America's Cash Flow Negative Energy Companies Have $325 Billion In Debt Among Them

Tyler Durden's picture

With the topic of distress among U.S. oil and gas exploration and production companies becoming more important with every passing day that oil not only continues to drop, but certainly fails to rebound to levels that allow US energy companies to return to a cash flow positive state, we would like to show just how much debt is at stake.

To do that, drawing inspiration from a tweet by J Pierpont Morgan, we have conducted a quick CapIQ sort through all US energy companies - both public and private - that have at least $100 million in annual revenue, and whose EBITDA less CapEx was a negative number in the LTM period.

To be sure, this gives listed companies the benefit of not only higher EBITDA in the early quarters when the drop of oil was not as severe, but also of oil price hedges. As such as the true negative cash flow going forward assuming no rebound in the price of oil for the foreseeable future will be far worse as the benefit of the base effect dissipates with every passing quarter and as oil price hedges, which have so far cushioned the oil price blow, are unwound.

Here are the results:

  • There are roughly 80 U.S. companies that had $100mm in LTM revenue and that had negative FCF or EBITDA less CapEx.
  • The combined market cap of these 80 companies is just shy of half a trillion dollars.
  • The combined Total Enterprise Value of these 80 companies is $775 billion.
  • The combined debt of these 80 companies is $325 billion.

None of these companies are bankrupt, yet. As a reminder, putting as many of these companies out of business, and thus slashing non-OPEC oil production (as OPEC forecasted in its latest bulletin earlier today), is the primary motive behind Saudi Arabia's relentless pumping spree.


There is just one problem with the Saudi plan: even assuming all of these companies file Chapter 11, all that would happen is their debt would be wiped out, with the existing creditors getting the equity keys, and becoming the new owners of streamlined, debt-free corporations. This would means that the All In Cost Of Production would plunge as no debt payments would have to be satisfied with the free cash flow. Meanwhile, the entire existing E&P infrastructure would still be in place and ready to pump as before.

This means that after the default and debt-for-equity deluge, US shale would be able to pump even more at far lower breakeven costs, forcing Saudi Arabia to overproduce for even longer ultimately shooting itself in the foot when its reserves run out!

Of course, none of this is any comfort for those who have exposure to the pre-petition debt, which may explain why various regional Feds are suddenly so very defensive when it comes to US banks and other lenders who are on the hook when the default tsunami finally hits.

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Lumberjack's picture

Valero has performed quite well. That said, what really peeves me off is How SUNE, TERP and GLBL keep skating.....

Occident Mortal's picture

I'm amazed that they are only negative EBITDA with capex.

Rainman's picture

' Houston .. we have a problem '

Xibalba's picture

Is Dick Cheney affected?  that's all I really care about. 

mandalou's picture


You are assuming the Saudi's are the one's pulling the strings to bankrupt these companies. You know better. Again you need to ask the FED this question along with the others in your previous article when Dallas Fed replied. It is the FED and its owners who are trying to get hard assets by theft as usual.

Handful of Dust's picture



"It's contained."



U4 eee aaa's picture

This probably explains why Wells Fargo has loaned so much to them. Buffett hunting for oil?

Antifaschistische's picture

Here's the other point....people scratch their head driving around Houston (well, no the 90% of it that's ghetto) but the 10% where the 1% of the 10% are building 15000 - 20000 sq ft mansions along Memorial Drive, etc...

....the point is....the money to build those homes came from the Fed and the Banking Debt Bomb Bubble....just like Larry Ellison's Island Purchase.   It's all the damn Fed's free money give away...and it will be be the taxpayers left to clean-up.   FINE....I want these homes liquidated when it all goes up in smoke.

ersatz007's picture

Theft...somehow that word makes me think my tax dollars are involved. 

Soul Glow's picture

He's on his sixth bionic heart.

nuubee's picture

How is Gasoline so cheap, but airline tickets have not decreased in price?

Gougers are everywhere.

sun tzu's picture

Water is half a cent a gallon unless you are stupid enough to buy bottled water

ah-ooog-ah's picture

nope.  Water is $0.70 a gallon unless you are stupid enough to drink from the faucet



One And Only's picture

Water falls from the sky for free.

gatorengineer's picture

Re Rainman, 

we really really dont have a problem, start with 325B, and say half of that is genuinely bad $160B.  That in todays terms is NOT real money the fed could control P that without batting an eye.

They will to prevent the CDSs on the crap from going off.

What I have trouble believing is that its only 325B.


Yes We Can. But Lets Not.'s picture

Works out to $4 billion per company, which is 4,000 million per co.

buzzsaw99's picture

too bad they aren't a tbtf bank because then they could get a bailout. in fact, as long as revenue covers bonuses the losses would be irrelevant. sucks to be them.

Spitzer's picture

Anew asset to use QE4 on. Oil backed securities

buzzsaw99's picture

the poor bastards who actually produce shit aren't worth anything in the new eCONoME. Only girly handed paper pushers are important.

Troy Ounce's picture



Value $775B in mark to BS


Just try to sell it

xxxxx's picture

Drill baby drill.....or not.

Make_Mine_A_Double's picture

I just got back from a meeting and had my first encouter with the deflation monster.

One of my competitors offered roughly the same product/service as mine, but at a roughly 40% discount to breakeven operating costs - forget profit.

My competitor is a foreign corporation heavily indebted in USD loans and holder of massive asset overbuilding that has to be utilized under bank covenants. So for him anything USD is tall clover and assets utilization is a bonus.

However, all of this is being done at an overall loss - a substantial one at that.

So the meme seems to be - accure USD, fuck the market upside since we'll worry abou that tomorrow.

I'm scratching my balls wondering how the hell I am supposed to operate in a net negative enviroment since I do not have the luxury of no profit transactions.

sschu's picture

Its called various things like mercantilism or dumping.  The seller is just concerned about covering their variable cost plus a little.  They are in survival mode.

The Japanese made this approach famous in the 1980s, they in effect exported their unemployment.

Sometimes these fights turn into wars.  How does it go, trade war, currency war and then shooting war?


Spitzer's picture

This is the post 2008 era. Amazon, Tesla, Godaddy are all companies that specialize in consuming capital

PersonalResponsibility's picture

The one that can hold their breath longest wins.  Sorry to hear bud :(

still kicking's picture

Managment at your competitor is now structuring exit packages or retention packages that allows them to rob the place empty since they know they are no longer a viable business.  My company is doing the same thing, all of a sudden they announced quarterly bonuses (large bonuses) when everyone knows we will be filing bankruptcy within the next 6-9 months.

gatorengineer's picture

You bid the subcontract to one of your competitors suppliers and have him take the contract in local currency and you take the risk.

I have a large subcontract with a canadian firm that they took in USD, at about parrity 3 years ago.  They are doing handstands and cartwheels right now.

A big part of business right now is stepping up and taking currency risk.


alphahammer's picture
alphahammer (not verified) Make_Mine_A_Double Jan 18, 2016 5:49 PM

"One of my competitors offered roughly the same product/service as mine, but at a roughly 40% discount to breakeven operating costs - forget profit.

My competitor is a foreign corporation..."

A foreign company selling their products in the US at a 40% discount to breakeven... Hmm ... Thats called dumping my friend and you should be on the phone to regulators ASAP. Your scenario is 100% illegal under US and Intl law re dumping.

Your answer is sanctions...


Omen IV's picture

marginal cash operating cost plus interest payment - same happened in 86" - in oil and gas as well as OCTG steel - as all eventually went to BK

the Saudi strategy is better than you think -  for one reason the shale curve is steep - within 36 months the decline is dramatic in the early 80's without horizontal then and now with horizontal with better pressure applied and combo-fluids - the same curve with more $$ up today - so who is going to put up new money for drilling of expiry acreage when price are below $50 /bbl?

so even with BK  - marginal cost of assets plus operating costs and no acreage cost to amortize - there will be few takers to drill for quite a while

once 2-3 million per year in US / Canadian production rolls off  - the market will stabilize -  even with Iran coming on board

and the Saudi/ Russia / Iraq / Iran /Libya will be ok except for social costs pressuring them

Bill of Rights's picture

So it fits in there between Washington Mutual and WorldCom... Keep printing assholes.

Black Forest's picture

Negative cash flow helps improving economy. All is fine.

Catullus's picture

You mean companies go bankrupt and their equipment, technology and people don't just disappear? So crashing the price never works?

Most of these companies don't hedge production. Then they lock in royalties. They're all positive ebitda in a $50 oil environment. Oil needs to go to $10-15 for this to shit the bed.

moonmac's picture

Those who loan out money foolishly deserves to lose it and deadbeats should be labeled as such. Instead our brilliant gubbermint bails out both the idiots and the bums. USA! USA! USA!

Sanity Bear's picture

This calls for a $235 trillion bailout!

Rainman's picture

anybody remember that old story about Enron and energy-based derivatives ?

Lumberjack's picture

I certainly do.


Most participants in the energy derivatives market rely on a standard contract that was developed by the International Swaps and Derivatives Association and is recognized in the courts. The contract clearly specifies the rights each party has in the event of a default, said Robert Pickel, the association's chief executive. As of late yesterday, he added, the markets appeared ''to be fairly resilient in the face of extremely negative developments regarding such a major player.''

But at least one lawyer who specializes in swaps contracts indicated that it might be too soon to assess the full impact. That lawyer, Ann O'Hara, in Lincoln, Neb., said that her clients' anxiety about Enron had escalated sharply only in the last few days. ''No one believed it would really happen,'' she said. ''It is not a surprise, but it is a shock.''

''We don't really know who is out there exposed to Enron's credit,'' she added. ''I'm telling my clients to prepare for the worst.''

Lumberjack's picture

Remember Honest Services Fraud?


This one involves Enron, and Hillary...Remember that Bill was president when Enron crashed.


Chicago, IL / Washington, D.C. - David Almasi of the National Center for Public Policy Research made himself the most unpopular person the room at the Boeing shareholder meeting in Chicago today after he asked company chairman and CEO W. James McNerney about conflicts of interest between Boeing's philanthropy and actions by senior public officials, and raised the question of whether Boeing had unnecessarily exposed itself to the danger of being prosecuted for honest services fraud.

Almasi was following up on a April 13 Washington Post story by Rosalind Helderman, who reported that Boeing made a $900,000 contribution to the Clinton Foundation and a $2 million donation important to then-Secretary of State Hillary Clinton in the same timeframe that Secretary Clinton made what she called "a shameless pitch" to Russia's state airline on Boeing's behalf.

Almasi asked Mr. McNerney, in part (full question here):

The official purpose of our Company's $900,000 donation to the Clinton Foundation was to build schools in Haiti. Assuming that building schools in Haiti was a key goal of this Company's philanthropic programs in 2010, why was it so important to support this work specifically through the Clinton Foundation, and not one of the many other reputable, independent charities then working in Haiti? By donating to the Clinton Foundation within months of receiving a huge favor from the Secretary of State, did we not expose both our Company and the Secretary of State to the risk of being charged with honest services fraud?

Almasi further asked:

There is at least one lobbyist in jail right this minute for giving public employees travel and meals worth far, far less than $900,000. He claims he didn't intend bribery; that what he did was business-as-usual. But he's in jail now, nonetheless.


"Boeing should have been aware of all of this," added Ridenour. "During the same time period as the Boeing donations, the U.S. Supreme Court was hearing the honest services fraud case of Enron's Jeffrey Skilling. After the court ruled in that case, the Washington Post's Amanda Becker reported that "uncertainty remains about the [honest services] law's meaning." Boeing announced it won the Russian contract in May 2010Skilling v. United States was handed down in June 2010; Boeing announced its gift to the Clinton Foundation in August 2010. Honest services fraud was headlining the newspapers at the very time Boeing apparently was considering a major gift to a foundation run by the husband of the sitting Secretary of State."

falak pema's picture

Aww; when you've lost 15 T in digital profits what is 300 B moar?

Its the digital rollercoaster economy stupid!

Soul Glow's picture

Who didn't see this coming?

Panic Mode's picture

Putin did warn you all about fracking in 2014, it's a bubble about to happen.

PTR's picture

Aaaaaand, it's gone.

InsanityIsWinning's picture

What were/are the Saudi's thinking? This is the first thought that came to mine, great, they'll lower the cost curve for the entire industry, all the debt will be bought by .gov, the marginal players fail and the big fish buy the assets for pennies on the dollar. Then the Saudi's will be completing with 10.00 bbl shale oil.

pitz's picture

$10/barrel oil for a year or two at best.  New shale drilling, in a capital constrained environment, likely will need $100+. 

Jstanley011's picture


Unlike during GM's bankruptcy, with the tug on the heartstrings that the prospect had of the "see the USA in your Chevorlet" company going out of business, and with pull that its union thugs had to bend bond holders over the table in a US taxpayer-funded bailout, nobody's going to bail out the oil companies.

Thank goodness!

The availability at liquidation prices of the assets of enterprises that have overleveraged themselves out of business to parties smart enough to have the cash to do so -- that is how free markets correct themselves. And if a cohort of banksters go broke in the process along with their debtors, so much the better for the country.

matermaker's picture

"chains keep us together...... runn'n through the shadows.  we must never break the chain..."