Oil price slump drives small-cap US shale firms to breaking point

New York

PLUMMETING oil prices are pushing some of the small-cap companies, which flourished as part of the US shale energy boom, close to their breaking point while also prompting some well-known fund managers to aggressively buy energy stocks.

Concerns about slowing growth in Europe and a stronger dollar have helped push the price of light crude oil down about 25 per cent since June to about US$82 a barrel, creeping closer to the average marginal cost of crude production of about US$73 a barrel for US onshore work, according to a research note from Baird Equity Research. Those declines have sent the SIG Oil Exploration and Production index down 21.2 per cent over the last three months. "The market is selling all of these companies, even if it's clear that US$75 a barrel oil is not going to affect every company the same," said Mike Breard, an analyst who works on the Hodges Small-Cap fund, part of Dallas-based Hodges Capital.