Salient to Investors:

  • Most oil drillers are spending money faster than they make it; an average of $1.17 for every dollar earned in the 12 months ended on June 30, 2014.
  • Only 7 US-listed firms in the Bloomberg Intelligence’s E&P index made more money than it cost them to keep drilling. 56 index companies owed $190.2 billion at the end of June, versus $140.2 billion at the end of 2011. S&P rates the debt of 41 of the companies as below investment grade.
  • Tim Gramatovich at Peritus Asset Mgmt said the shale industry is absolutely going to blow sky-high.
  • Many companies use two sets of numbers to describe their outlook. Proved reserves to the SEC and resource potential estimates to investors and lenders. No one including the SEC regulates what companies say at investor conferences, in press releases or on their websites.
  • Ed Hirs at Hillhouse Resources said discrepancies between proved reserves and resource potential are common in the industry, and investors can get duped.

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