February 25, 2019 Read More →

Money-losing fracking industry struggling to attract new investment

The Wall Street Journal ($):

The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money.

Frequent infusions of Wall Street capital have sustained the U.S. shale boom. But that largess is running out. New bond and equity deals have dwindled to the lowest level since 2007. Companies raised about $22 billion from equity and debt financing in 2018, less than half the total in 2016 and almost one-third of what they raised in 2012, according to Dealogic.

The loss of that lifeline is forcing shale companies-which have helped to turn the U.S. into an energy superpower-to reduce spending and face the prospect of slower growth. More than a dozen companies have announced spending reductions so far this year, even as crude-oil prices have rallied more than 20% from December lows. More are expected to tighten budgets as they release earnings in coming weeks.

The drop in financial backing is especially being felt by smaller, more indebted drillers. But even larger, better-capitalized frackers are facing renewed investor skepticism about whether they can keep spending in check and still hit growth and cash-flow targets.

Wall Street support allowed shale companies to persevere through a plunge in oil prices that began in 2014, eventually helping the U.S. surpass Saudi Arabia and Russia as the world’s largest producer of oil, with 11.9 million barrels a day in November, according to the U.S. Energy Information Administration.

More ($): Frackers face harsh reality as Wall Street backs away

 

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