The Shale Defaults Begin Here: Banks Quietly Shrink These 25 Companies' Credit Facilities

Tyler Durden's picture

Everyone knows that at $35/barrel oil, virtually every US shale company is cash flow negative and is therefore burning through cash and other forms of liquidity such as bank revolvers and term loans, just as everyone knows that should oil remain at these prices, the US shale sector is facing an avalanche of defaults.

What is less known is who will be the next round of companies to default.

One good place to get an answer is to find which companies' bankers are quietly tightening the liquidity noose (because they don't want to be stuck holding worthless assets in bankruptcy or for whatever other reason), by quietly reducing the borrowing base on existing credit facilities.

It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the US, leading to tens of billions of defaults junk bonds over the next 12-18 months.

So, without further ado here are 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners.

Source: Bloomberg

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CHoward's picture

They better start looking in the executive office's couches for loose change - they're going to need it.

38BWD22's picture



I just saw The Big Short.  Highly recommeded, but you will not leave with a smile.

Reminded me, again, why I have no faith in S&P, Moody's, etc.

Kirk2NCC1701's picture

It's just a BTFD bonanza for the Chinese and Sauds.

Just as I predicted months ago.

Escrava Isaura's picture



Ohh boy! You let your ego blinds you:


FIRST: How do you explain the 80’s? And why that the Saudis didn’t buy US oil companies back then?

Get this over your head: Petrodollar/Geopolitical. If Russia, with the help of China (forming Eurasia), if put into action, without dollar loans, the dollar will no longer be needed. GOT IT?

"Give me control of money and I care not who makes it's laws." — Mayer Amschel Bauer Rothschild .


SECOND: Shale is not oil

Condensate versus conventional oil (CvsC)

What If There Is Peak Oil?


Wulfkind's picture

Agreed.  The shale companies that are about to get schlonged this year will either be bought up by (a) bigger shale companies (b) Goldman Sachs or some other TBTF (c) one or more of the big boys like Exxon, if for nothing else but the land rights.  Or a combination of all three.

38BWD22's picture



Shale will be worth something off in the future.  Someone will get a bargain if they buy at the bottom at the right price.*

* Making an assumption that the banksters don't screw ya...

Wulfkind's picture

Oh....I think its safe to assume they will. 

But I wouldn't be so sure about shale being worth something in the future.  When you have  enough boom and busts people and even banks get tired of the whipsaw.  They'll just say fuck it and never return in large enough numbers to make a difference.


Reggie Dunlop's picture

Linn has an EPS of -7.03ish.

Who saw this coming.....

mayhem_korner's picture



LOL.  That "ish" is well played. 

KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) Jan 5, 2016 7:51 PM

Fee simple asset ownership (from money printed out of thin air).

Dr. Venkman's picture

Swift already filed for bkr NYE. Been a pretty steady flow of Oil and gas/expl cos going bellly up. Not quite a tsunami, but we'll get there. 

Wulfkind's picture

Like the slow motion tsunami of Mississippi River Flooding. 

billybobtx's picture

Swift filed BK already. Penn Virginia trading in the low pennies.

Shall I go on?

mayhem_korner's picture



I thought Bonanza Creek Energy was Jed Clampett's.  What did I miss?

Wulfkind's picture

No....Jed worked in the day in which you could shoot the ground with a shotgun and crude came a bubblin' up.  That may have been surface fracking.....but it's not today's fracking.

azusgm's picture

Boom and bust.

Seen this before.

buzzsaw99's picture

WLL down 90%, LINE down 97%.

valley chick's picture

Wasn't there a ZH article some months ago that had a more intensive list of companies that were going to be greatly impacted? Trying to find it in archives but if someone has the link it would be appreciated.

Bossman1967's picture

I live in oklahoma and companies are going bankrupt left and right then there is Chesapeake no Christmas lights all the leds gone and ar $4 a share primed for bnk13 Dont you love it when Obama curtsy to the King got us all this bad ink. Fuck Washington

giovanni_f's picture

GAME starts: Too much and easy money at a time where oil price projections are positive --> asset prices rise --> no yield --> search for higher yield --> junk bonds thrive --> easy money for junk companies (such as tight oil producers)  available --> tight oil production takes off --> junk debt can be paid back with current production as long as oil prices are high --> GAME changes: oil prices sink due to over production and SAUDI gaming --> initially production RISES to compensate lower oil price with higher production --> some assholes think this is resilience, ignoring that it is due to past hedging and production cranked-up-in-panic --> some months pass by without major bankruptcies, again making some assholes believe this means successful adaption by a healthy industry to an adverse environment --> oil prices continue to sink --> junk debt becomes increasingly unavailable  --> bankruptcies set in in earnest --> GAME OVER in the junk bond/junk oil industry --> spill-over to other parts of the economy due to massive debt-asset write-offs--> recession sets in--> policy of easy money re-adopted again --> recession continues and gets more severe --> ... --> current financial systems crashes, middle class gets wiped off the social map, realizing that its entitlements are valid in a world that no longer exists --> those who own real assets which are not forfeited by the government can make a decent living, all others are FUCKED big style --> NEW WORLD ORDER SUCCESSFULLY ESTABLISHED.

RadioFlyer's picture
RadioFlyer (not verified) giovanni_f Jan 6, 2016 5:59 AM


Totentänzerlied's picture

Tight oil was a mega-scam of historic proportions, now the money and the joules are gone, the party is over, and no one has jack shit to show for it.

The overwhelming pleasure one derives from witnessing actual market forces finally smashing their way back into reality and utterly eviscerating the cosmically absurd, fully retarded US "shale miracle" (they called it a miracle because one had to believe in thermodynamic miracles to believe it), the real story is and always was the KSA and the approaching end of its ability to be swing producer. If you think the economic impact from all those unconventional joules never being extracted once the tight oil industry dries up and blows away is going to be impressive, just wait until KSA total exports begin to fall (ELM is a bitch), indeed fall off a cliff at some point as the regime and nation implode, as no one can ever even hope to make up the difference without crude prices TRIPLING on a forward basis when the world already can't afford $40/bbl.

Wulfkind's picture

100% correct.  There was SOOoooo much evidence that tight oil was snake oil from the get go.  But here is the 100% IREFUTABLE PROOF that is was banker derived bullshit from the start.  And this works everytime.

When Cramer touts it as a financial miracle and to "BUY BUY BUY" absolutely know it's bullshit.



Wulfkind's picture

"Bear Stearns is fine......DO NOT TAKE YOUR MONEY OUT OF BEAR STEARNS !"

Sorry.....had a "Rick Perry" moment.   Ooops.

new game's picture

don't forget about the keynsian stimulation via cb's that created the 100/bbl oil in the first place. then there was the hy credit to fund the bubble. and prices stayed at 100 long enough for wall st to reap their rewards before the gravity of the over stimulation worldwide and supply glut routed the whole phenom. classic banker bubble nomics...

tempo's picture

subprime auto loans and $1.4 trillion in student aid most of which will never be repaid...its all the same crap to buy off social unrest.

Mat Cendana's picture

Can or can't afford the prices, people will have to. I'm trying to look beyond the current and near future. There are quite a few variables that can quickly reverse the trend in oil prices. I don't think traders have really priced in the Saudi-Iran tension, and of the escalation that looks likely to follow. 

OldPhart's picture

It seems plausible that Iran would target oil production and distribution facilities in Saudi Arabia.  US would soon be in deep shit, iran/Russia get a higher price and can be choosy on who they sell to.  Saudi Arabia would burn through the rest of their cash and start taking on loans to fund the war.

Gohigher's picture

I vote for a color revolution in KSA. We need regime change. And democracy. You know, for the children.

Wait ...... KSA ?  I meant USSA.

Ras Tanura, 3 cheap old scuds could hit it EASILY.

mayhem_korner's picture least there will be some new domain names freeing up shortly.

Seriously, how do you go into work each day knowing this death-spiral* is waiting for you?


*My scotch says it's a back-inside death spiral. 

new game's picture

next on deck is the auto industry courtesy of da fed and zirp...

eco bubble housing coming too.

these fuckers got the world econ on a perma rollor coaster causing strife to joe blows and ja mama. fucking fed fucks fucking with everyday people lives and livlyhood. all bullshit...

uhland62's picture

Not necessarily, if Volkswagen will have to depart from the US market. One competitor less!

Spare a thought for the Saudi/US friendship!!! Saudis are upsetting the ME when we thought they could not be upset any more. Where's the demand to get rid of the awful dictator in Saudi? Where is the call to not go to Mekka or Medina and deprive them of tourist revenue? They enforce the low oil price and force US companies into default. Friendship!

surf@jm's picture

Obama has blackmailed mama Merkel into throwing the borders open, in exchange for letting Volkswagen to continue selling in the U.S.A...

Dead Canary's picture

Don't sell your Bear Stearns! That's just silly! Don't be silly!

tempo's picture

location and # of employees please.

big rock's picture

Just a note on how/why so many oil companies are showing increases in "reserves". Under current accounting rules they only have to bore (and not complete/frack) a hole, in other words they just have to "spud" the hole, in order to claim the potential oil under ground as a new "reserve". They could be months and probably years away from actual completion and production of the well yet just because they bored the hole they can count that well as new reserves. That's the reason so many companies, especially in the Bakken, are drilling and not completing their acreage. They go to their lenders and say look at us, we just upped our reserves by xxx% when in fact they did no such thing.

big rock's picture

...the list only show oil companies, ie, operators. it's the service companies that are going bust at a rate probably 4 to 6 times higher than the oil companies. i was looking at NES today, nuverra environmental services; they haul oil and salt water, mostly in the bakken but some west texas areas. they have a $500 million note due in 2019. . . . their annual revenue, total revenue, is less than $400million........there are scores of those companies out there.

Wahooo's picture

Buy the frackin' dip.

surf@jm's picture

The FED balance sheet will be measured in quadrillions with the next bank bailouts....

onmail1's picture

Banks are gonna loose

Banks are gonna loose

Banks are gonna loose

Banks are gonna loose


But wait

Banks are gonna get QE

Banks are gonna get QE

Banks are gonna get QE


Cabal banksters have found all the money

Press Ctrl+Alt+Print

bluelabel's picture

ARP is one more.

chilller's picture

I'm sure between the 5 biggest oil companies they can pool enough $$$ to start a nice war in the middle east that pinches off oil output and raised crude price dramaticaly...but will the actors take the bait?

SirBarksAlot's picture

The plot thickens, as the February 2016 NAPE conference hosts none other than Rudi Giuliani and the former head of the Dallas Federal Reserve as guest speakers.

This years theme is "WTF?"