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VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

05 June 2019

First, a health warning. This article is about recalcitrant, inept and quite possibly corrupt Nigerian politicians and government ministers. It is certainly about incompetence and misconduct in public office. It...

DISASTER AS UNEMPLOYMENT LEAPS BY 30%  TO 20.9m

DISASTER AS UNEMPLOYMENT LEAPS BY 30% TO 20.9m

29 May 2019

Nigeria is sleepwalking into a disaster which has the potential to unleash instability, insecurity and crippling hardship. Unemployment is always a cause for concern, it is the clearest indication that...

 NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

08 May 2019

Working on the assumption that the Minister of Labour and Employment, Senator Chris Ngige has not been misquoted it is difficult to understand his recent pronouncement and what now seems...

NIGERIA ANOTHER MOU ANOTHER DAY

NIGERIA ANOTHER MOU ANOTHER DAY

01 May 2019

Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the Nigerian National Petroleum...

NNPC REFINERY WOES 2019

NNPC REFINERY WOES 2019

24 April 2019

The Nigerian Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has not unpredictably, stated that Nigeria’s continuous subsidy of petrol consumption means the Nigerian National Petroleum Corporation (NNPC) will...

NIGERIA OPEC STAND FIRM

NIGERIA OPEC STAND FIRM

28 March 2019

Nigeria and other member countries of the Organisation of Petroleum Exporting Countries (OPEC) as well as their non-OPEC allies led by the Russian Federation have said they are committed to...

PALM OIL PRODUCTION UNDERPERFORMS

PALM OIL PRODUCTION UNDERPERFORMS

18 March 2019

PALM OIL PRODUCTION A MEAGRE PERFORMANCE Nigeria from gaining a substantial share of the global oil palm industry now worth $62 billion annually, casting doubts on government’s ability to grow...

NIGERIA REFINING THE VISION

NIGERIA REFINING THE VISION

18 March 2019

NIGERIA REFINING THE VISION Nigeria is the only OPEC member country that imports gasoline (PMS) and holds the dubious distinction of being the largest importer in the world. The Nigerian...

IS THE PGB FATALLY FLAWED?

IS THE PGB FATALLY FLAWED?

18 March 2019

IS THE PIGB FATALLY FLAWED? Ten years after the Petroleum Industry Bill began its tortuous odyssey which has included the Bill being broken into four portions, both houses of the...

CBN PUMP UP THE T-BILLS

CBN PUMP UP THE T-BILLS

18 March 2019

CBN PUMP UP THE T-BILLS The Central Bank of Nigeria (CBN) plans to raise a total of N1.809 trillion from the debt market, in the first quarter of 2019.This is...

TIN EXPORTS NIGERIA

TIN EXPORTS NIGERIA

17 March 2019

TIN EXPORT NIGERIA Synterra are able to export high grade tin ore from Nigeria. We agregate the Mining production of a number of artisanal miners and consolidate volumes for exportSynterra...

BERYLLIUM MINING OPPORTUNITIES

BERYLLIUM MINING OPPORTUNITIES

17 March 2019

The Nigeria Solid Mineral and Mining Sector has in effect made the great leap forward which will now allow investors to take advantage of the vast mineral potential Nigeria possess....

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Monday, 22 April 2019 21:37

SHALE THE DOTCOM THAT WEARS ROBES

Written by

In the past decade, the shale-fracking revolution has made the U.S. the world’s largest oil-and-gas producer and reshaped markets. Despite this shale has been a dreadful impulse for most investors. For example Since 2007, shares in an index of U.S. producers have fallen 31%, while the S&P 500 rose 80%. Energy companies in that time have spent over $280 billion more than they have generated from operations on shale investments.

Recently the U.S. government has cut its oil production forecast for the first time in six months as drillers scale back in smaller shale plays in the U.S. , the Permian and the Gulf of Mexico. Whilst crude output is still anticipated to reach record levels, the Energy Information Administration (EIA) revised down its 2019 forecast to 12.3 million barrels a day -- 110,000 barrels-a-day lower than the previious forecast. In 2020, production is expected to reach 13.03 million barrels a day --

170,000 barrels a day lower than last month’s estimate.

As a group, U.S. shale companies have been forecasting they are on the brink of generating free cash flow—taking in more revenue from operations than they spend on new investments—for the first time since 2014, when oil traded at over $100 a barrel. Since then, they have largely repeatedly moved those goal posts back.
Wood Mackenzie estimates that if oil prices hover around $50, shale companies won’t generate positive cash flow as a group until 2020. Even then, only the most efficient operators will do well, says Craig McMahon, a senior vice president of research for the consultancy.

Yet CEO's have championed a business model which places emphasis on increased production over profitability and free cashflow. Not only brcause such a model supports CEO remuneration but any conventional model would illustrate nothing other than insolvency and illiquidity. Shale palys have benefited from cheap money mainly as a consequence of the recent financial crisis and the lack of yield in fixed income. Private equity has funded over 30% of the investment in hydraulic fracking in the last decade, yet there appears to be no sign of the sector delivering returns.

The Trump Administration seems to be preoccupied by creating historic legacy via the global oil market, yet fails to recognise the inherent schitozrenia in its foreign policy decision making. The contigent liability which the fracking industry now constitutes on the financial system is to big to bail and needs $80/b oil. Unless the Fed are prepared to keep interest rates low the debt is a ticking time bomb. Recently there has been clear indications by the Fed that it is their intention to unwind QE by hiking rates and tightening momentary policy. This will have a catastrophic effect on Shale, forcing many junior E & P's into extinction and creating systemic downside risk.

Much has been made about OPEC by the Trump administration and their allegation of an 'anti-competitive ' cartel, yet US Shale has increased production and seized market share only as a consequence of QE in the US an unfair competitve advantage. In essence the negligable cost of money in the US has kept Shale in business and skewed the E&P playing field. Given the current Administrations pre-occupation with gasoline pump prices, it seems that inconruent that the current US Administration would be willing to bail out an industry which requires WTI oil prices to remain above $80 to provide investors a return.

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