• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 10 hours Biden admits he has been tested for Cognitive Decline several times. Didn't show any proof of test results.
  • 2 hours Putin Forever: Russians Given Money As Vote That Could Extend Putin's Rule Draws To A Close
  • 1 hour During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 12 hours Apology Accepted!
  • 4 hours Tesla Model 3 police cars pay for themselves faster than expected, says police chief
  • 15 hours U.S. natural gas at major disadvantage in Europe and China.
  • 16 hours Biden came out of his basement today (Thursday) and said , "we have 120 Million deaths from Covid 19.
  • 3 hours Why Oil could hit $100
  • 4 hours The Political Genius of Donald Trump
  • 16 hours Putin Paid Militants to Kill US Troops
  • 21 hours CoVid in Spain, 9 months before China
  • 21 hours Per most popular Indian websites it was Indian troops not Chinese troops breach of LAC that caused the clashes. If you know any Indian media that claim to the contrary please provide the link
  • 21 hours The world is headed for big problems - interview with very smart economist

Breaking News:

OPEC Production Falls To Three Decade Low

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Texas Hit Hard By Shale Slowdown

Texas’ economy is perhaps the most vulnerable to oil price swings given its leading role in the country’s oil industry. Recently, as prices have remained low, talk has begun about the outlook for the state’s economy.

According to a recent Reuters report, for example, smaller independent oil and gas producers in the Lone Star State are struggling to get loans from banks as the latter become increasingly wary of the ability of the borrowers to return the money when the time comes.

Jobs in the Texas oil and gas industry are falling, too. The Houston Business Journal reported this month that September saw a 1,100 decline in the number of jobs in the mining and logging sector—the category that includes oil and gas jobs. Over the 12 months from September 2018, the state’s oil and gas industry added just 1,700 new jobs, which was the lowest number of new job additions to any Texas industry over the same period, data from the Texas Workforce Commission showed.

Yet not everyone is worried. The University of Houston Energy Fellows, for instance, wrote in an article for Forbes that “the alarm bells are premature.” While the experts that make up the group acknowledge there are plenty of reasons to be worried about the economy of Houston—the article focuses on the city—oil prices are not among them.

The trade war with China and the anticipation of a global economic slowdown caused by it is a top concern for any economy and Houston is no exception. Political economic problems in Europe are also a cause for worry. Yet, according to the University of Houston Energy Fellows, bankruptcies in the Houston oil and gas industry are only slightly higher this year than last, and the credit crunch energy independents are facing now is “far from comparable to 2015-16.”

True as this may be, there is no guarantee things will plateau at this level of problems and not deteriorate further. Reuters reports that banks have marked down the perceived value of U.S. oil and gas not just for next year but for the next five years. This value makes the foundation of reserve-based loans, so the lower it is, the less money the banks would be willing to give businesses.

And then there is the question of exposure. Related: Pakistan’s New Energy Proposal Is A Double-Edged Sword

“Some banks believe they have too much energy exposure and want to reduce some of this risk,” a senior executive from private equity firm Warwick Energy, Ian Rainbolt, told Reuters.

“I expect the biggest issues to be with over-leveraged natural gas producers, especially those without firm transportation in geographically-disadvantaged areas,” said another financial services executive, the managing director of investment bank Carl Marks Advisors. To be fair, this executive said the biggest trouble is for companies in the Appalachia, the Rocky Mountains, and Oklahoma.

Meanwhile Texas has begun exporting pure Permian crude—the light, sweet kind of crude pumped from the most prolific shale play in the U.S. Buyers, especially in Asia, want the so-called ‘neat’ barrels with consistent quality of the Midland grade—the purer, the better. That’s a new market that can grow if producers maintain consistent quality. Any new market would strengthen the resilience of the industry despite problems with banks and benchmark prices.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News