Will the Texas Freeze Be Too Much for Some Operators?

Will the Texas Freeze Be Too Much for Some Operators?
Here is a preview of what to watch this week in the oil and gas markets.

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

Texas’ recent bout with an extended period of unusually cold weather tested many of the state’s energy producers. Recovering from the episode may prompt some of the state’s already-strained oil and gas firms to seek relief from the U.S. Bankruptcy Court or from suitors, according to one of Rigzone’s regular prognosticators. Read on for his perspective, along with other insights, in this installment of what to watch this week in oil and gas markets.

Phil Kangas, US Partner-in-Charge, Energy Advisor, Natural Resources and Mining, Grant Thornton LLP: Smaller U.S. shale producers in the Permian Basin were particularly hard-hit by the recent storms. These smaller to mid-size operators have had to navigate an already difficult year, with plummeting oil prices driving up bankruptcy rates. Analysts estimate that more that 2 million barrels per day of crude output was lost during the recent cold snap and restarting production may take weeks. Associated production/quarterly earnings losses and the high cost of restarting marginal wells may be more than some operators can sustain. Will be watching to see if additional bankruptcies or merger and acquisition activity may occur.

OPEC alliance members will meet this week (March 4) to review demand information and consider options for its stance on supply restrictions. Shale output has generally responded to U.S. crude price, and the Permian storm recovery and ever-strengthening price per barrel will be on the minds of decision-makers. Finding consensus on the reportedly divergent views on supply from Saudi Arabia and Russia will make headlines.

Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: How quickly refiners recover post the extreme weather will be a key focus. So far it has been quick, but that may stall out.

To contact the author, email mveazey@rigzone.com.


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