From year to year, the shale segment of the American oil industry made shareholders doubt the viability of investing. The pandemic can put an end to this story.
According to analysts at Haynes & Boone Law Firm, the past 5 years have not been the easiest for US oil producers. Without coronavirus, more than 200 North American oil and gas producers have ceased to exist since 2015. Together, the debt of these companies exceeds $130 billion. At least 15% of this amount falls on the era of coronavirus.
Chesapeake Energy Corporation declared bankruptcy on Sunday. As a pioneer in the oil shale industry, it ceases to exist three decades after its founding. Chesapeake Energy is largely a victim of the shale revolution. Years of desperate attempts to reduce their debts have not been successful. When the pandemic broke out in the world, the corporation’s losses amounted to $8.3 billion. At the time of bankruptcy, Chesapeake Energy had a capitalization of $116 million, while ten years ago it reached $37.5 billion.
Bloomberg, in turn, notes that Chesapeake Energy is far from the first company on the long list of victims. The agency provided a list of four other major oil companies that did not survive the coronavirus pandemic.
The Denver-based corporation, like many, faced problems long before the 2020 crisis. Last year, Whiting Petroleum announced the reduction of a third of all its employees. The failure of the OPEC+ transaction and the ensuing short oil war was enough to make Whiting Petroleum go bankrupt on April 1. The debt of the corporation was $3.6 billion.
It is noteworthy that before the bankruptcy was declared, the board of directors approved cash bonuses for senior executives of WP in the amount of $14.6 million.
Extraction oil & gas inc
Operating solely in the Denver-Julesburg Basin, a corporation with $1.5 billion debt filed for bankruptcy on June 15. Like Whiting Petroleum, the company decided to pay a premium of $6.7 million to 16 executives and senior managers. In return, they were required not to leave the company in anticipation of a possible default on bond payments.
Ultra Petroleum Corp
For this corporation, “coronavirus” bankruptcy was the second. Four years after the first, Ultra Petroleum’s management so wanted to keep the company afloat that it discontinued the drilling program back in January to maintain free cash flow and focus on debt repayment. This decision did not save it.
Sable Permian Resources LLC
In 2013, Aubrey McClendon left Chesapeake Energy to build his own oil empire, American Energy Partners. Three years later, McClendon died in a car accident, the company closed, but Sable Permian Resources took over part of it last year. It was believed that the business created by McClendon was very promising, but the coronavirus took SPR by surprise. Sable Permian Resources LLC filed for bankruptcy last week.
As News Front previously reported, the United States has already begun to increase oil production, but this casts doubt on further compliance with the OPEC+ agreement. Ultimately, the parties to the deal, represented by Russia and Saudi Arabia, may wonder whether they should curb the collapse in prices for American companies.Protests in the U.S. forced one of the states to change its flag