The money pipeline is running dry for large portions of the U.S. shale oil sector, tipping drillers into bankruptcy and threatening the industry’s breathtaking growth in oil production.

Spooked by lower oil prices, equity and bond investors are now shunning the smaller, independent shale explorers that lifted the U.S. to the top rank of global oil producers. Meanwhile, say analysts, banks have pulled in their horns, and are likely to further restrict companies’ capacity to borrow when they begin their twice-annual reviews of loans secured by oil and gas reserves.

Market-watchers expect this financing squeeze to trigger a wave of mergers among smaller companies in the Permian Basin and other shale-oil regions.

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