from Wolf Street:
All eyes are on Chesapeake.
The price of natural gas in the US has gotten completely destroyed. The process started in July 2008, at over $13 per million Btu and continues through today, at $1.77 per million Btu.
In between, natural gas traded at prices that, for much of the time, didn’t allow drillers to recoup their investments, leading to permanently cash-flow negative operations, and now huge write-offs and losses, defaults, restructurings, and bankruptcies.
You’d think that this sort of financial misery would have caused investors to turn off the spigot, and for production to fall because drillers ran out of money before it got that far.
But no. Over the years, money kept flowing into the industry. In this Fed-designed world of zero interest rate policies, when risks no longer mattered, drillers were able to borrow new money from banks and bondholders and drill that money into the ground, and production soared, and more money poured into the industry based on Wall Street hoopla about this soaring production, and this money too has disappeared.
In the process, the US has become the largest natural gas producer in the world – and the place where the most money ever was destroyed drilling for natural gas.
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