Oil price slide claims first victim: Shale gas company declares bankruptcy

Author: Eamonn Sheridan | Category: News

Overnight news from Australia

  • Red Fork’ is a Perth-based company … drills for shale gas in the United States, producing oil and gas.
  • Completely exposed to the US shale gas industry
  • Red Fork’s major lender, Guggenheim Corporate Funding, called in the receivers this week

Macquarie private wealth resource analyst Bevan Sturgess-Smith said most players in the shale gas industry were heavily in debt:

  • “Their costs of production are a bit higher, they’ve only been in the game really for a few years so their debt structure is a little bit higher than other companies, more mature companies,” he said.
  • “Those two things are really putting pressure on them so with the price where it is they’re just not making any margin.”

Analysts say shale gas companies are not the only ones under threat, with lenders also at risk. .. the banks were over-leveraging the industry:

  • “They’ve lent a lot of money to the industry on the basis the oil price would be $US100 forever, they bet OPEC would continue to adjust its supplies to keep the oil price at that level”

More to come … and I don’t mean on this post :-(

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