The biggest independent shale oil groups in U.S. see a record combined loss of $26 billion in the first quarter as coronavirus slashes energy demand.
The biggest independent shale oil groups in the U.S. reported a record combined loss of $26 billion in the first quarter as the sector braces itself for a wave of bankruptcies over the next two years.
The sweeping impairments reported by the 39 publicly listed U.S. shale oil producers analyzed by Rystad — which exclude majors and gas-focused companies — underline the pressure being faced by the industry as a result of the pandemic.“The bottom line is there is going to be a wave of bankruptcies and restructurings,” said Regina Mayor, global head of energy at KPMG.
“I don’t think $30 oil saves a lot of those producers who are sitting in the emergency room on a gurney waiting on a heart transplant,” said Buddy Clark, a lawyer at Haynes & Boone in Houston. “There are more bankruptcies to come.”Already 17 smaller U.S. oil and gas producers, with total debt of around $14 billion, have filed Chapter 11 bankruptcy this year, according to data from Haynes & Boone.
But a model in which producers rely heavily on borrowed money while delivering meager returns has caused investor patience to wear thin. The industry was already struggling to generate cash and hold on to investor support in 2019 when West Texas Intermediate averaged $57 a barrel.Now, with West Texas Intermediate down by about half this year and with little access to financing, the pandemic and oil-price crash it caused are set to accelerate defaults, according to rating firm Fitch.
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