150+ North American Producers in Chapter 11 Risk
Unless prices strengthen further, about 150 more North American exploration and production (E&P) companies will need to seek Chapter 11 protection through 2022.
That’s according to Rystad Energy, which estimated that, if WTI prices remained at $40 per barrel, 29 North American E&P Chapter 11 filings would take place this year, 68 in 2021 and 57 in 2022.
Rystad Energy highlighted that if its Chapter 11 forecasts materialize, this would bring the total number of North American E&P filings for 2020-2022 to nearly 190, compared to 207 during the five-year period of 2015-2019. The company noted that this would also bring total Chapter 11 North American E&P debt for 2020-2022 to about $168 billion, which it stated is 36 percent higher than the $122 billion recorded in 2015-2019.
The Covid-19 pandemic has added “severe financial strain” on a North American upstream industry that was already “reeling” under billions of dollars of debt, Rystad Energy outlined.
“While an improvement in oil prices towards $40 per barrel WTI saved a significant number of E&Ps and prevented early Chapter 11 filings in June-July, the current price environment is in no way sufficient for a large number of E&Ps in the medium-term,” Rystad Energy’s head of shale research Artem Abramov said in a company statement sent to Rigzone.
“As hedging programs set at WTI $50+ per barrel expire in the second half of this year, we anticipate greater financial pressure on the industry unless WTI prices recover further,” he added in the statement.
Rystad Energy says its E&P Chapter 11 model is based on a cash flow analysis covering about 10,000 active North American oil and gas E&Ps. The model is designed to present a macro-level outlook rather than look at individual company insights, according to Rystad Energy.
As of August 23, 12:48pm CEST, there have been 23 million confirmed cases of Covid-19, with 800,906 deaths, according to the latest data from the World Health Organization (WHO). The region most affected by the virus in terms of confirmed cases and deaths, as of August 23, has been the Americas, WHO data shows.
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