The Shale Daily Update – 6.22.2020

Deloitte has a major new report out today full of interesting data. It concludes the shale business peaked in 2019 without turning a profit in total.

What You Should Know About Oil and Gas Today

The Big Story 

Deloitte has a major new report out today detailing the current state of the U.S. shale industry. Chock full of interesting data, the study concludes that the overall shale business peaked in 2019 without turning a profit in total. One of the study’s major findings is that, since 2010, the industry as a whole in fact “registered net negative free cash flows of $300 billion, impaired more than $450 billion of invested capital, and saw more than 190 bankruptcies.”

Due largely to the COVID-19 pandemic, Deloitte sees a global “economic storm on the horizon” during which the firm believes we will see a large number of bankruptcies and a great deal of industry consolidation.

In fact, Deloitte sees consolidation as an absolute necessity, given that its analysis classifies 50% of the current shale producers as being “superfluous.”

Deloitte sees those companies, along with the additional 14% of companies it classifies as “value traps” as producers to be avoided by acquiring companies. However, it also targets a sizable 27% of producers who operate 40% of shale production in the U.S. as “augmentors,” companies who could become likely takeover or merger targets.

It’s an excellent report that everyone truly interested in the oil and gas business should take time to read and absorb.

In other news…

Reportedly in the middle of bankruptcy negotiations with major creditors, Chesapeake Energy missed $13.5 million in interest payments that were due at the end of last week.

Almost unbelievably given everything else that is happening at this moment in time, the U.S. Bureau of Land Management is actually planning to hold a federal lease sale for oil and gas drillers who would might think it’s just a peachy idea to drill wells in the middle of Lake Lewisville. I rarely find myself on the same page as Cyrus Reed, the interim Director of the Lone Star Chapter of the Sierra Club, but I have to admit he makes some very good points on this matter in an op/ed today. My goodness.

The Houston Chronicle’s Paul Takahashi has a strong story today about the struggles of Diamond Offshore and the Gulf of Mexico oil and gas industry. Definitely worth a read.

Amid all of the troubling news related to oil and gas, the price of West Texas Intermediate did rise above $40 again on Friday, although it has dropped back slightly this morning. The Wall Street Journal reports on how rising demand and falling production in the U.S. and Canada are combining with the OPEC+ production cuts to create a healthier oil price.

Meanwhile, things are starting to pick up in the Haynesville Shale, where companies like Tanos Exploration and Rockcliff Energy are gearing up their drilling programs in anticipation of higher natural gas prices over the fall and winter. Sergio Chapa has a report in today’s Houston Chronicle covering this bright spot in the energy picture.

That’s all for today.

 

 

 

 

 

 

 

 

 

 

 

 

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