The Securities Litigation Expert Blog

Litigation Alert: Now Batting - Shale Bonds

Posted by Jack Duval

Mar 19, 2015 7:44:00 AM

The collapse in oil prices has been felt throughout the oil and gas industry, but nowhere as much as the in the high cost shale producers.

Goldman Sachs has produced a matrix of shale players according to their balance sheet and asset quality (HT ZeroHedge):


I've charted the bond prices of the Group Four companies (Low Quality Assets/Weak Balance Sheets):

(For a high res image, download this.)


The bonds of these highly leveraged shale players have performed in line with their speculative characteristics.  There is no recovery in sight because the only hope they have of making their bond payments is by producing more oil, which will continue to depress prices, which will make these firms less profitable, and less able to make their bond payments...

The gears have reversed and barring some geopolicital event, are unlikely to reverse again before many of these players exit the corporate gene pool.


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Topics: shale oil, bonds, securities litigation, fixed income, Securities Expert

Master Limited Partnership Bubble Now Well Documented

Posted by Jack Duval

Feb 21, 2013 3:05:00 AM

This blog post continues our expert analysis of complex investments and their regulation.

Two new reports are out documenting the bubble in shale gas and shale oil.  The first is "Shale and Wall Street" by Deborah Rogers and is published by the Energy Policy Forum.  (EPF)  The second is "Drill, Baby, Drill" by J. David Hughes and is published by the Post Carbon Institute.  (PCI)

The crux of these reports is that a bubble has formed due to: massive over-investment in shale gas extraction, heroic assumptions about shale gas and oil reserves, rapidly declining extraction rates, complex investment products used to finance the exploration, a flurry of Wall Street activity which generated large transactional fees for Broker-Dealers, and a wholesale lack of transparency.

Sounds a lot like the sub-prime bubble.

Our previous coverage of the MLP bubble can be found here, here, and here.

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Topics: Master Limited Partnerships, MLP, FINRA, shale oil, Energy Policy Forum, bubble, litigation, Senior Investors, investments, Master Limited Partnership, sub-prime, natural gas, shale gas, Compliance, Post Carbon Institute, Complexity

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