The Shale Daily Update – 7.10.2020

Paul Takahashi reports in the Houston Chronicle that 18 upstream oil and gas companies filed for bankruptcy protection during the second quarter of this year.

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Paul Takahashi reports in the Houston Chronicle that 18 upstream oil and gas companies filed for bankruptcy protection during the second quarter of this year. The largest of those included Chesapeake Energy, Whiting Petroleum and Unit Corp. Takahashi quotes from a new report issued yesterday by the law firm of Haynes and Boone, which has tracked energy industry bankruptcies since the previous oil bust hit during 2015.

Those 18 bankruptcies are the most in a single quarter since the 34 that were seen during the second quarter of 2016. Despite recovering crude prices and global demand for the product, Haynes and Boone expect this pace of Chapter 11 filings to continue in the coming several quarters.

“Until full economic activity returns and consumer confidence that the worst of the pandemic is behind us, demand levels will not pull up prices,” Haynes and Boone said. “It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy, even if oil prices recover over the next few months.”

Meanwhile, in other news…

Bloomberg reports that U.S. gasoline demand has already recovered to pre-pandemic levels seen early in 2020. That’s the good news. The bad news is that that level seen in January is well below normal gas demand levels for a typical summer driving season. U.S. refineries are running at about 77% of their normal capacity for this time of year. So there is still quite a ways to go here.

The Chronicle’s Sergio Garcia has a really interesting piece today about a partnership involving Halliburton and Technip that will provide fiber optic service to offshore oil and gas wells. Here’s an excerpt from that story:

The two companies announced Thursday the launch of their “Odassea” technology, which combines hardware and software from both to improve the efficiency of subsea projects.

Odassea improves seismic imaging and reservoir diagnostics while reducing costs and improving the data gathered for oil and natural reservoirs below the sea floor.

A solid report at Oilprice.com today by Alex Kimani, detailing isolated shortages of crude oil popping up around the globe, which in the writer’s view means the market could be shifting from April’s enormous glut to a suddenly under-supplied situation. Kimani believe that the OPEC+ cuts in production, combined with the significant production losses in the U.S., Canada and other major oil-producing countries may have gone to far at this point. We’ll see.

Meanwhile, some U.S. companies continue to reactivate their shut-in production. Houston-based independent Noble Energy announced yesterday that it plans to reactivate most of its curtailed production by the end of July. Noble joins other upstream companies like Continental Resources, EOG Resources, Parsley Energy and ConocoPhillips in announcing plans to reactivate shut-in production due to improved prices.

Your obligatory “will X be the end of oil?” piece of the week comes from Yahoo News, with this report theorizing that the “end of oil” will now be produced by Tesla. Like all of the “end of oil” pieces that came before it, this one is also wrong.

That’s all for today. Have a great weekend – we’ll see you on Monday.