is going to survive. We’ve seen it
before.”
Some investors
are already bailing out. On May 23, Loews Corp. (L), the holding
company run byNew York’s Tisch family, said it is
weighing the sale of HighMount Exploration & Production LLC, its oil and
natural gas subsidiary, at a loss.
HighMount lost
$20 million in the first three months of the year, after being unprofitable in
2013 and 2012, Loews said it its financial reports. As with much of the
industry, HighMount has shifted its focus to oil after natural gas prices plunged and has struggled
to find sites worth developing, company records show.
Mary Skafidas,
a spokeswoman for Loews, declined comment.
In a measure of
the shale industry’s financial burden, debt hit $163.6 billion in the first
quarter, according to company records compiled by Bloomberg on 61 exploration and productioncompanies
that target oil and natural gas trapped in deep underground layers of rock. And
companies including Forest Oil Corp. (FST), Goodrich Petroleum Corp. (GDP) and Quicksilver Resources Inc. (KWK) racked up interest expense
of more than 20 percent.
Credit: Bloomberg.net
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