Drop in financial backing may slow growth for shale drillers
Thursday, February 28, 2019
The investors that once sustained the U.S. shale boom are turning away from the industry after nearly a decade of losing money, according to The Wall Street Journal. The frequent infusions of Wall Street capital have dried up and shale drillers have to face the prospect of slower growth.
So far this year, more than a dozen companies have announced spending reductions and more are expected to tighten their budgets as they release earnings in coming weeks. While the investment reduction is especially being felt by smaller, more indebted drillers, even larger drillers with more capital are facing investor skepticism about whether they can keep spending in check and still hit growth and cash flow goals.
Even Banks, which have provided financing when producers spend more cash than they take in, have been forced to tighten their standards for lending to oil and gas companies.
The reality for shale drillers reduced funding all around, meaning less spending is likely and slower growth.
Learn more: The Wall Street Journal > Frackers Endure Reckoning on Wall Street
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Shale FAQ
What is fracking?
Fracking is a slang term for hydraulic fracturing. Fracturing is a process by which highly pressurized fluid is pumped thousands of feet into the ground to fracture rock formations. The goal is to release the natural gas that’s locked inside the rock.
Is it safe?
What most concerns people about fracturing is ground water contamination. The worry is that fractures underground, caused by the process, will extending upwards and into aquifers, releasing gas and chemicals into the ground water supply. There’s been no confirmed reports of such a thing happening. Though surface spills and drill site blowouts can lead to localized environmental concerns.
Will my water catch on fire?
Flammable water is caused by the release of methane gas into a drinking water supply. Methane gas occurs naturally and can be released by any kind of drilling, including water wells. In Pennsylvania officials fined Chesapeake Energy $1 million for contaminating ground water with methane. It was determined that the company had not properly cemented it’s boreholes and gas migrated up the well, between rock and into aquifers.