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    Home > Chemicals Industry > Petrochemical News > The epidemic hits the U.S. economy and the oil and gas industry becomes bankrupt

    The epidemic hits the U.S. economy and the oil and gas industry becomes bankrupt

    • Last Update: 2022-06-07
    • Source: Internet
    • Author: User
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    Since this year (2020), affected by the spread of the new crown pneumonia epidemic, the U.
    S.
    economy has been severely damaged and triggered an unprecedented wave of bankruptcies, and the oil and gas industry has become one of the "hardest hit areas

    .
    "


    A few days ago, many investment banks and consulting agencies pointed out that the United States’ perception of the new crown pneumonia epidemic is “irrational”, which makes the epidemic out of control and affects the pace of economic recovery, leading to a wave of bankruptcy sweeping all walks of life in the United States, and shale developers are the representatives.
    US oil and gas companies have become a "high-risk group" among them, and it is not ruled out that more bankruptcies of oil companies will emerge before the end of the year

    .


    The number of corporate bankruptcies hit the highest level in 10 years


    According to data from the industry information agency S&P Global Platts, the number of bankruptcies of US companies has reached the highest level in 10 years

    .
    As of August, more than 400 "sizable" companies had gone bankrupt, of which 157 had debts of more than US$500 million

    .
    It is worth noting that during the 2009 financial crisis, no more than 40 large companies filed for bankruptcy in the United States

    .


    Fed Chairman Powell recently said frankly that despite the rebound in a number of economic indicators, the overall outlook for the US economy remains extremely uncertain

    .
    Affected by this, the energy industry, which accounts for 8% of the US GDP, is now struggling

    .


    According to Norwegian independent energy research agency Resta Energy, if WTI oil prices remain at the current level of US$40/barrel, by the end of 2022, the number of oil and gas producers that have filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Law may be close to 5 The total number of bankruptcies of American companies during the year was comparable

    .

    The Wall Street investment bank Jefferies Group released the latest report stating that although the Federal Reserve and the U.
    S.
    Congress have provided huge amounts of funds to large companies, the number of bankruptcies filed by large U.
    S.
    companies has soared by 244% in July and August compared with the same period last year.
    Among them, the number of bankrupt companies in the oil and gas industry has increased by as much as 45%

    .


    And this bad situation does not seem to have reached its peak

    .
    Joseph Acosta, a partner in charge of bankruptcy cases at the American Law Firm, said: "The statistics of bankruptcy cases have not yet reached the top, and it may be even worse

    .
    " CEO of New Generation Research, a consulting firm that tracks bad securities and corporate bankruptcies Ben Schlafman also believes: "We are in the first phase of this bankruptcy cycle.
    As the crisis deepens, bankruptcy will continue

    .
    "


    In fact, due to the uncertain prospects for the US economic recovery, the financial and investment communities are unwilling to take the same risks as they did in the past

    .
    “Compared with expectations of rising oil prices and increased M&A activity five years ago, investors nowadays are getting tired of the oil and gas industry, especially credit investors who failed to recover funds due to default during the last economic downturn are even more reluctant to spend a lot of money

    .
    ” Energy Consulting Company Said Andrew Gillick, managing director of RS Energy Group

    .


    Bankruptcy will continue


    In the latest "Petroleum Bankruptcy Monitoring Report", Haibo International Law Firm of the United States pointed out that 2020 is a year of "disastrous casualties" since it began tracking the bankruptcy and reorganization of the energy industry in North America in 2015

    .
    Since March, 33 oil and gas producers in the United States have sought bankruptcy protection, with debts exceeding US$50 billion; 16 upstream oil companies went bankrupt in July and August each; as of August, the number of bankruptcy applications has increased by 62 compared to the same period last year.
    %

    .


    Other data show that for the entire five-year period ending August 31, a total of 244 oil and gas producers in the United States filed for bankruptcy, involving more than $172 billion in debt

    .
    The top three states for the number of oil and gas producers that filed for bankruptcy this year are: 118 in Texas, 37 in Delaware, and 12 in Colorado

    .


    "The new crown pneumonia epidemic has contributed to the'collective pessimism

    .
    '" Haibo International wrote in the report.
    "In view of the short-term economic situation of U.
    S.
    oil and gas exploration and production companies, it is difficult to get a boost.
    It is expected that there will be a large number of people before the end of this year.
    Bankruptcies keep popping up

    .
    "


    Although oil and gas companies have tried to respond to the worst crisis in the history of the oil industry through layoffs, salary cuts, reduction of upstream activities, and substantial cuts in expenditures, the actual effect is quite limited

    .
    In fact, long before the outbreak of the new crown pneumonia epidemic, the financial and capital markets have already begun to withdraw from the oil and gas industry, which has led to financial strains for small and medium oil and gas companies

    .


    “We will continue to see the bankruptcy and reorganization of oil and gas producers and oil service providers.
    This trend will not end immediately

    .
    ” Charles Beckham, partner of Haibo International, emphasized, “The wave of bankruptcy will continue, especially in the oil service industry.
    The rate of filing for bankruptcy every month will rise significantly because it is difficult for them to maintain their vitality in terms of liquidity and new business

    .
    "


    The most risky industries in the U.
    S.


    It is worth noting that although the "shale revolution" has led to a surge in U.
    S.
    oil and gas production, shale developers have been plagued by capital shortages, and it has become the most risky industry in the United States

    .


    The Institute of Energy Economics and Financial Analysis (IEEFA) conducted a survey of 34 North American shale producers and found that the cash consumption of shale practitioners far exceeds the cash gains, which once again proves that this is a speculative industry

    .


    IEEFA pointed out in the survey report that these 34 shale producers have been in a state of “long-term loss”.
    The total investment in the past 10 years has exceeded revenue by US$189 billion.
    Since 2017, the expenditure of these companies has exceeded operating cash flow.
    The cumulative scale increased by US$29 billion, and the funds spent on capital projects in the second quarter of this year were US$3.
    3 billion more than the funds obtained from the sale of oil and gas

    .


    In addition, although the capital expenditures of these 34 shale producers have been cut by an average of 45% compared with last year this year, to the lowest level since the oil price plummeted in mid-2014, they still ran out of cash flow and faced the risk of breaking the capital chain

    .
    So far this year, the revenue of these shale producers has plummeted from last year's 33 billion U.
    S.
    dollars to 11.
    7 billion U.
    S.
    dollars

    .


    "In terms of finance, this (shale) production boom is a kind of financial collapse

    ," said Clark Williams Derry, a financial analyst at IEEFA and the lead author of the survey report.
    "The shale industry is facing an existential crisis and begged the government to introduce supporting regulations.
    This is the perfect proof that drilling has been unprofitable in the past 10 years

    .
    "


    The US CNBC News Network pointed out that the poor financial performance of shale producers predates the global economic slowdown caused by the new crown pneumonia epidemic.
    This is not only the result of the new crown pneumonia epidemic, but will be a long-term trend that will last for 10 years.

    .

    (Source: China Energy News)

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