Reuters: Free cash flow says little about the future of shale: Kemp

The independent companies at the forefront of the U.S. shale boom will finally earn enough from selling oil and gas to cover their capital expenditures next year, for the first time since 2008.

Free cash flow, which measures operating cash flow minus capital spending, for the 25 leading independent oil and gas producers is expected to show a surplus of $2.4 billion in 2015, according to a consensus forecast in the Financial Times.

That compares with a shortfall of around $9 billion in 2013 and $32 billion in 2012. ("Shale oil and gas producers' finances lift growth hopes" FT, Aug 27)

During the years of negative free cash flow, independents relied on equity issues, borrowing and asset sales to sustain their drilling programmes. That led some analysts to conclude the shale boom was unsustainable or even liken it to a Ponzi scheme, which will collapse when fresh capital inflows cease.
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