The Market And Energy Page, Part 6, T+210 -- August 18, 2017

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

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