Ann: New Wet Gas Discovery at Varanus South-1, page-12

Hi Striebs,
I think we are making a very similar point. Your point about what the majors are doing is actually part of the process, I think. You'd imagine they will snap up the shalers that go bankrupt.

There is much uncertainty about at what price debt burdens of the shalers become unsustainable (i.e. identifying the point at which a bubble is pricked is always difficult). But there is no doubt, however, that many shalers are highly leveraged, and that interest rates are likely to go in one direction. Sure official (fed) rates are unlikely to go up much. More likely, there will be a re-assessment of risk in the (junk) bond markets and bank debt markets (i.e. a sector specific re-rating). I think OPEC know this, and will squeeze hard y doing not much so that the long-term equilibrium price is higher than it might otherwise be (i.e. by putting marginal shalers out of business).

But there are so many unknowns, I admit. The core one is that actual average cost per barrel of production from shale in the US, which now has a large influence on the floor price for oil. This has been occluded by cheap finance and high risk appetite, as well as the diversity of the sector.