Fracked Financials

aka ‘Drilling on Debt’

(Republished blog from November 11, 2019)

Low natural gas prices continue to cause layoffs and bankruptcies, with no short term end in sight. We’re also aware that most of the “sweet spots” in the Marcellus Shale have already been drilled out, so future production will be worse than past returns. We also know how stingy Marcellus Shale can be.
Headlines over the past five months tell the woeful tale:

UPDATE: Oil Prices Are Steady. Why Are Risky Energy Companies Unpopular as Ever?
November 14, 2019 – There are good reasons for investors to be cautious, particularly in the high-yield energy sector. On average, about 20% of those companies’ debts will come due before the end of 2023, according to Morgan Stanley. The bank’s analysts flagged a few energy companies with more than 40% of their debt maturing in the next three years: EQT Corp. (ticker: EQT), Antero Resources (AR) and Range Resources (RRC). Source

UPDATE: Range Resources Closes Houston Office, Lays Off Staff
November 13, 2019 – U.S. natural gas producer Range Resources Corporation will be closing its Houston office, resulting in the layoffs of 50 Houston employees, a company spokesperson confirmed to Rigzone Wednesday. Source

Campbell County uses new law to help offset bankruptcy fees
November 8, 2019 – From Aug. 1, 2018, to Oct. 21, 2019, Campbell County spent $1,354,987 in legal fees in five bankruptcy cases in four states for taxes owed from 2015 through 2019. Between August 2018 and October 2019, the county fought to collect taxes in the bankruptcies of Vanguard Natural Resources, Alpha Natural Resources, Blackjewel and Cloud Peak Energy. Source

Chesapeake Energy plunges below $1 as survival in question
Nov. 6, 2019 – Chesapeake Energy collapses to 20-year lows, a day after it issued a going concern notice and warned it may not be able to outlast low fuel prices. CHK’s Haynesville shale asset is the most likely candidate for a sale, but “production (and value) is declining by the day as the asset has entered base decline,” says Tudor analyst Sameer Panjwani. Source

Calgary-based Houston Oil & Gas ceases operations, leaving almost 1,300 wells needing cleanup
November 6, 2019 – Another Alberta oil and gas company has closed its doors, leaving more than $80 million in estimated costs to clean up its remaining wells, pipelines and facilities. Calgary-based Houston Oil & Gas told the Alberta Energy Regulator (AER) last month that it was ceasing operations and no longer has any employees, according to court documents. Houston entered receivership last week. Source

TROUBLE AT MIGHTY EXXONMOBIL: Record Number Of Shale Wells While Permian Oil Production Remains Flat
November 5, 2019 – There’s trouble brewing in the U.S. largest oil company while most investors remain in the dark.  ExxonMobil added a record number of wells in the Permian during the first three quarters of 2019, only to see the company’s oil production plateau. This is the BIG PROBLEM facing ExxonMobil and other oil companies trying to outrun the industry’s KILLER annual decline rate. Source

Encana HQ move to U.S. part of oilpatch ‘tragedy,’ says Cenovus
October 31, 2019 – Alex Pourbaix said the move announced Thursday is similar to announcements by some drilling companies to move rigs south of the border to pursue more active oilfields, and the exodus of foreign companies over the past few years from the oilsands. “I think this is a tragedy for Canada,” adding foreign companies have taken billions of dollars with them as they left the Canadian oilpatch. Source

Small U.S. oil and gas companies get cold shoulder from large banks
October 28, 2019 – The largest banking lenders to the U.S. oil and gas sector are becoming more cautious, marking down their expectations for oil and gas prices that underpin loans in a move expected to put further financial stress on struggling producers. Since 2018, the S&P 500 Energy Sector is the worst performing sector in the Standard & Poor’s 500, falling 18% against a 12.8% increase for the broader index, and many publicly-traded shale companies have done even worse. Source

Husky Energy confirms staff layoffs
October 22, 2019 – Calgary-based Husky Energy Inc. is confirming it is laying off staff but won’t say how many. The job cuts are reminiscent of a series of layoffs by Calgary oil and gas producers following an oil price crash in late 2014 that contributed to an estimated 110,000 direct and indirect jobs being lost through 2015 and 2016. Source

Oilfield Services Face Crisis As Shale Slowdown Worsens
October 21, 2019 – The first and third-largest oilfield service companies in the world saw their earnings hit in the third quarter due to the slowdown in U.S. shale drilling. Schlumberger took a $12.7 billion impairment charge related to its North American business, a rather dramatic write-down. “That just tells you the state of the North American onshore market being pretty poor.” Source

The late Aubrey McClendon’s Permian business merges with parent to avoid bankruptcy
October 18, 2019 – The Permian Basin business of the late shale pioneer Aubrey McClendon merged its assets with its parent company to avoid bankruptcy for now. Houston-based Permian Sable Resources said Friday it successfully merged its assets with its subsidiary American Energy – Permian Basin and paid almost $400 million in cash in a deal with creditors to cut back the company’s debt by $1.4 billion. Source

U.S. oil and gas jobs fall as drilling declines
October 15, 2019 – Employment in oil and gas support activities had fallen by 14,000 or 5% between its cyclical peak in October 2018 and August 2019. Since November 2018, the number of rigs drilling for oil has fallen by 176 (20%) and for gas by 51 (26%). Source

Has the U.S. hit peak shale oil? Output has gone from explosive to sluggish
October 15, 2019 – Money isn’t as plentiful for an industry that in the last decade burned through nearly $200 billion. Investors are restless. Returns haven’t matched rocketing production, with the S&P 500 Oil & Gas Exploration stock index losing 21% in the last 10 years, compared with a 177% rise in the wider market. Source

Halliburton lays off 650 employees in four western states
October 9, 2019 – Houston oilfield service company Halliburton laid off 650 employees in four western states from New Mexico to North Dakota as demand for drilling and hydraulic fracturing services remains week amid lackluster oil prices. Source

EQT set to announce layoffs
September 9, 2019 – EQT Corp.is preparing plans to lay off ~200 employees in a move that could happen sometime this week. The layoffs, which would mark the second round of cuts since January when ~100 workers were laid off, would comprise a large chunk of the ~800 employees at the Pittsburgh-based natural gas driller. Source

Oil and Gas Bankruptcies Grow as Investors Lose Appetite for Shale
August 30, 2019 – Bankruptcies are rising in the U.S. oil patch as Wall Street’s disaffection with shale companies reverberates through the industry. Twenty-six U.S. oil-and-gas producers have filed for bankruptcy this year. That nearly matches the 28 producer bankruptcies in all of 2018, and the number is expected to rise as companies face mounting debt maturities. Source

CNX lays off fewer than 50 employees
August 20, 2019 – CNX Resources Corp., a natural gas exploration and production company based at Southpointe, laid off some of its workforce last week. Source

Energy bankruptcies back on the rise in 2019
August 15, 2019 – This year has seen nearly 40 energy bankruptcies thus far with more on the way in the weeks and months to come.The biggest filings this year includes the oilfield services giant Weatherford International. Source

Bankruptcy filings by U.S. energy producers pick up speed: law firm analysis
August 14, 2019 – In the oilfield services industry, there were 10 bankruptcy filings so far this year, with Weatherford International Plc by far the largest. It filed in July, listing unsecured debts of $7.4 billion, according to the report. The remaining nine firms combined have debts with a total value of $205 million. Source

Natural gas driller lays off employees
June 12, 2019 – Range Resources Corp., one of the largest natural gas production companies in the region, laid off about 40 employees on Tuesday. The layoffs were spread between Range Resources offices in Pennsylvania and Texas. Source

With natural gas being a finite resource and exports increasing rapidly, the US may be backing itself into a corner with so much reliance on natural gas, since prices could rise substantially over time due to global market conditions.
Bob

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