“Motherfrackers” and Big Oil Hypesters
Forbe’s contributor Christopher Helman has always been an unapologetic supporter of shales. For instance, only last September he wrote a piece entitled “America’s Energy Outlook is Fracking Great, For Now”. Never mind that oil prices had begun their downward spiral three months prior to this statement. Never mind that every shale gas play in the US with the exception of the Marcellus had already tipped into decline. And never mind that reserve estimates had been repeatedly downgraded culminating with the colossal downgrade of the Monterey shale in California by 96% by EIA. You bet…fracking great!
Christopher Helman, however, is paid to hype Big Oil. And to his credit, he does occasionally mention a few problems as he tries to gloss over their implications. For instance, in this same article dated September 2014 he states:
“At the same time, they have to get their volumes up high enough that they can generate enough free cash flow to pay back their debt. If you can’t drill economically it all unravels.”
Yes, it does.
There’s just one problem. Shale operators have never been able to get their volumes up high enough to generate free cash flow though Mr. Helman leaves one with the impression that they have. But they haven’t…at least not since 2009! That’s right, 2009.
Examining a universe of 21 shale operators including all the usual suspects, free cash flow has been overwhelmingly negative since at least 2009. Only three companies of the 21 have ever had positive free cash flow during that time frame. And even then it was nominal and not consistent.
Mr. Helman, however, glossed over this but went on to state with his usual hyperbole that:
“What is news is that the boom is showing no signs of slowing down.”
Well, not exactly!
…click on the above link to read the rest of the article…
