U.S. shale producers still struggling to find a profitable path

first_img FacebookTwitterLinkedInEmailPrint分享OilPrice.com:The financial struggles of the U.S. shale industry are becoming increasingly hard to ignore, but drillers in Appalachia are in particularly bad shape.The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said. Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.The outlook is not encouraging. The gas glut is expected to stick around for a few years. Bank of America Merrill Lynch has repeatedly warned that unless there is an unusually frigid winter, which could lead to higher-than-expected demand, the gas market is headed for trouble. “A mild winter across the northern hemisphere or a worsening macro backdrop could be catastrophic for gas prices in all regions,” Bank of America said in a note in October. [Nick Cunningham]More: Shale’s debt-fueled drilling boom is coming to an end U.S. shale producers still struggling to find a profitable pathlast_img read more