Quote:
Originally Posted by puckedoff
^ Money is still cheap, and people are still greedy. I don't see any reason why we won't end up in a similar situation a few years down the road.
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Yes but rates are going up in the US. After banks write-down and restructure the bloated balance sheets in Energy, they're going to significantly tighten up credit to that space. It will be harder to get debt capital. Given that's it's pretty much impossible to issue equity, and there's no cash flow in the industry for capex, there is literally nothing to replace these massive declines in shale. All of the production sitting behind pipe has been used up, which IMO is the main reason for the robust production through 2015.
The market will see this through 1H 2016 and also will see that for the first time maybe ever, there isn't any spare OPEC capacity sitting there. The environment is going to be completely different in about 12 months. As long as demand continues to chug along at 1-2%.
Not really sure about your "people are still greedy" comment. Corporations look at projects based on IRRs and NPV, and all the economics have to support returns higher than their cost of capital.