Chesapeake Energy Corporation Is the Latest Energy Giant to Hand Out Pink Slips
As that chart notes, as U.S. oil production has risen, OPEC's imports to the U.S. have fallen. That has left it searching for new markets for its oil, namely in Asia, which are the same markets U.S. oil companies would love to reach by having the oil export ban lifted.
However, before we blame OPEC for the job losses in the U.S. there's one other factor that's a real driving force behind a lot of the industry's trouble. Oil companies took on an enormous amount of debt to fuel the oil boom, which in a sense stole growth from future years.
As that chart shows, oil companies used more cash than they produced in order to fund new wells, with debt being one of the main bridges used to cross the gap. That debt-induced growth fueled a hiring boom in the industry. However, now not only is cash from operations falling as a result of lower prices, but so is the ability to borrow in order to bridge the gap as oil companies are at -- or over, in a growing number of cases -- their borrowing limit. That's leaving producers no choice but to reduce staff as not only is the work no longer there, but the interest payments on the debt are mounting.
The energy industry is in a real rough patch as the boom created by high oil prices and debt is over. That's forcing companies like Chesapeake Energy, which borrowed billions to fund growth, to reduce staff in order to cope with the tighter operating conditions. It's one of many energy companies that now has to readjust to a new normal.
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Matt DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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