Implode-o-Meter News - Not Even a Wave of Oil Bankruptcies Will Shrink Crude Production

The only moves left for most producers are dividend cuts and share buybacks, Deloitte says. The firm estimates that 175 companies, or 35% of the E&Ps listed world-wide, are in danger of declaring bankruptcy this year.
The conundrum for many investors is that a slew of bankruptcies won't necessarily shrink the global glut of crude. Companies need cash to repay their debts, so their existing wells are unlikely to stop operating throughout the bankruptcy process. In fact, those wells will probably be sold to better-financed buyers, who can afford to keep production going or even increase it.

It's funny to think that a coherent OPEC was actually necessary to the US shale gas sector to keep it from impaling itself on it's own production...

But one flaw in these analyses is that it ignores share decline rates in existing wells. Once the tap of new drilling is turned off, and all the juice is squeezed out of sunk wells through efficiency, ultimately you need to drill new wells. And without prices that support the full well life-cycle, you can't get that. So ultimately, there will be supply declines. There are signs this is beginning, due to major shale field output peaking.

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Not Even a Wave of Oil Bankruptcies Will Shrink Crude Production