NEW YORK (Reuters) - Shale stocks have been hard-hit as investors see margins all but evaporating following the slide in crude oil prices, but the U.S. shale energy boom is not over.
An index of oil and gas exploration and production <.SPLRCOILP> tumbled 8.15 percent on Friday as U.S. crude fell almost 10 percent to around $66.36 per barrel to hit its lowest in 4-1/2 years.
The slide came the day after oil cartel OPEC decided not to cut output in a meeting in Vienna. Prior to the decision, Saudi officials were reported as saying the kingdom, with its large currency reserves, was prepared to withstand oil prices as low as $70-$80 per barrel for up to a year.
But the weaker shale players may not have that long.
"We do not know if OPEC has ulterior motives to let oil prices drift lower and pinch the global (exploration and production) sector, or if reaching a consensus on cuts was just too challenging," wrote Wells Fargo Securities in a Friday client note. "What is clear is that lower cash flows are highly likely to translate into lower E&P spending."
U.S. crude prices were catching up to Thursday's action in Brent as markets across the United States were closed for the Thanksgiving holiday. Friday's was a half-day session.
"We'll wait to see the trend next week when there's full market volume, however it's clear that as oil prices come down there will be pressure for the weaker of the companies in the sector, particularly exploration and the ones that are highly indebted," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
The overall energy sector of the S&P 500 fell 6.3 percent on Friday, adding to its year-to-date losses, now at 10.3 percent.
Fourteen of the sector's more than 40 stocks are within 2 percent of a 52-week low and the sector's weighting on the S&P 500 has dropped to single digits, closing below 8 percent after Friday's shellacking, according to Reuters data.
Nearly 90 percent of the sector's shares are trading below their 100-day moving average.
However, the sharp declines also create an opportunity.
