Today’s Pickup: Shale oil producers are stuck with serious cash flow issues

Good day,

Companies in the shale oil exploration business have been staring down the barrel for quite some time now, as their operating cash flow remains lower than capital expenditure incurred. Only nine out of 33 shale oil exploration and production companies have shown positive cash flow this year till date, and this is concerning as companies have failed to show profit even with oil prices climbing steadily from 2016.

The increased debts being accrued by the shale companies mean that they do not have the bandwidth to invest in future production or well acquisitions, which would further dampen its prospects on showing positive numbers in its quarterly sheets. Add to this, the shockingly decremental rates of oil production in shale wells, which unlike other oil production sites, see a 70 to 90% fall in production within three years from production start.

These factors put together would mean rapidly declining investor trust, which might turn catastrophic unless shale oil production companies figure out a way to keep production levels high, while turning in positive cash flow.  

Did you know?

Ships contribute about 13% of total sulfur-dioxide emissions by burning heavy fuel with sulfur levels 2,000 times higher than the permitted level for cars on U.S. highways.

Quotable:

“Air cargo has continued to grow, albeit slower than last year, owing to a lack of access to new freighter capacity which has hindered growth. We are predicting about 4% growth this year over last year, and the five-year growth rate is approaching 5%. This is much better than the last decade when growth was approaching 3%, which had to do with the fact that we had an economic downturn in 2008-09.”

– Tom Crabtree, regional director of Airline Market Analysis at Boeing

In other news:

U.S. and OPEC flood oil market ahead of midterms

A flood of new oil supply from OPEC, Russia and the U.S. has suppressed oil prices, but many analysts think that a continued surge in output is unsustainable. (Oilprice)

In the race between humans and robots, humans are often winning

Some companies find it more efficient to use a workforce of people, rather than make sizable investments in automation that risks being wasted if the economy slows. (Wall Street Journal)

Package delivery robots coming to the Bay Area

Autonomous delivery robots made by Starship Technologies will deliver packages to urban dwellers in the Milton Keynes area of the U.K., and will expand to the San Francisco area by the end of the year. (Supply Chain Dive)

IBM struggles to sign up shipping carriers to blockchain supply chain platform

Speculation that running joint venture with shipping giant Maersk might be off-putting to rivals. (The Register)

U.S. factory orders increase more than expected in September

New orders for U.S.-made goods increased more than expected in September, but softening business spending on equipment suggested the manufacturing sector could be slowing. (Reuters)

Final Thoughts

Subaru Corp. has announced the recall of 400,000 vehicles globally to repair an engine part that could cause stalling. This had reflected on its quarterly earnings last week, when the company cut down on future prospects by saying it expects an operating profit of $540 million, a reduction of $430 million from its previous projection.

The problem lies in the valve springs of the cars being recalled, which Subaru believes could fracture and cause the engine to stall, leading to accidents. The recall would mainly affect its Forester SUV series, Impreza compact, and BRZ sports car variants. The issue also affects Subaru-made Toyota 86 cars, which account for 80,000 of the recalled units. The repair expenses are expected to prove costly for the automaker, causing Subaru’s market share price to plummet by nearly 7%.

Hammer down everyone!