RISK VERSUS PROFIT IN FRACKING
SHALE FORMATIONS
By www.ProfitableInvestingTips.com

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As oil prices fall we would like to
look at risk versus profit in
fracking shale formations.

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The United States crude oil
production is near a four decade
high.

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With production at historic highs
the U.S. imported 3.7 billion
barrels of oil in 2014 as opposed
to 5 billion barrels of oil in 2006
according to the U.S. Energy
Information Administration web
page for U.S. Imports of Crude
Oil and Petroleum Products.

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That was twenty-six percent drop
in oil imports.

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As a result of the U.S. oil shale
fracking boom and a lagging
world economy the price of crude
oil has fallen substantially.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
Reuters reports that oil is near
an 11-year-low due to excess
supply. Reuters reports the story.

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Oil fell to around $37 a barrel on
Monday, trading within sight of an
11-year low, pressured by excess
supply that has led to prices more
than halving since the downturn
began in mid-2014.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
U.S. crude was trading above
global benchmark Brent, having
earlier in December risen to a
premium for the first time in about
a year following the lifting of a 40-
year-old ban on most U.S. crude
exports.

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“We expect both prices to rise
next year,” said Eugen Weinberg,
an analyst at Commerzbank.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
“A short-term slide can’t be
excluded, due to persisting over-
supplies, negative sentiment and
stronger downside momentum.”

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
Figures from the Organization of
the Petroleum Exporting
Countries imply a glut of more
than 2 million barrels per day,
equal to over 2 percent of world
demand.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
Oversupply is expected to persist
into the earlier part of next year.

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The problem for those pulling oil
from share formation via fracking
is keeping costs low and
production high while staying in
business until the price of oil goes
up.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
Surviving Low Prices

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To a certain degree the problem
for those drillers who are fracking
oil formations is that no good
deed goes unpunished!

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Although the world economy is
slowing it is substantially higher
U.S. oil production and
persistently high OPEC
production that is helping keep
prices down.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
The fracking operations that are
staying alive are using every
possible efficiency they know to
stay in the game until prices come
back up.

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Bloomberg Business reports that
many U.S. operators are running
out of survival tricks as OPEC
refuses to cut production in a
costly game of chicken.

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In 2015, the fracking outfits that
dot America’s oil-rich plains threw
everything they had at $50-a-
barrel crude.

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To cope with the 50 percent price
plunge, they laid off thousands of
roughnecks, focused their rigs on
the biggest gushers only and
used cutting-edge technology to
squeeze all the oil they could out
of every well.

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Those efforts, to the surprise of
many observers, largely
succeeded.

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As of this month, U.S. oil output
remained within 4 percent of a 43-
year high.

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The problem? Oil’s no longer at
$50. It now trades near $35.

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For an industry that already was
pushing its cost-cutting efforts to
the limits, the new declines are a
devastating blow.

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These drillers are “not set up to
survive oil in the $30s,” said R.T.
Dukes, a senior upstream analyst
for Wood Mackenzie Ltd. in
Houston.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
The Energy Information
Administration now predicts that
companies operating in U.S.
shale formations will cut
production by a record 570,000
barrels a day in 2016.

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That’s precisely the kind of
capitulation that OPEC is seeking
as it floods the world with oil,
depressing prices and pressuring
the world’s high-cost producers.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
It’s a high-risk strategy, one
whose success will ultimately
hinge on whether shale drillers
drop out before the financial pain
within OPEC nations themselves
becomes too great.

HTTP://PROFITABLEINVESTINGTIPS.COM/STOCK-INVESTING-TIPS/RISK-VERSUS-PROFIT-IN-FRACKING-SHALE-FORMATIONS
There is still oil to be drilled out of
shale formations for a long, long
time.

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Those companies that survive
should do well into the indefinite
future.

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And those who do not make the
cut this next year will go out of
business.

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Companies with substantial cash
reserves will likely to better and
those with a lot of debt will get
bought out or simply go bankrupt.

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Do your homework before
investing in this market sector.