SLB and HAL is pulling out all the stops to keep those highly leveraged and unprofitable E & P drilling companies to keep drilling.
Two big problems with this: 1). All that extra supply will keep coming to the market moving the energy costs even lower and prolonging any recovery. 2). In the end it won't work and SLB and HAL will themselves find themselves in the same boat as they'll have a lot of debt owed to them and nobody will be around to pay it.
HOUSTON (Reuters) - Business is so tough for oilfield giants Schlumberger NV and Halliburton Co that they have come up with a new sales pitch for crude producers halting work in the worst downturn in years. It amounts to this: "frack now and pay later."
The moves by the world's No. 1 and No. 2 oil services companies show how they are scrambling to book sales of new technologies to customers short of cash after a 60 percent slide in crude to $45 a barrel.
In some cases, they are willing to take on the role of traditional lenders, like banks, which have grown reluctant to lend since the price drop that began last summer, or act like producers by taking what are essentially stakes in wells.
At Halliburton, some of the capital to finance the sales will come from $500 million in backing from asset manager BlackRock, part of a wave of alternative finance pouring into the energy industry that one Houston lawyer said on Thursday allows companies to "keep the engine running."
Well let's see... CHK has $11+ Billion in debt. Projected future earnings are negative which means they'll burning cash for the foreseeable future. If I where the bank where CHK had that $4B line of credit I'd be more than a little nervous. I'd likely cut that off. And wouldn't surprise me if that's exactly what happened. And that might explain the suspension of the dividend. Hint: APA is in a very similair position. The fact is a lot a small to medium E & P companines are in the same position and the banks have to be getting nervous. Once the banks they cut-off the the free money tap.... these companies go straight to bankruptcy. That's the way it is. Just watch.