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Thursday, May 28, 2015

Shale Oil Is a Ponzi Scheme

Shale Oil Is a Ponzi Scheme Bcause of Its Unique Production Process

Shale oil is unique in the way it is produced because it yields a very front-loaded result. Shale producers get 50% or more their oil in the first year that a well is in service. The companies continuously drill new wells to be at peak production levels and keep the cash flow strong. As a result, there has been a massive amount of capital that has come into the market to chase these investments. Ultimately what happens is something that Greenlight Capital's David Einhorn spoke about at the Sohn Investment Conference in May in terms of enterprise and capital inflows and outflows. Essentially, the industry looks at cash coming out of the business and doesn't look at the cash that has to go into the business. Dan Dicker, senior energy analyst at TheStreet, tells Jill Malandrino that he likens shale oil to a Ponzi Scheme. Fundamentally, the oil supply glut remains strained. As crude moves lower, producers dial back on production and hope for a demand increase and draw downs in supply. But when crude moves higher, producers rush to get wells back on line flooding the market with new product which stresses the supply glut.

Wednesday, May 27, 2015

Shale Boom, Shale Bust - The Myth of Saudi America

Low oil prices will last for several more quarters and there will be massive changes in the oil patch that will accompany this very slow recovery. Understanding the reasons for the collapse in oil are critical for positioning oneself correctly inside the oil and gas sector and taking advantage of the next boom in prices, according to TheStreet's energy contributor, Dan Dicker. Dicker makes a case for the limited resource that shale oil represents and the issues that have been highlighted by the recent collapse in oil prices.

Gold Headed for Longest Losing Streak Since March

May 27 -- Chris Gersch, director of strategy at Bell Curve Capital, discusses the price of gold and the U.S. dollar. He speaks on “Market Makers.”