As me if I care?
Investors have a message for suffering U.S. oil drillers: We feel your pain.
They’ve pumped more than $1.4 trillion into the oil and gas industry the past five years as oil prices averaged more than $91 a barrel. The cash infusion helped push U.S. crude production to the highest in more than 30 years, according to data compiled by Bloomberg.
Now that oil prices have fallen below $46, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of $393 billion since June — $353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost $40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.
“The only thing people are noticing now is that gas prices are dropping,” said Sean Wheeler, the Houston-based co-chairman of the oil and gas industry team for law firm Latham & Watkins LLP. “People haven’t noticed yet that it’s also hitting their portfolios.”
The money flowing into oil and gas companies around the world in the last five years came from a variety of sources. The industry completed $286 billion in joint ventures, investments and spinoffs, raised $353 billion in initial public offerings and follow-on share sales, and borrowed $786 billion in bonds and loans.
But others will….
‘“We’re very concerned about the banks located in these oil-producing areas,” he said. “A prolonged time of low oil prices is really going to cause banks significant problems.”
More people will be affected than realize it, said Michael Shaoul, who helps oversee about $9 billion as CEO of Marketfield Asset Management LLC in New York. “So much of this has ended up in 401(k)s and in pension funds and in mutual funds, and that’s where the bulk of the pain is going to be felt.”Share on Facebook