Authored by Phil Cohen
Demand for oil is down. Falling oil prices are a huge help to the transportation industry, consumers and many other small businesses. But, for the US oil and gas industry & the jobs that depend on it, declining oil prices are taking their toll.
According to an analyst for the oil and gas industry, once oil falls below $90 per barrel, between 30 to 60 percent of shale gas production companies risk outspending their cash flow. Current oil prices are around $80 per barrel. It’s estimated that the United States fracking industry will merely break even at $75 a barrel. Should prices continue to drop, many small to mid-sized oil and gas companies could quickly find themselves in a cash flow squeeze.
Energy is a huge driver of the US economy and the shale industry has produced many new job opportunities for Americans. If oil continues to decline in price, it could cease operation for many onshore fracking wells that lack the working capital to continue drilling. Hydraulic fracturing is more expensive than typical drilling, so shale gas companies will be the first to take a hit if the cost of production outweighs profits.
So what’s ahead for the US shale gas industry?
Opinions are mixed. Some say if the global economy continues to slow, we can expect to see low oil prices hang around for a while. On the flip side, many experts believe that crude oil prices will quickly rebound, especially as oil producers cut back on exploration and new production, causing supplies to tighten up.
Cash flow solutions for the oil & gas industry
Factor Finders offers cash flow solutions to oilfield service providers and energy companies through accounts receivable factoring for oil and gas producers. When cash flow gets low, oil and gas factoring companies can provide instant cash for outstanding receivables. Factoring may be the answer to getting through patches of turbulent cash flow.