The tight oil sector has struggled to generate positive cash flow since 2010. Last year, only one company in the sector posted positive cash flow. But there is light at the end of the tunnel. Wood Mackenzie’s new report "When will tight oil make money?" calculates that the five largest tight oil players could become cash flow positive by 2020.
But it is not all good news. Tight oil returns are highly sensitive to oil price, and in the event that oil prices remain flat or even fall (not our base case view), only the best operators, in the best plays can expect to make returns.
The report also identifies tight oil’s two key advantages: the scale of the opportunity and capital investment flexibility.