Hey, Kid, Come Here…I got something for you. All your peers are doing it- you wanna try? You can pay me later. Wait until you see what it does to your equity! You’re gonna be so rich!! You know you want to…

Earnings BEFORE… Interest. We left off yday with EP: They moved quickly in ‘16, cut capex and generated net positive FCF. But alas, every positive step was eaten by interest and so the debt remained.

Flashback: in Feb ‘14 when oil was $104.83 and NG was $5.97- the name of the game was acquire. It’s easy to judge critically now but land was scarce and many Pubcos didn’t have the repeatable, consistent and multiplicative inventory it needed. Conventional assets had run their course: there was no growth and no scale and without those two things, there was no point in being Public. And so to catch up, Cos bought and they bought. And then the price crashed.

Shale didn’t cause this- free money did. Why issue equity when you can get debt? (Don’t forget the banks leading up to 08). But as we saw from EP, growing out of leverage is tough to do. In growth mode, shareholders don’t get money back. When prices stay depressed, shareholders don’t get money back. And when the debt- the heroin that started it all- gets called, the music stops.