Debt could force oil companies to act come spring
Friday, December 26, 2014
Banks will reassess credit conditions in April, which may limit how much money companies can borrow, according to Fuel Fix.
If oil prices remain low by spring, banks will look for oil companies that have too much debt and force them to sell their assets or their companies.
Oil companies have borrowed billions of dollars in leveraged loans, which is a risky type of debt. Plus, many oil firms spend much more than they actually have in order to keep wells in production.
From Fuel Fix:
“Oil companies typically need 20 to 30 percent more money than their cash flows allow to finance their capital expenditures, but if they can’t spend at higher levels, their pre-tax cash flows will decline.”
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Shale FAQ
How often do royalty payments come?
Depending on the company, royalty payments can arrive monthly or quarterly.
Are my royalty payments transferable?
Yes. If you plan on selling your property, notify the gas company that is leasing your land and your realtor. They will make arrangements to allow the royalty payments to transfer to a different land owner.
What are royalties?
Royalties are payments from the gas company to the landowner as part of a lease agreement. Royalties payments cannot begin until production begins. The payments are dependent upon the market price of the resource.