It is less than two months since Donald Trump travelled to Texas to declare that the US energy industry, laid low by this year’s oil price crash, was back on its feet.”We’re OK now,” the president told the assembled crowd. But bankruptcy numbers released this week tell a different story. Another 16 upstream US oil and gas companies – producers and service providers – hit the wall in August, the same number as in July, according to law firm Haynes and Boone.
Bigger drillers such as Chaparral and Valaris have joined a pile-up that has seen companies with a combined $85bn worth of debt file for protection from creditors over the past eight months.
“We’re continuing to see a steady stream of oil and gas producer bankruptcies and oilfield service bankruptcies. And we do not anticipate any immediate interruption in that steady stream, especially on the oilfield service side,” said Charles Beckham, a partner at Haynes and Boone.
If oil prices stay around current levels – with US marker West Texas Intermediate trading in the region of $40 a barrel – the number of operators expected to file for Chapter 11 by the end of 2022 could hit almost 190, according to Rystad Energy, a consultancy. That would be on a par with the total number of casualties over the five years to 2019.
North American oil and gas bankruptcies have gained pace
The country’s oil sector was battered in the early months of the coronavirus pandemic, which sapped global consumption byas much as a third, just as a surge in Saudi Arabian output left the market oversupplied. Prices collapsed, with the US benchmark turning negative in April for the first time.
That left US producers slashing production as they scrambled to cut costs. For the services groups that provide producers with muscle and knowhow, it was even worse: work dried up to a trickle.