The following charts and information are obtained from www.silverdoctors.com
Chart 1 shows that the highly leveraged shale oil industry in the US could face further headwinds when the redemption of bond in 2020 could double that of 2018. The sector is being kept alive by bankers who are too eager to lend and oil barons who are too eager
As oil continues to hover in the US$40s range these companies could face further erosion of cash flow.
Forget what they say that they could break even at US$30 - US$40 per barrel. That's just the production cost. Cost in the capital investment and cost of financing the debs, many are actually cash flow negative.
In Chart 2 and 3 you can see how precarious the situation is. One shows that 75% of the cash flow from the shale oil companies is used for debt servicing, the other the interest expense of one of the major player, Continental Resources. As you can see, the interest expense has gone parabolic
Its just a matter of time when these companies fail under the weight of their debts.
So exercise prudence and stay out of this sector.
Chart 1
Chart 2
Chart 3