Oil Drillers Trapped in a High-Debt-No-Cash Vicious Circle

While OPEC and Russia are talking about freezing or even cutting crude oil production to restore the market balance – and pushing up prices in the process – rig drillers and manufacturers are struggling to make ends meet. It’s certainly been a tough couple of years for E&Ps in the U.S. and elsewhere, but it has been even tougher for drilling tech makers and contractors. For one, just like shale boomers, the drillers that made the boom possible have borrowed heavily, and are now facing the bill. For another, in order to survive when the price slide began, drillers seriously discounted their services —an act that hasn’t really helped their cash position. Now, the drilling segment is trapped in something very much resembling a vicious circle. E&Ps, hungry for more efficient drilling tech that will reduce their breakeven point even further, turn to cash-strapped drilling tech developers which need serious investments for research and development. On the other hand, these cash strapped innovators can’t continue to make high-risk investments. The already heavily indebted companies that survived the bust must focus on lower-risk investments that contribute to a more positive cash-flow in order to tackle their enormous pile of debt...more