Fracking In 2018 - Another Year Of Pretending To Make Money
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On the edge of the Permian in New Mexico, The Albuquerque Journal reported the industry is “on pace this year to leap past last year’s record oil production,” according to Ryan Flynn, executive director of the New Mexico Oil and Gas Association. And yet that oil has at times been discounted as much as $20 a barrel compared to world oil prices because New Mexico doesn’t have the infrastructure to move all of it. Who would be foolish enough to produce more oil than the existing infrastructure could handle in a year when the industry promised restraint and a focus on profits? New Mexico, for one. And North Dakota. And Texas.
In North Dakota, record oil production resulted in discounts of $15 per barrel and above due to infrastructure constraints. Texas is experiencing a similar story. Oilprice.com cites a Goldman Sachs prediction of discounts “around $19-$22 per [barrel]” for the fourth quarter of 2018 and through the first three quarters of next year.
Oil producers in fracking fields across the country seem to have resisted the urge to reign in production and instead produced record volumes of oil in 2018. In the process — much like the tar sands industry in Canada — they have created a situation where the market devalues their oil. Unsurprisingly, this is not a recipe for profits.
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However, Reuters recently analyzed 32 fracking companies and declared that “U.S. shale firms are more profitable than ever after a strong third quarter.” How is this possible? Reading a bit further reveals what Reuters considers “profits.” “The group’s cash flow deficit has narrowed to $945 million as U.S. benchmark crude hit $70 a barrel and production soared,” reported Reuters. So, “more profitable than ever” means that those 32 companies are running a deficit of nearly $1 billion. That does not meet the accepted definition of profit.
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https://www.desmogblog.com/2018/12/18/fracking-finances-record-oil-production-fuzzy-math