the Permian Basin – Exxon Mobil (XOM), Occidental Petroleum (OXY), Chevron, and CrownQuest. That means there are more than 100 producers that can’t turn a profit at $31 per barrel oil. Even worse, North American oil field-services and drilling companies have $32 billion in debt coming over the next four years. With oil hovering around $25 per barrel, it’s safe to assume that another wave of bankruptcies is coming. Investors left the industry for dead after falling returns and increased opposition to fossil fuel companies made energy companies a poor bet. During the last industry downturn due to low prices, approximately 200,000 jobs were lost. If these conditions persist, we could see that level again. Companies are already trimming costs and some – like Halliburton (HAL) – are already letting employees go. The folks in Texas are used to these cycles in the oil industry. But never before have we seen a collapse in prices along with a sharp drop in demand. The outlook is bleak, but the shale oil industry in the U.S. has proven its resilience in the past. This collapse will see many of the weaker players disappear, but the industry – through innovation and capitalism – will certainly bounce back.
a U.S. ally, relations have gotten frosty over the past several years.
MORE THAN 100 U.S. PRODUCERS AT RISK
So where does that leave the U.S. producers? Regardless of what happens between Russia and OPEC, there is plenty of pain ahead in the shale patch. Even if OPEC cuts production, there is still a demand problem. Top energy analysts are forecasting a demand loss of 15 million to 22 million barrels per day through the month of April. Refineries are reducing output, and storage tanks are filing up. Plus, the U.S. shale patch was already in financial trouble. According to law firm Haynes and Boone, 50 energy companies filed for bankruptcy last year. And it isn’t just the little guys... Energy major Chevron (CVX) wrote down $11 billion in assets in the fourth quarter, while oil field- services giant Schlumberger (SLB) took a $12.7 billion impairment in October. According to CFRA Research, as many as 21 U.S. oil companies had announced spending cuts of at least 40% for 2020. Investors left the industry for dead after falling returns and increased opposition to fossil fuel companies made energy companies a poor bet. And that’s before oil prices fell off a cliff... According to Norwegian consulting firm Rystad Energy, only four companies can make money at $31 per barrel of WTI in
American Consequences
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