Bankruptcy filings by US oil and gas producers rose to a four-year high in the second quarter of 2020 due to the downturn caused by the coronavirus pandemic, according to Oslo-based Rystad Energy.
“Chapter 11 filings for US E&P (exploration and production) companies jumped to a four-year high in the second quarter of 2020, both in terms of the overall number of cases and in cases filed by companies with at least $1 billion (Dh3.67bn) in total debt,” the consultancy said in a report.
“Both in 2Q20 (second quarter of 2020) and 2Q16 (second quarter of 2016) the number of cases increased as WTI prices dropped below $40 (per barrel), causing operators with higher breakeven prices to struggle to service their debt.”
Oil prices have seen wide swings this year, mainly due to the coronavirus pandemic that reduced demand for crude while supply remained steady.
Brent, the international crude benchmark, dropped from highs of almost $69 per barrel in January to $19.33 by mid-March as demand buckled due to movement restrictions put in place to stop the spread of Covid-19. West Texas Intermediate – a blend of US crude grades – took a dive and traded briefly below zero on April 20, hitting the revenues of oil and gas producers.
Operators that survived the oil price fall in 2016 “were unable to avoid that fate this time around”, according to Rystad Energy.
Some of the largest companies that have filed for Chapter 11 in 2020 include Chesapeake Energy with a debt of $9.2bn, Ultra Petroleum ($5.5bn in debt), Whiting Petroleum ($3.6bn), Denbury Resources ($2.1bn) and Extraction Oil & Gas ($1.9bn).
