The shale oil bust

Crunched by lower oil prices and excess production capacity in the global market, shale oil related stocks are rapidly losing their shine.

Summary: In Australia, an attempt to replicate the US shale boom is effectively over, forcing an exploration switch back to conventional oil and gas. US fund manager David Einhorn has criticised the US shale industry for its low levels of profitability, while the Australian industry is buffeted by strong levels of production and sluggish demand. Some oil majors have walked away from local projects, while BHP Billiton has booked heavy writedowns on its US investment.

Key take-out: Australia’s shale industry might restart if the oil price rises back above $US100 a barrel, but investors would need to be convinced the higher price is sustainable.

Key beneficiaries: General investors. Category: Oil and gas.

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