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Bloomberg reports former EOG Resources (an oil and gas company) CEO Mark Papa sees oil prices lagging for the next 16-24 months.
It’s going to send a “wave of restructurings and bankruptcies” throughout the sector.
Papa is a legend in the oil and gas space. He led the move to use horizontal drilling and hydraulic fracturing (or “fracking”) to unlock enormous quantities of oil from shale rock. That put the U.S. back in the top slot in world oil production.
Papa said even the companies that don’t go bankrupt will be “grievously wounded financially.” He’s right…
According to Zero Hedge, 80 U.S. shale oil companies are now cash-flow negative with oil around $30 per barrel. There’s no way most can survive up to two more years of low oil prices.
These companies share $325 billion in debt between them. That’s a lot of banks and bondholders whose “assets” are fast becoming liabilities…
Bottom line: Just like Venezuela, U.S. oil exploration and production companies’ fates rest 100% on the price of oil. Bankruptcies and debt defaults in the space will place even stronger deflationary pressure on the economy. That will send the U.S. dollar even higher… and add more momentum to The Great Unwinding.
It’s why Tom says it’s time for investors to focus on “maximum defense.”