Oil Producers Not Well Hedged Going Into 2016

With the price of oil trading below $33 on Thursday, and early prognosticators saying a practical bottom has been put in, financial stress will remains elevated for independent U.S. oil producers in 2016. The core projection of difficulty in the traditionally over-leveraged oil patch – where an industry has become “accustomed to growing and spending beyond its cash flow" – may provide opportunity for hedge funds with money to lend and an eye for investing in distressed debt when blood is on the street. This is essentially the conclusion of 33 page report from Goldman Sachs, one that considers differing probability paths as oil market volatility could lead to industry disruption as well as opportunity.