07-02-2020, 03:15 PM
As far as the oil and gas industry goes, few are predicting a recovery soon.
Energy producers got themselves into this mess back in 2010 through 2014 when they borrowed money and bid against each other to buy up prospective shale reserves around the country suitable for fracking, explained Beckham, the partner in Haynes and Boone's restructuring practice.
When prices were high, oil and gas companies made money and transformed the United States from a net oil importer to an exporter. But Saudi Arabia didn’t like losing market share and fought back by opening its spigots, creating excess supply and causing oil prices to plummet from above $100 a barrel in the summer of 2014 to half that price the following year. Dozens of heavily indebted American companies were forced to file for bankruptcy protection.
Instead of capping their wells and going out of business, U.S. producers adjusted to the new costs, said Buddy Clark, a partner with Haynes and Boone’s energy transaction group. "Technology rose to the occasion. The industry came up with significant cost-cutting innovations and production continued at $55 a barrel."
With the onset of the pandemic, however, oil prices plunged again, dipping briefly below $20 a barrel in April, before recovering to just under $40 a barrel in June.
Clark said it costs U.S. producers anywhere from $12 to $35 a barrel to get the oil out of the ground depending on where they are operating. That’s called the “lifting cost.” On top of that, they have the cost of servicing their debt. As long as oil prices are higher than the lifting cost, companies have an incentive to keep producing and to renegotiate their debt.
https://oklahoman.com/article/5665651/wi...-recession
Energy producers got themselves into this mess back in 2010 through 2014 when they borrowed money and bid against each other to buy up prospective shale reserves around the country suitable for fracking, explained Beckham, the partner in Haynes and Boone's restructuring practice.
When prices were high, oil and gas companies made money and transformed the United States from a net oil importer to an exporter. But Saudi Arabia didn’t like losing market share and fought back by opening its spigots, creating excess supply and causing oil prices to plummet from above $100 a barrel in the summer of 2014 to half that price the following year. Dozens of heavily indebted American companies were forced to file for bankruptcy protection.
Instead of capping their wells and going out of business, U.S. producers adjusted to the new costs, said Buddy Clark, a partner with Haynes and Boone’s energy transaction group. "Technology rose to the occasion. The industry came up with significant cost-cutting innovations and production continued at $55 a barrel."
With the onset of the pandemic, however, oil prices plunged again, dipping briefly below $20 a barrel in April, before recovering to just under $40 a barrel in June.
Clark said it costs U.S. producers anywhere from $12 to $35 a barrel to get the oil out of the ground depending on where they are operating. That’s called the “lifting cost.” On top of that, they have the cost of servicing their debt. As long as oil prices are higher than the lifting cost, companies have an incentive to keep producing and to renegotiate their debt.
https://oklahoman.com/article/5665651/wi...-recession
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