Thread on the life cycle of shale
- The shale oil revolution started when oil prices were $75+

- You drill wherever at high prices

- When prices collapse, you move to the core, write down expensive stuff & brag about declining costs & higher productivity. Investors got fooled!

- At low prices, what matters is the operating costs, not the full cycle costs. You survive. But now you have new money from investors. You start drilling...

- In the second market collapse, investors are angry, there is no core to move to. No new investors: Capital starvation!

- The only way to attract new investors is to show a decline in costs and higher productivity. No more core. Technology is almost maxed out! what do you do?

- You merge with another company that has lower cost than and higher productivity! Bingo!

- or you merge with a company where the synergy is high and save on whatever is duplicated.

- Here is the problem: No more core. No more new investors. Mergers and acquisitions to reduce costs and increase productivity are done. What would you do in the third plunge? #OOTT

- What does that mean? the biggest wave of bankruptcies that will hit the US shale industry is during the next market collapse. That will be the killer.

Sorry the whole thread is just to explain this last point. #oil #shale #OOTT