When will tight oil make money?
A great analysis from Wood Mackenzie. Three reasons why one would not expect to see positive cash flow in the shale oil industry (think Amazon in the early years):
- early life
- high growth
- capital intensive
Operators have spent a lot of money:
- acquiring positions
- investing in infrastructure
- getting up the learning curve
The shale oil industry is in early stages; much of this is structural, not cyclical.
The analyst gets specific regarding oil prices:
- $50 oil or better: positive cash flow
- $45 - $50 oil: operators will make production/growth targets but at expense of cash flow
- below $45: operators will have to change their behavior, but it would take a full 12 months of $45-oil, and Wood Mackenzie thinks that is unlikely to happen
Disclaimer: this is not an investment site. Do not make any
investment, financial, job, travel, or relationship decisions based on
anything you read here or think you may have read here.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.