Permian Basin shale oil industry recovering, page-2

Time to bust the BS some of the down rampers are saying:

This article explains it well:

Superficially, the narrative for many has been “Shale oil isn’t economical. The wells deplete too quickly. Just look at the negative cash flow.” But it’s just not quite that simple. Let’s dig a little deeper to gain a better understanding of what has happened, what is happening, and what is likely to happen moving forward.

The Boom-Bust Cycle for Dummies
First it’s important to understand that the oil industry is cyclical, and more importantly to understand the reason that it is cyclical. The long history of the oil industry has been one of boom and bust cycles. During the booms we hear about windfall profits, but during the downward part of the cycle, oil companies lose a lot of money and many people lose their jobs.
So why is the oil industry cyclical? It’s not complex. It is a function of the capital-intensity of the business, and the multi-year lag time in getting projects executed. If you just want the executive summary, here it is. I have arbitrarily started this at the bottom of the cycle, and the 5 stages I have described here could be described at a more granular level with more stages:

• Stage 1. At the bottom of the cycle, there is excess oil supply which results in low oil prices and a period of under-investment by the oil industry. Low prices also stimulate higher demand.
• Stage 2. Demand grows faster than supply, leading to a tightening supply/demand balance. Oil prices begin to rise.
• Stage 3. Rising oil prices mean oil companies start making money, and they ramp up investments in new projects. The higher prices rise and the longer they remain high, the greater the investments. New oil plays become economical, and new oil companies are formed. Some of these companies employ a lot of financial leverage, which is OK until…
• Stage 4. Higher prices curb demand growth, and new projects begin to come online. Production growth begins to outstrip demand growth.
• Stage 5: Prices collapse, and the oil industry contracts as capital expenditures are slashed. We return to Stage 1. The cycle is complete.

Keep in mind that some of these steps overlap in time, partially because the oil industry is made up of so many different companies with many different management styles. One company may still be investing heavily while another has already slashed spending in anticipation of falling prices.

What has happened to AKK is not unique to them - it is industry wide.

Where in the cycle do you think AKK is?