Stung by Low Oil Prices, Companies Face a Reckoning on Debts
If prices hold at such low levels — oil traded near $28 on Tuesday — as many as 150 oil and gas companies could file for bankruptcy, according to IHS, an energy research firm.
.. As much as a third of the oil industry could be consolidated as a result of the downturn, according to one estimate.
.. “The industry will be permanently damaged,” said Steven H. Pruett, chief executive of Elevation Resources, a leading Midland oil company.
.. energy companies on average have twice as much leverage, or borrowed money, as companies in the Standard & Poor’s 500-stock index
.. Major oil companies like Exxon Mobil andRoyal Dutch Shell, which have ample cash cushions, may end up benefiting from the turmoil, scooping up broken companies or their assets.
.. Nationally, just 15 percent of oil and gas production is hedged in 2016, compared with 28 percent of production in the fourth quarter, according to IHS, the research firm.
.. As rigs go off-line, companies are using technologies to squeeze as much oil as they can out of existing wells. But if an aging well breaks, many companies are not spending the money to fix it, and executives predict a rapid decline in production as shale wells peter out.
.. We’re hoping to see prices stabilize and recover sometime in 2017,” Mr. Lucas said.